Bayer and Avigen Collaborate On Gene-Therapy Treatment 

Stephen D Moore / Wall Street Journal 17nov01

German pharmaceutical giant Bayer AG on Friday announced a $60 million collaboration with U.S. biotech firm Avigen Inc. on a gene-therapy treatment for hemophilia B, a rare inherited blood-clotting disorder.

The transaction, which includes the purchase by Bayer of a 2.5% stake in Avigen, is the latest step in an expensive research revival at the German company. But it is a risky gamble. Despite enormous scientific potential, gene therapy has fallen from favor as ballyhooed research projects have flopped. And the first death apparently linked to gene therapy last year has spurred a crackdown by regulatory agencies.

"Gene therapy is the ultimate biotechnology," said Tim Wilson, a London-based drug analyst with Bear Stearns Cos. "But we've learned that there isn't a single magic breakthrough that's going to make it happen. It will be a trial-and-error process, and it doesn't look pretty right now."

Candidates for Treatment

Hemophilia B is a genetic disorder caused by the absence or deficiency of a blood-clotting protein called Factor IX. Bayer officials estimate that only 8,000 patients in the U.S., Europe and Japan might be candidates for treatment with Avigen's gene therapy, called Coagulin-B.

But lab tests of Coagulin-B in mice and dogs suggest that a single round of injections might restore lifelong production of Factor IX at levels sufficient to transform severe cases of hemophilia B to moderate ones. Currently, genetically engineered or plasma-derived versions of Factor IX generate annual global sales of roughly $350 million.

Hemophilia is an obvious gateway into gene therapy for Bayer. The German giant is one of the world's dominant producers of Factor VIII, the clotting protein used to treat Hemophilia A, the most common form of the bleeding disorder. A handful of U.S. biotech companies -- from Chiron Corp. and Targeted Genetics to Cell Genesys Inc. -- are racing to develop Factor VIII gene therapies.

Previous Push

Bayer made a big push in the Factor VIII gene-therapy race in the mid-1990s with a different U.S. biotech ally, "but the results were really disappointing," admitted Anthony Nagle, a vice president responsible for global clinical development of Bayer's hemophilia products.

Although a Factor IX gene therapy represents a far smaller market, it also is less competitive, at least for now. "And we think the first company to market will claim the Factor IX gene-therapy market," Mr. Nagle added.

Bayer officials believe Avigen has a lead of at least two years over potential rivals. The Alameda, Calif., firm already has treated seven patients with Coagulin-B in early clinical tests to demonstrate safety and determine a dose that would assure sustained function of the replacement Factor IX gene. If the current round of testing is successful, Bayer would take over world-wide development.

Offering a likely development timetable, Mr. Nagle said the pivotal phase of clinical testing could begin by 2002, followed by applications for regulatory approval in late 2005 and a market debut the following year. Bayer officials assume that regulators would require an unusually long follow-up period to assess the efficacy and safety of early gene therapies seeking clearance. Mr. Nagle also cautioned that recruitment of patients also will be slow for such a rare disease. But if all goes according to plan, Coagulin-B still might be one of the first gene therapies on the market, he said.

Separately, Bayer reported a 24% rise in third-quarter net income to 534 million euros ($457.9 million) from 431 million euros a year earlier, as sales climbed 22% to 7.68 billion euros from 6.28 billion euros.

The company's agriculture and health-care divisions were the key drivers of profit growth; the revenue rise was swelled by favorable exchange-rate fluctuations.

Bayer reaffirmed forecasts calling for double-digit percentage growth in full-year sales and operating profit, excluding effects of acquisitions and divestitures.

Bayer to Invest in Alameda Biotech Firm's 

Hemophilia Research Drug company to help develop Avigen gene therapy

Tom Abate / SF Chronicle 20nov00

A deal between a German drugmaker and an Alameda biotech firm provides a case study in the calculus of science, faith and hope that creates the therapies that change patients' lives.

Bayer, the company whose aspirins launched the modern drug industry a century ago, agreed Friday to invest $60 million to help finish the clinical trials and ultimately win the right to sell a gene therapy for hemophilia that is being developed by Avigen Inc.

Hemophiliacs lack one of the two proteins that help blood clot. Most hemophiliacs suffer from the loss of protein A. Avigen is working on the rarer form of the disease, which affects people missing protein B.

Whether they are missing protein A or protein B, however, the effect is the same. People with this inherited disease suffer painful and crippling bleeding episodes throughout their lives.

Today, severe hemophiliacs control their disease by taking regular injections of whichever of the two proteins they lack.

Bayer's investment represents a bet on a radical new approach to curing the rarer form of hemophilia with a single shot. Although the potential market for hemophilia B remedies is relatively small, just $350 million a year, Bayer is buying into the cutting edge of biotechnology.

Gene therapy is a technology that has been hyped for years. Until now, it has failed to deliver. But tiny Avigen could be the company that breaks the gene therapy jinx.

Avigen has injected seven hemophiliacs with a virus containing the gene that makes the protein B. The virus is the delivery vehicle. It burrows into muscle cells and deposits the gene for clotting factor B. In human tests so far, the gene has actually been shown to manufacture the clotting factor. (See related stories on Avigen in The Chronicle's Business section on April 12 and Dec. 7, 1999.)

Although Avigen is in only the first stage of human testing, Bayer Vice President Anthony Nagle said his company is convinced that future experiments will persuade the U.S. Food and Drug Administration that Avigen's Coagulin-B should be the first gene therapy approved for ordinary use.

Tests on seven human patients may not seem conclusive. But Nagle said hemophilia B is so rare -- only 150 cases are diagnosed annually -- that seven subjects are probably representative of those in the general population who suffer from this rare bleeding disorder.

Even in the best of circumstances, however, Bayer and Avigen must still put Coagulin-B through four more years of tests before they can hope to bring the drug to market sometime in 2006, Nagle said.

If all goes according to plan, that waiting will certainly be worthwhile for the roughly 8,000 people in the developed world who suffer from hemophilia

Nagle said Bayer expects that a single injection of the Avigen gene therapy will give severe hemophiliacs the ability to produce about 5 percent of the normal level of clotting factor B.

"That would allow these people to lead normal lives," Nagle said, and free them from the need to take several injections of protein clotting factors each week to control their bleeding.

Shareholders in Bayer and Avigen hope to profit from what might cautiously be called a cure for hemophilia B. Today, said Nagle, a person with severe hemophilia B -- or rather that person's health insurer -- pays $120,000 to $150,000 a year for injections of clotting factor.

How much will Bayer charge for a single gene therapy treatment that could replace years' worth of today's treatment?

"We're dealing with those issues right now," said Nagle. "We know it won't be any more than the cost of current treatments."

But that leaves a lot of room for negotiation with the insurers who will ultimately foot the bill. Does Bayer mean no more than the cost of a single year's worth of injection treatments? Or the cost of a lifetime's supply of treatments for a teenage patient?

"Fortunately, we have several years to work this out," Nagle said.

Avigen, for its part, timed the Bayer announcement to coincide with its annual shareholder meeting, which it held in the new factory in Alameda, where the company one day expects to manufacture Coagulin-B and other gene therapy drugs.

Leonard Cohen, M.D., a financial analyst with AmeriCal Securities in San Francisco, said investors don't appreciate just how good a deal Avigen cut with Bayer.

Avigen shares fell $2.69 Friday, to close at $40.75. The stock hit a 52- week high of $89 in March.

Cohen said that, although terms of the deal were not disclosed, he expects Avigen will get to keep a majority of the proceeds from the eventual sales of Coagulin-B. Most biotech firms would feel lucky to keep 20 percent of sales when they sell the marketing rights to their drugs.

Furthermore, Cohen said, by retaining control of the manufacturing process, Avigen is laying the groundwork to manufacture future gene therapy drugs.

Avigen is already performing animal tests of a gene therapy for the more common form of hemophilia A. The company hopes to begin testing this new gene therapy on human patients in 2001. Cohen said protein injections to curb hemophilia A represent a market of $1.6 billion in the United States, more than four times the market for hemophilia B.

"Wall Street just doesn't understand this company yet," said Cohen, whose firm recently took a large stake in Avigen shares.

One of the keys to understanding the rationale behind the Bayer-Avigen collaboration is visible from Interstate 80 in Berkeley, where Bayer employs 1, 400 people at a plant that makes the clotting proteins for hemophilia A.

This is the more common form of hemophilia. Avigen's current project doesn't affect Bayer's Berkeley plant, because the gene therapy is aimed at the less common hemophilia B.

But let's imagine Avigen is successful in creating a gene therapy for hemophilia A. That one-shot remedy would be a direct threat to Bayer, which has invested $350 million in the Berkeley factory over the past few years, and has $120 million in new plans on the drawing board.

Given the glacial pace of drug development, that speculative threat couldn't possibly materialize for five to seven years. Even so, by getting in with Avigen now, Bayer presumably gets a leg up on a future licensing deal, if and when the Alameda firm makes gene therapy possible for hemophilia A.