Merck Serono MS Study Halted

Yesterday, Zymogenetics Inc (ZGEN) announced that Merck Serono SA, which has exclusive worldwide development and commercialization rights for ZymoGenetics' drug candidate atacicept, discontinued trials for the treatment of multiple sclerosis (MS).
 
The decision to halt the mid-stage trials was based on a recommendation from an independent data monitoring panel. The panel observed an increase in MS disease activity in those treated with atacicept compared to a placebo group.

As a reminder, atacicept (formerly known as TACI-Ig), a soluble receptor with potential applications for the treatment of cancer and autoimmune diseases, was co-developed by Zymogenetics and Merck Serono until August 2008 pursuant to a development and marketing agreement established in 2001.

However from August 28, 2008, this agreement was converted to a worldwide royalty license, granting Merck Serono exclusive worldwide development and commercialization rights for atacicept. Merck Serono was fully responsible for the program’s cost. By converting to a royalty position, Zymogenetics is looking to avoid a major capital commitment, reduce operating expenses and preserve cash over the next several years, while maintaining the value of atacicept.

Even though the studies for multiple sclerosis have been stopped, atacicept continues to be developed for other indications such as rheumatoid arthritis and systemic lupus erythematosus.

Biogen Idec (BIIB - Analyst Report) is the market leader in therapies to treat multiple sclerosis (MS). The company’s largest product is Avonex, which recorded sales of $2,203 million, up 18%, in 2008. We expect Avonex to continue contributing significantly to the top-line thanks to price increases and positive clinical data.

Meanwhile, Tysabri, the company’s second MS product, continued to see an increase in patient growth despite carrying a black box warning for the risk of progressive multifocal leukoencephalopathy (PML) and other cautionary language.

Biogen is working on consolidating its position in the MS market and has an impressive late-stage pipeline of drugs including Fampridine-SR, which is currently under review by the US Food and Drug Administration (FDA). We believe Fampridine, once approved and launched, could post sales of about $275 million by 2013.

Besides Fampridine, the company has another interesting MS candidate, BG-12, which is currently undergoing late-stage trials. The other leading candidates in the MS market are Copaxone of Teva Pharmaceutical Industries (TEVA - Analyst Report), Rebif of Pfizer (PFE - Analyst Report)/Serono.

However, the market has huge potential as only about 36% of MS patients are currently treated with MS drugs. This percentage is expected to increase to 56% by 2014 as new oral MS therapies are launched. MS prevalence rate is higher in women than men. It is the fourth leading cause of disability among American women.

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