Significant Event Commentary

2-Year CATT Results Show $50 Avastin Equivalent to $1,950 Lucentis
Avastin and Regeneron’s Eylea Could Squeeze Lucentis Out of Wet AMD
Novartis Could be Biggest Loser in Wet AMD Space on IVAN Results

Download Full 7-Page Note with Important Disclosures: Morning Note 05-01-12 ROG NVS REGN BAYN

The 2-Year results from the Comparison of Age-related Macular Degeneration Treatments Trials (CATT), which compared two of Roche/Genentech’s drugs, Avastin (bevacizumab) versus Lucentis (ranibizumab) for the treatment of Wet Age-Related Macular Degeneration (Wet AMD) were published in the journal Ophthalmology in the paper titled “Ranibizumab and Bevacizumab for Treatment of Neovascular Age-Related Macular Degeneration”. The U.S. National Institutes of Health National Eye Institute stated that the results showed that “Avastin and Lucentis are equivalent in treating age-related macular degeneration.”

Avastin is a full-length humanized monoclonal antibody that was FDA approved for the treatment of multiple solid tumor cancers in 2004 while Lucentis is a smaller molecule (antigen binding fragment) derived from the same murine monoclonal antibody that is used to construct Avastin. Lucentis was FDA approved for the treatment of “wet” or neovascular Age-Related Macular Degeneration (AMD) in 2006. The two drugs mechanisms of action are the same but they differ in size, affinity for VEGF, speed of clearance from the eye, and cost. Lucentis, which is FDA-approved for Wet AMD, costs approximately $1,950 per dose or $23,400 per year while Avastin, used off-label in Wet AMD, costs approximately $50 per dose or $600 per year.

Winners: We believe these results will split the market between Avastin for Medicare and other cost-sensitive patients, especially those that are able to receive treatment monthly, and Regeneron/Bayer’s Eylea (aflibercept) for private insurance and patients desiring treatment as needed.

Losers: We see Lucentis as less attractive versus Eylea since the latter is FDA approved for once every eight weeks ($1,850 per treatment) based on trials that showed it to be equivalent to monthly Lucentis and thus yielding a cost savings of $12,300 per year. While Roche/Genentech are expected to be impacted, we note that Novartis only has rights to Lucentis (ex-US) and not Avastin, resulting in Novartis losing the most opportunity in the cost restrained ex-US market. We further believe the upcoming 12-month results of the U.K. IVAN trial (also Avastin vs. Lucentis) puts Novartis at risk. (see IVAN trial at http://www.controlled-trials.com/ISRCTN92166560 )

NOTE: The CATT and IVAN results will be discussed in detail at The Association for Research in Vision and Ophthalmology (ARVO) conference on Sunday May 6th at 1:15pm.

Specifically, the results for the 1,107 patients who were followed up during year 2 (out of 1,185 patients originally enrolled) showed that:

1.) Ranibizumab and bevacizumab had similar effects on visual acuity over a 2-year period.

Mean gain in visual acuity was similar for both drugs (bevacizumab-ranibizumab difference, -1.4 letters; 95% confidence interval [CI], -3.7 to 0.8; P=0.21).

2.) Treatment as needed (PRN) resulted in less gain in visual acuity, whether instituted at enrollment or after 1 year of monthly treatment versus monthly treatments.

Mean gain was greater for monthly than for as-needed treatment (difference, -2.4 letters; 95% CI, -4.8 to -0.1; P= 0.046).

The proportion without fluid ranged from 13.9% in the bevacizumab-as-needed group to 45.5% in the ranibizumab monthly group (drug, P=0.0003; regimen, P<0.0001).

Switching from monthly to as-needed treatment resulted in greater mean decrease in vision during year 2 (-2.2 letters; P=0.03) and a lower proportion without fluid (-19%; P<0.0001).

3.) There were no differences between drugs in rates of death or arteriothrombotic events.

Rates of death and arteriothrombotic events were similar for both drugs (P>0.60). The proportion of patients with 1 or more systemic serious adverse events was higher with bevacizumab than ranibizumab (39.9% vs. 31.7%; adjusted risk ratio, 1.30; 95% CI, 1.07-1.57; P=0.009).

4.) The interpretation of the persistence of higher rates of serious adverse events with bevacizumab is uncertain because of the lack of specificity to conditions associated with inhibition of VEGF.

Most of the excess events have not been associated previously with systemic therapy targeting vascular endothelial growth factor (VEGF).

Among all organ systems, the greatest imbalance was in gastrointestinal disorders.

When all known VEGF–related serious adverse events are excluded, most of the imbalance remains, leaving it uncertain whether this difference was the result of chance, imbalances at baseline not captured in multivariate modeling, or truly higher risk.

We note these comments made at ARVO 2011: The excess number of events were distributed over many different types of conditions, most of which were not seen in cancer trials where patients had received 500X the Avastin dose that was used in the CATT trial. Based on this, Dr. Martin believed this difference may not be drug-related and that the trial would have required 10,000 patients to be powered to detect the differences to statistical significance.

The paper can be accessed at: http://www.ophsource.org/webfiles/images/journals/ophtha/announcement.pdf

Download Full 7-Page Note with Important Disclosures: Morning Note 05-01-12 ROG NVS REGN BAYN

The CATT’s Out of the Bag – Avastin versus Lucentis at ARVO 2011
Results Put More Pressure on Lucentis from Medicare Costs to Patient Co-Pays
Regeneron’s VEGF Trap Could Struggle in New AMD Landscape

Download Full Report with Important Disclosures: Morning Note 05-02-11 ROG NVS REGN BAYN

The Association for Research in Vision and Ophthalmology (ARVO) annual meeting began on Sunday which included a presentation of the NIH National Eye Institute’s “Comparison of AMD Treatments Trials” (CATT) results. The trial was designed to see a.) if Avastin is equivalent to Lucentis and b.) if “as needed” or pro re nata (PRN) dosing is equivalent to monthly dosing.  While the results were already published in the New England Journal of Medicine on Thursday (see below), the study chairman, Daniel F. Martin, M.D., of the Cleveland Clinic Cole Eye Institute as well as other members of the CATT group, provided significant color on the 1 year results.

The most commonly used anti-VEGF drugs for the treatment of macular degeneration are Avastin (bevacizumab) and Lucentis (ranibizumab), both of which were developed by Genentech, now fully-owned by Roche (SW:ROG) and partnered with Novartis (NYSE:NVS). Avastin is a full-length humanized monoclonal antibody that was FDA approved for the treatment of multiple solid tumor cancers in 2004. Lucentis is a smaller molecule (antigen binding fragment) derived from the same murine monoclonal antibody that is used to construct Avastin. Lucentis was FDA approved for the treatment of “wet” or neovascular Age-Related Macular Degeneration (AMD) in 2006. The two drugs mechanisms of action are the same but they differ in size, affinity for VEGF, speed of clearance from the eye, and cost. Lucentis, which is FDA-approved for AMD, costs approximately $2,000 per dose or $24,000 per year while Avastin, used off-label in AMD, costs approximately $50 per dose or $600 per year.

Equivalence was considered ±5 letters in visual acuity with the results at 1 year demonstrating that Avastin is equivalent to Lucentis at 99.2% confidence (higher than the usual 95% confidence). Avastin was also shown to be equivalent to Lucentis when both were dosed PRN.

Specifically, Dr. Martin’s presentation summary was as follows:

• Lucentis and Avastin were equivalent (virtually identical) for visual acuity at all time points when administered at the same dosing regimen.
• PRN dosing with monthly evaluation produced average gain that was 2 letters less than monthly dosing but overall results still excellent (equivalent for Lucentis, inconclusive for Avastin).
• PRN dosing resulted in 4-5 fewer injections over 1 year than monthly dosing. Avastin patients received mean 0.8 more injections than Lucentis.
• Both drugs produced an immediate and substantial decrease in fluids.
• Neither drug eliminated fluid in the majority of eyes although more eyes were completely dry with Lucentis monthly.
• There was no drug difference in leakage on FA but more leakage observed in both PRN groups.
• No lesion growth with monthly treatment of either drug; some growth with PRN over 1 year.
• No difference in death, stroke, MI or HTN between drugs at 1 year.
• Non-Specific SAE differences require additional study.

The issue of safety was discussed extensively as the proportion of patients with serious systemic adverse events (primarily hospitalizations) was higher with Avastin than with Lucentis (24.1% vs. 19.0%). Dr. Martin pointed out that the Avastin patients, especially the PRN arm, were slightly older (overall median age >80 years old) and had more co-morbidities than the Lucentis patients. In addition, there were more adverse events in the PRN arm where the patients were given less drug. Finally, the excess number of events were distributed over many different types of conditions, most of which were not seen in cancer trials where patients had received 500X the Avastin dose that was used in the CATT trial. Based on this, Dr. Martin believed this difference may not be drug-related and that the trial would have required 10,000 patients to be powered to detect the differences to statistical significance. Rather, the CATT group panelists were hopeful the 2 year data would provide more clarity. Roche/Genentech has funded a Johns Hopkins study of Medicare patients since 2005 showing that Avastin has 11% higher risk of mortality (see Johns Hopkins Medicare Claims Study). This paper will be presented at ARVO on Tuesday.

Despite current regulations prohibiting CMS from making Medicare reimbursement decisions using comparative effectiveness research studies, we believe Roche/Genentech and Novartis are now caught in a significant political and economic controversy as a result of the dramatic 40X difference in drug costs with equivalent efficacy. Philip J. Rosenfeld, M.D., Ph.D. from the Bascom Palmer Eye Institute stated “Health care providers and payers worldwide will now have to justify the cost of using ranibizumab (Lucentis). Regulators in certain countries will be forced to reconsider their policies that make it illegal to use drugs off-label, particularly when so many of their citizens cannot afford ranibizumab. The CATT data support the continued global use of intravitreal bevacizumab (Avastin) as an effective, low-cost alternative to ranibizumab.”

We also believe that Regeneron and Bayer face significant headwinds for their VEGF Trap-Eye drug. Data thus far shows dosing every other month as equivalent to Lucentis dosed monthly and would presumably yield a cost savings. However, the CATT data demonstrated that PRN dosing at 7-8 injections per year was effective which significantly diminishes the VEGF Trap-Eye dosing advantage. Furthermore, Avastin, even if given monthly, makes the economic case for VEGF Trap-Eye extremely difficult.

Download Full Report with Important Disclosures: Morning Note 05-02-11 ROG NVS REGN BAYN