European Approval for Cimzia

Yesterday, Enzon Pharma (ENZN - Analyst Report) announced the European Commission approval of UCB’s Cimzia (certolizumab pegol) for the treatment of adult patients with moderate-to-severe active rheumatoid arthritis (RA). Cimzia utilizes Enzon's PEGylation technology. Earlier in May 2009, Cimzia received the US Food and Drug Administration's (FDA) approval. Apart from RA, the drug is used to treat Crohn’s disease. Cimzia is a PEGylated anti-TNFa - Tumor Necrosis Factor alpha. 

Enzon receives royalties from several drugs manufactured using this technology – Schering Plough’s (SGP) Pegintron, Macugen marketed by Pfizer (PFE - Analyst Report) and OSI Pharmaceuticals (OSIP - Analyst Report) and Roche’s Pegasys. We believe the approval of Cimzia will boost its sales, thereby increasing the royalty income for Enzon. 

In a positive development, earlier this week, an FDA advisory panel voted in favor of recommending Pegintron as a treatment in addition to surgery in patients with metastatic melanoma. The drug is currently approved for the treatment of chronic hepatitis C in patients with compensated liver disease previously untreated with interferon alpha who are above the age of 18 years. In addition, Pegintron in combination with Rebetol (ribavirin) is used for the treatment of chronic hepatitis C in patients 3 years of age and above with compensated liver disease. The drug faces steep competition from Pegasys in the hepatitis C segment. 

The majority of Enzon’s royalty revenue is from Pegintron. However, the company’s royalty revenue is on a declining trend. During the second quarter of 2009, Enzon recorded $13.9 million in royalties, lower than $15 million in the year ago period. Royalty revenues were lower for both Pegintron and Pegasys. Pegintron recorded lower sales due to the unfavorable impact of foreign exchange along with lower sales of the drug in the US. The slowdown in royalties at Enzon places added pressure on product sales and the company’s development pipeline to drive growth.