Thursday, December 6, 2007

Genentech's next Blockbuster

Med stocks rise and fall on the success of blockbuster devices or treatments. These are the breakthrough products that have large markets and have a good chance of garnering patent protection, at least for a few years.

Its a high-risk, high reward business fraught with potential litigation, patent challenges and lengthy approval processes. Some of the biggest successes of late have revolved around the biggest challenges in medicine: heart disease and cancer.

Recently however, there has been more and more attention paid to auto-immune disorders which include Type 1 Diabetes, Crohn's, Celiac, Lupus, Multiple Sclerosis, Rheumatoid Arthritis because they effect so many people and actually burden our health care system even more than cancer does.

Which is to say, there is a huge market and a huge potential payoff in the form of new treatments for patients and cost reduction for the system.

We have family member who is Type 1 Diabetic as well as numerous friends and extended family members with Celiac Disease, a related disorder. It is encouraging to hear Genentech, touted as the "founder of the biotechnology industry" sees this set of related disorders as their next big economic opportunity as there may be opportunities to leverage their existing cancer treatments and substantial research and development resources in the treatment of auto-immune disorders.

Tackling autoimmune disease is an enormous opportunity for Genentech—and the biggest gamble it has ever taken. The field is littered with failures, Levinson notes, such as drugs that don't work for huge swaths of patients or that cause side effects worse than the diseases themselves. What's more, competition in autoimmune research is growing more intense. Companies ranging from Amgen to Novartis (NVS) are vying for leadership positions, with some charting early successes in rheumatoid arthritis. A number of Genentech's first forays into this area have fared poorly, in part because there are so many new contenders.

Much of the challenge stems from the fact that scientists have barely begun to understand the cascade of biological miscues that trigger the illnesses. And even though drug companies currently rack up some $10 billion a year in sales of autoimmune treatments, the need for better drugs couldn't be more urgent. In lupus, for example, the immune system ambushes the organs, turning the liver, kidneys, or skin to mush. In multiple sclerosis, it assaults the nerves in the brain and spine. In rheumatoid arthritis, it destroys the joints. While these afflictions rarely kill, they rob their victims of everything that makes life worth living: mobility, independence, dignity.

Genentech had only dabbled in immunology before it discovered the hidden powers of Rituxan. With the board's blessing, Levinson launched a program to study the drug as a possible treatment for rheumatoid arthritis, MS, and lupus. And Genentech deployed a third of its 1,000 researchers to pursue new drugs to fight autoimmune disease.

It is still early days for Rituxan in autoimmune disease, but there have been some important milestones. On a Saturday in the summer of 2006, the MS research team gathered in a conference room to review early results of a key Rituxan trial. As they studied MRI scans of patients' brains, they were amazed to discover that the signs of the nerve-ravaging disease had dropped by 91%. "I can forever remember sitting in this room and watching a story unfold that we really hadn't seen before," recalls Craig Smith, a medical director at Genentech.

Rituxan was approved to treat rheumatoid arthritis in February, 2006, and has captured 10% of the market. For patients such as Nancy Kowalski, the sign-language interpreter, the drug has been a lifesaver. She got her first infusion in March, 2007. While the needle was still in her arm she glanced at her hands and couldn't believe what she was seeing. "The swelling was going down." Kowalski has gone back to work.

Genentech will announce key Rituxan data in lupus and MS next year, and it's working on some completely new approaches to autoimmune disease. The mandate, as always, is to consider ideas others might overlook. "There's this tremendous herd instinct out there," Levinson says. "That's a great opportunity, because often the crowd is wrong."

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