A Meaningless FDA Approval ... for Now

As best I can tell, Novartis (NYSE: NVS  ) has discovered a great drug, Ilaris, which was approved yesterday. Unfortunately, it's not likely to be a blockbuster for a while.

Ilaris was approved to treat CAPS. No, not the Motley Fool investing community; this CAPS (cryopyrin-associated periodic syndrome) is a group of auto-inflammatory disorders that causes the immune system to overreact. Come to think of it, overreacting is something I seem to do when I log in to see that my (Fool) CAPS score has gone down, so maybe the two are similar.

CAPS is an ultra-orphan indication. When Regeneron Pharmaceuticals (Nasdaq: REGN  ) got Arcalyst approved to treat CAPS last year, the company reported that the frequency of the disease is about 1 in 1 million people in the U.S. -- meaning about 300 patients to treat. That's much smaller than the populations that Biomarin Pharmaceuticals' (Nasdaq: BMRN  ) and Genzyme's (Nasdaq: GENZ  ) orphan drugs treat and the sales show it: Regeneron only expects to ship out $15-$20 million worth of Arcalyst this year. Even if Ilaris takes the entire market, and it'll likely take a big chunk considering that it needs to be injected less often than Arcalyst, it'll still be not much more than a rounding error for Novartis' revenue.

So why are Novartis and Regeneron developing drugs that treat so few people? Because the protein that is overproduced in CAPS patients, interleukin-1 beta, has been implicated in causing symptoms of patients with other diseases including gout, systemic juvenile idiopathic arthritis and type 2 diabetes.

That last one should pique your interest. There are over 23 million diabetics in the U.S. and most of those are type 2. Merck (NYSE: MRK  ) sold $1.4 billion worth of Januvia last year. That's about as far from orphan-drug status as you can get.

Getting approved for a small indication and then working up from there is a pretty common strategy -- think Onyx Pharmaceuticals' (Nasdaq: ONXX  ) Nexavar and Pfizer's (NYSE: PFE  ) Sutent treating fairly rare kidney cancer before moving into the larger breast cancer market -- Novartis and Regneron have just taken it to the extreme.

An orphaned further Foolishness:

BioMarin Pharmaceutical is a Motley Fool Rule Breakers recommendation. Pfizer is an Inside Value pick. Novartis is a Global Gains selection. Try any of our Foolish newsletters today, free for 30 days

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.


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  • Report this Comment On June 19, 2009, at 6:54 PM, BIGJIMT wrote:

    Speaking about meaningless FDA approval, how about the recent FDA approval 'MRNA" received for a 'copy cat' drug? Anything that keeps making shareholders drive up the price, and then it goes back down almost 50%. It has been like this for 25 years now, A PERMANENT ROLLER-COASTER RIDE for shareholders. Nail bitting hopes of partnering, then 2 new partnership deals are made.

    This company has numerous press releases that

    continue to give shareholders the needed edge of excitement & continue speculation of striking it rich.

    My opinion, but I don't get this stock at all.

  • Report this Comment On June 19, 2009, at 7:30 PM, KalerSimth wrote:

    "So why are Novartis and Regeneron developing drugs that treat so few people? Because the protein that is overproduced in CAPS patients, interleukin-1 beta, has been implicated in causing symptoms of patients with other diseases including gout, systemic juvenile idiopathic arthritis and type 2 diabetes."

    So to the point! http://top-stocks-market.blogspot.com

  • Report this Comment On June 19, 2009, at 11:49 PM, NODwhitemouse wrote:

    HINT I am a TYPE I diabetic and own Amylin. . . .

    How does NVS drug ilaris relate to TNF-alpha?

    Dr. Faustman thinks that TNF should be increased and not decreased as some drug companies do.

    Why ilaris? They, NVS are trying to learn how the immune system works.

    One theory of how it works is . . . .

    http://en.wikipedia.org/wiki/Denise_Faustman

    http://www.faustmanlab.org/

    FOOLS investing in things even the experts don't understand. If she is correct than sell the drug companies that disagree, because the lawsuits a decade from now will make the asbestos settlement seem like small change.

  • Report this Comment On July 29, 2009, at 7:17 AM, gabrlx wrote:

    Hi, ILARIS being an "orphan drug" in EU, per se, is not designed a BBD (BlockBuster Drug) - not another Zocor et al.

    Be aware - accept IT "as-IT-IS" no copy. NVS guys have done their work, copies should prove (aftere yars and years).

    TO: NODwhitemouse - TNF is a tricky part of the business - as a knife - a typical feed/kill product. Very personalised. If you are interested in DD (deeper discussion), I hope I could provide (15 yrs accute cadio dept, 3 yrs GA [Gov Admin], 5 yrs PB [Pharmaceutical Business] consultant). I'm Gabriel.

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