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Did Roche Unleash Biogen's Worst Nightmare?

By Cory Renauer - Oct 20, 2015 at 9:52AM

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Roche's once-failed rheumatoid arthritis therapy hit a bullseye in relapsing multiple sclerosis.

Going into a recent scientific conference, the multiple sclerosis community already knew ocrelizumab was a game-changer. Back in September, Roche (RHHBY -0.07%) announced the CD20 targeting antibody was the first experimental therapy to demonstrate efficacy in a phase 3 trial with primary progressive patients.

About 15% of all MS patients can be described as PPMS, and the rapid advancement of their disease makes them the most difficult to treat. Multiple sclerosis comprises the majority of sales for Biogen (BIIB -3.54%), but without a PPMS disease-modifying therapy, it had little to fear from ocrelizumab.

That's all about to change. During the latest meeting of the European Committee for Treatment and Research in Multiple Sclerosis, investigators laid out some very compelling data that suggest Biogen's entire MS franchise is at risk.

Meeting need
New ocrelizumab data suggest it could gain a great deal of market share for relapsing MS (85% of patients) as well. When treating relapsing MS, physicians need to choose between less effective therapies with favorable safety profiles, or more effective therapies that put patients at increased risk.

Source: Roche

Generally, neurologists begin new MS patients on the safer, but less effective ABCRs -- Avonex, Betaseron, Copaxone, and Rebif. Biogen's Avonex, and its more recently approved longer-lasting version, Plegridy, pulled in a combined $1.4 billion in the first half of the year, comprising 28% of total sales for the period.

At the more effective end is Biogen's Tysabri (natalizumab). Unfortunately, this antibody's label comes with black box warnings -- the FDA's most severe -- of progressive multifocal leukoencephalopathy, or PML. This is an opportunistic viral infection that is extremely rare in the general population. So, while it tames the immune system to reduce rates of relapse for MS patients, it can go a step too far. For this reason, physicians typically reserve its use for patients who don't respond well to safer, albeit less effective therapies. In the first half of the year, sales of Tysabri contributed just $926 million of Biogen's total revenue of $5.1 billion during the period.

In terms of safety and efficacy, Biogen's Tecfidera (dimethyl fumarate) was generally considered somewhere between Avonex and Tysabri. Approved by the FDA in 2013, it has already reached sales of $1.7 billion in the first half of this year, despite being the third oral MS therapy on the U.S. market.

Following the incredibly successful launch, Tecfidera is finally showing signs of slowing down. Recent cases of PML associated with the treatment and formulations of its active ingredient began weighing on sales recently. In July, the company lowered its 2015 top-line growth estimate to 7% for the year. Highlighting the link between perceived safety and sales, management was expecting 15% growth just six months earlier.

All told, a well-tolerated MS therapy as effective as Tysabri but as safe as Avonex would pressure sales of therapies comprising 79% of Biogen's total revenue.

Goldilocks cell targeting
Roche's ocrelizumab is an antibody that selectively depletes beta cells that express the CD20 antigen on their surface. This antigen is primarily present on cells in the intermediate stages of their development, which should allow for both reconstitution and retention of long-term immune memory.

It's a bit of a stretch, but this intermediate targeting could explain ocrelizumab's impressive tolerability level. During the phase 3 Opera trials, which directly compared ocrelizumab to Merck KGaA's Rebif -- a beta interferon 1a in the same class as Biogen's Avonex -- a combined 88% of patients receiving ocrelizumab completed two years of therapy. That's a bit higher than the 82% of patients completing two years of treatment with standard of care Rebif.

An even better indication of ocrelizumab's tolerability is that 97% of patients chose to remain on therapy after taking it for two years. A convenient, twice-annual dosage schedule may have played a role in patients' choices.

Whatever the reason patients were willing to stay on ocrelizumab, its efficacy compared to the standard of care is even more threatening to ABCR market share. In the Opera 1 and Opera 2 studies, ocrelizumab patients exhibited significant 46% and 47% reductions in annualized relapse rates versus Rebif, respectively. Patients receiving the experimental therapy also trounced the standard of care in terms of disability progress and number of new brain lesions.

Relative safety
I'll be the first to admit that I was caught a little off guard by the relatively low number of serious adverse events. After all, Roche decided to suspend ocrelizumab treatment of patients in a rheumatoid arthritis trial in 2010 because of safety concerns.

The MS community will be pleased to know that only 6.9% of patients receiving the experimental therapy experienced serious adverse events, versus 8.7% taking Rebif.

It's hard to make apples-to-apples efficacy comparisons of ocrelizumab to Tecfidera and Tysabri, but its stellar performance versus Rebif certainly suggests it has what it takes to compete fiercely. Roche plans to submit its data to regulators for both the relapsing and progressive forms of MS early next year.

At this point, I'd be very surprised if it failed to win approval for either indication. Luckily for Biogen, an agreement with Roche will go a long way toward mitigating potential losses. You see, Biogen licensed ocrelizumab to Roche years ago. According to the agreement, Biogen will receive enormous royalties between 13.5% and 24% on U.S. sales of ocrelizumab, if approved by the FDA. This might not be enough to completely offset losses, but after seeing data from the Opera trials, I think Biogen investors are going to need all the comfort they can get.

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