Hereditary AngioEdema
(HAE) is a rare, severely debilitating, and potentially life-threatening genetic
disease characterized
by spontaneous and recurring attacks of edema (swelling) in various parts of
the body. While abdominal HAE attacks, caused by the swelling of the intestinal
wall, can lead to severe pain, attacks affecting the hands, face, throat, and
feet can be fatal. Patients suffer an average of 12 attacks per year, each
enduring about two to five days if left untreated. Although approximately
10,000 patients in the US and EU have been diagnosed with HAE, the disease is
believed to be severely under-diagnosed.

Despite the relatively
“small” HAE market size there are several companies that have come into the
limelight for developing these drugs. Click here for a table on HAE
Treatment Options.

The Key Question
Remains – Why is there
so much interest and increasing competition for a niche indication for which an
approved product is unlikely to achieve more than $300-400m in worldwide peak
sales? The below companies have recently commanded a premium for their HAE
efforts even without a clear cut approval in place:

ViroPharma acquired
Lev pharma for $2.75 per
share, or $442.9 million in stock and cash. The price is represents a 49%
premium to Lev’s closing price of $1.85 on July 15, 2008, the day before the
deal was announced. The deal gives ViroPharma Cinryze, a complement 1 (C1)
esterase inhibitor under FDA review to treat and prevent HAE with an Oct. 14th
PDUFA date. ViroPharma markets vancomycin, an antibiotic approved to treat
enterocolitis, and this deal broadens its portfolio of therapies for
life-threatening conditions in specialty markets.

• Based on our analysis of the efficacy and safety of the HAE
  drugs, we believe that CSL’s drug Berinert-P could be approved first in the US for
  Acute HAE (PDUFA 9/6/08) and block Cinryze’s entry in the US (both have orphan
  drug status in US) for acute HAE.
• The Prophylactic HAE market is currently hard to estimate as
  effective diagnosis of HAE remains difficult and poses a challenge for the
  prophylactic approach. Off label use of other approved drugs could potentially
  reduce the opportunity of Cinryze even if it gets approved for “Prophylactic
  HAE”. Viropharma is unlikely to gain significantly from this acquisition and
  the investors too have not reacted positively to the acquisition (Viropharma
  shares were down by 16% after the announcement).

Shire acquired Jerini for $521 million
(73% premium on Jerini’s share price on July 3, ‘08). The EC approved Firazyr (icatibant), a
selective peptidomimetic bradykinin B2 receptor antagonist), on July 15, 2008,
but the drug received a not approvable letter in April ‘08 from the US FDA and
a complete response is expected to be submitted to FDA within the next
quarter. Firazyr
is the first drug to be approved in all EU countries for acute HAE. Shire stated
that the acquisition is “Consistent with our strategy. Firazyr is a product
which satisfies a high unmet medical need and treats a morbidly symptomatic
disorder. With orphan designation in both the Europe and US, and a launch in
the Europe in the second half of this year; the acquisition will bring near
term revenues as well as contribute to Shire’s longer-term growth.”

Dyax is negotiating
with Dompe Farmaceutici, an Italian pharmaceutical company, over the European licensing
of DX-88 for HAE. As a condition for the exclusive negotiation rights, Dompe
has entered into a securities sale agreement with Dyax to purchase just over 2
million shares of Dyax common stock in a private placement at $4.98 per share which
represents a 57% premium over the July 10 closing price of its shares. US approval and
results of the PhIII EDEMA4 trial is expected in 2H08. Earlier in April, Dyax
licensed DX-88 for surgical indications (CABG) to Cubist receiving an upfront
payment of $15m with Cubist responsible for the development costs in
cardiothoracic surgery (CTS).

The “Busting of
Blockbusters”: What trends do these acquisitions forecast?

• A focus on niche indications where an approval may be less
  challenging than for blockbuster drugs targeting chronic disease!
• The safety bar for anti-infective, anti-diabetic, anti-obesity
  drugs is increasing and is taking a toll on the R&D budget of large and mid
  cap companies. Could focusing on smaller niche markets offset the risk?
• What attracts companies focused on treating life threatening
  infections (Viropharma, Cubist) to Jerini or Dyax’s HAE compounds? Perhaps it
  is the potential of these drugs beyond HAE. An approval in this indication may
  prompt a more positive outlook on more challenging indications like CABG,
  angioedema, severe liver diseases, burn injuries, allergic or inflammatory
  conditions, and in drug-induced edema, which offer a much larger commercial
  opportunity than HAE.
• Other than HAE, the following niche indications may drive
  further acquisitions: ITP, IPF, Myelofibrosis, and Vaccines for addictions.

Which of the new
treatment options is most promising?

HAE treatment needs
include quick relief, convenient dose administration, a reduction in the number
and severity of attacks as well as a minimal injection-site and adverse
effects. Based on our analysis of the clinical data, we believe that CSL’s
Berinert-P® could win on ground of efficacy; but lose on the IV route of
administration where Dyax commands an edge. The balance could be tilted in favor
of CSL in cases of hospitalization where the route of administration may not
matter much.