Fighting The Flu

• October 15, 1999
• Paul Ruggieri

Many health professionals have predicted that this year’s flu season will be a particularly unkind one. Despite the recent availability of vaccines to prevent this unwanted ritual of winter, many of us continue to succumb to the virus every year, resulting in a huge number of lost work hours.

Because the potential market for a new class of drugs to treat the flu is enormous, it’s not surprising that many biotech and pharmaceutical companies are committing big dollars to solve the flu riddle. We’ll take a look at some of the companies that are best positioned to make a mark in this field.

Bugged by the flu

The most common flu virus today is Heamophilus Influenza (A and B strains), which will affect over 100 million people worldwide this year, up to 50 million in the United States alone. The total health care cost of the flu, which causes 30,000 deaths and close to 300,000 hospitalizations each year, is a staggering $13 billion. We have vaccines (which only work 80 percent of the time) and we have drugs (which only treat the symptoms), but we still have no effective treatment for this common disease–and no cure.

Several companies are making inroads into the $2 billion/year flu market with a new class of drugs that are very different from anything we’ve seen before

Several companies are in the process of making substantial inroads into the $2 billion a year flu market by developing a new class of drugs, called neurominidase inhibitors, which are very different from anything we’ve seen before. The drugs work by attacking the virus itself, blocking the enzyme that allows the flu virus to leave infected cells and infect other cells. Since the virus cannot spread, the duration of the illness is considerably shortened.

This is a relatively virgin market with enormous financial and health potential. Right now, a heated race is underway to develop the perfect flu drug before the new flu season arrives.



First on the scene

The first new drug on the scene usually captures the initial momentum and market

In the pharmaceutical industry, usually the first new drug on the scene captures the initial momentum and market. We have seen this in the case of Pfizer’s Viagra, and Monsanto’s Celebrex vs. Merck’s Vioxx (see “New Treatments, New Opportunities“). However, this may not be the case with this new class of anti-flu drugs. Glaxo Wellcome Plc [GLXO>GLXO], the world’s fourth-largest drug maker, was the first to burst on the scene with a neurominidase inhibitor. In collaboration with the Australian biotechnology firm Biota Holdings Ltd., Glaxo received FDA approval of its anti-flu drug Relenza this past July. For this approval, Biota Holdings received a $4 million payment.

Relenza is a neurominidase inhibitor that proved in testing to be effective in shortening the duration and the severity of the flu. It is an inhaled agent with minimal side affects. Interestingly, the FDA rejected Relenza’s application in February because the U.S. data on its effectiveness was not convincing enough. However, the drug had already been approved in Europe, and the data there was strong enough for a second look and ultimate approval by the FDA. Once approved, Glaxo and Biota were poised to be the first companies to have a new drug with blockbuster potential on the market, and just in time for this year’s flu season.

But something happened on the way to the market.



The new drug on the block

Soon after approving Relenza, the FDA granted “priority status” (meaning the FDA is expected to grant approval by November 1, 1999) to a competing neurominidase inhibitor, Tamiflu, developed by Gilead Sciences [GILD>GILD] in collaboration with Roche Holding AG [ROCZ>ROCZ]. It works like Relenza in combating the flu virus, and is very effective in decreasing the virus number and limiting the severity of the disease. Despite the same mechanism of action, some differences could easily give the edge in the flu wars to Roche and Gilead Sciences–an edge that could mean millions of dollars in revenue for these companies as the flu season approaches.

Many analysts are excited about GILD and expect Tamiflu to be approved before the flu season gets underway

Tamiflu, also known as oseltamivir, is taken several times a day in pill form. This is a huge advantage over the inhaled Relenza, since inhaled medications make getting the correct dose difficult. Recent data suggests Tamiflu may also be more effective than Relenza not only in treating the flu but in actually preventing its onset. By preventing the virus from showing up–that is, acting like a vaccine–Tamiflu would have a major advantage over its competition. Nobody enjoys taking time off to go get a flu shot, and many people don’t bother to do so. But offer them a pill and their response may be very different. Many analysts are excited about Gilead Sciences and expect Tamiflu to be approved before the flu season gets underway.

The numbers Gilead Sciences has performed well over the last year. It hit a 52-week high of 95.5 in early September 1999 and has pulled back somewhat, recently closing at 75.

Figure 1.   Gilead Sciences (GILD), daily.   Source: Quote.com.

The company has a good reputation in the biotech industry and is working on some other exciting projects. I expect Gilead Sciences to start trending upward and test its highs in anticipation of FDA approval of Tamiflu (sometime within the next 30 days).



Last but not least



The last entry into the billion-dollar flu market is a small Birmingham, Alabama, biotechnology firm called BioCryst Pharmaceuticals [BCRX>BCRX].

BCRX looks like it could be a winner in the flu pill war, and the stock should easily retest its recent highs

BioCryst (in partnership with Johnson & Johnson) has a flu-fighting pill in late clinical trials that has several advantages over Gilead’s Tamiflu or Roche’s Relenza, including the fact that it only needs to be taken once a day (vs. twice a day for Gilead’s Tamiflu). It also reportedly does not cause the nausea side effects that Tamiflu does. On paper, BioCryst’s product looks exciting, and the clinical trials are supporting this, but it is not up for FDA approval in the near future (unlike Gilead’s Tamiflu). Biocryst is expected to receive royalty payments as the drug advances in the approval process.

The numbers The company’s stock had been in a holding pattern around $10 for the past year. However, in early August some analysts highlighted the positive news about the anti-flu pill, and the stock quickly rose to a 52-week high of 35.5.

Figure 2.   BioCryst (BCRX)), daily.   Source: Quote.com.

Since the news, BioCryst has given back some of its gains, recently closing around $25 per share.

When the final clinical data is out, BioCryst Pharmaceuticals looks like it could be a winner in the flu pill war, and the stock should easily retest its recent highs. Until that occurs, Gilead Sciences and Roche Holdings have the advantage with Tamiflu.