Biotechs line up to tap growing ophthalmics market
Back in November, life sciences company Ocular Therapeutix unveiled plans to resubmit a swollen eye treatment for approval with the Food and Drug Administration by the end of 2016 – the last hurdle to clear after years of research and millions of investment dollars.
The action followed the freshest wave of clinical results showing the drug in question, Dextenza (dexamethasone), was effective in a new indication: reducing inflammation and pain in patients who recently received eye surgery. Ocular has spent nearly $18 million since 2013 developing the drug for various indications, a hefty sum for a small-cap company with about $82 million in assets.
But the reward may be well worth the risk, since analysts anticipate extensive growth for the global ophthalmology market. Currently, there are 11 million Americans with some form of age-related macular degeneration (AMD). While the dry form leads to gradual vision loss, the wet form (which makes up 90% of the cases) can lead to rapid blindness, according to the American Academy of Ophthalmology. A GBI research report released in August found global revenues for the drugs that treat these conditions totaled $13.7 billion in 2015, and forecast the market will be worth $26 billion by 2022.
Eylea (aflibercept), Restasis (cyclosporine) or Lucentis (ranibizumab) —the top drugs currently on the market — raked in more than $6.5 billion combined in 2015 for their respective parents Regeneron, Allergan and Roche. While Restasis dominates the dry eye market and has been available since 1983, Lucentis and Eylea are relatively newer innovations, garnering approvals from the Food and Drug Administration in 2006 and 2011, respectively, for the treatment of wet age-related macular degeneration (AMD), diabetic macular edema (DME), macular edema following retinal vein occlusion and diabetic retinopathy in patients with DME.
Wet AMD was previously considered untreatable, but vascular endothelial growth factor (VEGF) inhibitors like Lucentis and Eylea have changed the disease landscape. Roche's Avastin (bevacizumab), initially designed to treat cancer, is also used as an off-label treatment for the condition.
Banking on those expectations, many pharmaceutical developers are driving down the often-tricky road of creating eye drugs, hoping the journey leads to big payoffs for patients and bottom lines.
The pipeline for ophthalmology is vast, with more than 700 drugs currently in development — albeit most of them are preclinical or in early stages — according to a report released on Nov. 29 also from GBI Research. The report found 54 compounds currently being developed for DME, another 63 for dry eye and 116 compounds being developed for the hot area of glaucoma. Across those diseases, there were 21 compounds in Phase 1, 57 in Phase 2 and only 23 in late-stages, while there were 81 in pre-clinical development.
Drug companies are investigating 94% of DME compounds, 98% of dry eye compounds and 88% of glaucoma compounds, while universities are exploring the remainder, the report said.
M&A heating up
A month before Ocular announced its latest topline results, the company inked a deal with eyecare juggernaut Regeneron. The big biotech wanted access to a capsule Ocular is developing that could stretch how long patients would receive a drug dose. Regeneron planned on applying the technology to its blockbuster Eylea, and offered up to $315 million for the rights to use it.
The deal, however, pales in size to others.
Shire, which declared its intentions to enter the eyecare space in 2013, has been expanding its portfolio at a rapid clip. The Irish biopharma dropped more than $460 million to acquire ophthalmology companies SARcode Bioscience in 2013 and Foresight Biotherapeutics in 2015. And the Dublin-based specialty pharma has just launched its fist product in the space, the dry eye drug Xiidra (lifitigrast) that it gained through the SARcode deal.
Novartis announced Dec. 20 that it has picked up Encore Vision to bolster is ophthalmology franchise.
Deals like these are a clear example of how eager pharmaceutical developers are to strengthen their eyecare offerings. A big part of the appeal are the large patient populations with unmet medical needs. From retinal diseases to gene therapy, "there's a number of different directions they can go in," Stifel Nicolaus analyst Annabel Samimy said in an interview.
"There is thought that M&A is going to pick up in the space because of those very large players who could … build out," Samimy said. "Every single small company can be a takeout, but ones that are more advanced in clinical development – I think those are ripe."
According to Samimy and RBC Capital Markets analyst Adnan Butt, gene therapy provider Spark Therapeutics and clinical-stage biopharma Aerie are two companies the industry has its eye on for their respective proprietary technology platforms and drug candidates.
Biopharma heavyweights might have some difficulty bringing smaller companies like Aerie and Spark to the table, however, according to Butt.
"The smaller company may not be interested because they want to wait and use their own platform to develop their own drug; so in that case M&A might be more hostile," Butt said.
Despite the obvious interest from bigger players, the space is rife with challenges.
The therapeutic area has long been viewed by industry experts as a "graveyard" of products, according to Perry Sternberg, head of Shire's U.S. commercial organization.
"People were saying company after company could never get a product approved," Sternberg said. Those people had a point too; at the time when Shire was pursuing Xiidra,the FDA hadn't approved a prescription dry eye drug in almost two decades, and a heap of failed medications, such as Inspire Pharmaceuticals' Prolacria, littered the path from clinical trials to market.
There were several reasons for the lack of approvals in dry eye and other ophthalmic diseases. One of the most glaring was the complexity of eye tissues and membranes, which study after study explained make it exceedingly difficult to develop effective ocular medications or ways to deliver those medications.
Recent advances in technology and research are helping to address those obstacles. "Understanding the disease better means you can figure out what your drug can benefit or what to design in a drug to make it efficient in a patient," Butt said. "The biology is becoming more like engineering as you understand the steps and know what to proceed with."
Still, problems persist, muddying the already arduous process of getting ophthalmic medications through the clinic. Some eye diseases don't show symptoms early on, while others — including dry eye or dry age-related macular degeneration (AMD) — are notoriously hard to treat. Some illnesses that vastly differ from each other give rise to the same symptoms, and can make it difficult to select patient populations for drug trials.
"The challenge is just really the nature of some of the diseases," said Herm Cukier, SVP of eyecare for Allergan. "The clinical trials can be quite complex to actually have a consistent outcome."
While the FDA has become more cooperative with eye care developers as of late, according to Butt, and could speed up its approval process under a new Congressional bill, many companies haven't overcome the agency's stringent late-phase requirements for eye drugs and devices. Regeneron, Ocular and Eleven Biotherapeutics are just a few who saw their potential products fail to meet Phase 3 clinical goals in the past two years.
As the big players in the space face loss of exclusivity, other companies are trying to take a piece of the ophthalmology pie.
San Diego-based Pfenex Inc., for example, is developing a biosimilar to Lucentis. Germany's Formycon AG is too, as well as a biosimilar for Eylea. Both blockbusters' U.S. patents expire in 2020. Allergan, meanwhile, is facing pressure from Akorn, which has been working on a generic version of Restasis, whose patent extends to 2024.
Loss of patent protection will surely bring more generic competitors into the market, but what indications those new entrants pursue may determine whether they thrive or fizzle out. There's a lot more competition in diseases like wet AMD, DME and back-of-the-eye diseases than dry eye and AMD, Butt noted.
"If you're looking at retinal diseases, you have to show yourself to be better than the Eyleas of the world," Stifel Nicolaus's Samimy said. Whereas with dry eye, "it's a lower bar, even though dry eye is an exceedingly difficult area to develop in."
Small companies like Adverum Biotechnologies are tapping innovation to beat out the big players. The company's entire pre-clinical pipeline for eye drugs uses gene therapies and viral vectors to treat wet AMD and X-linked retinoschisis, a disease that leads to poor vision and retinal damage.
Large-cap companies, meanwhile, continue to pursue new indications and variations of existing drugs. Last year, the FDA approved Lucentis for the treatment of diabetic retinopathy in patients with DME. And in late October, Allergan got the green light for a multi-dose version of Restasis, a product it hopes to bring to market in 2017, Cukier said.
"We are very proud of our innovation heritage," Cukier said. "It really allows us to look at the entire domain and really source and find … where we feel that there are real opportunities to dramatically impact the clinical outcomes for patients."
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