Bloomberg News

Actelion ‘Make or Break’ Drug Seen Having 63% Chance of Success

February 01, 2012

Jan. 31 (Bloomberg) -- Actelion Ltd. Chief Executive Officer Jean-Paul Clozel has staked the future of the company he founded on an experimental drug that analysts say has a 63 percent chance of success.

Actelion will probably announce the results of a decisive trial of the lung treatment, macitentan, in the second quarter, Clozel said this month. Among 12 analysts asked by Bloomberg News to predict the likelihood the drug will meet the main goal of the study, estimates ranged from 20 percent, by Sebastien Malafosse at Bryan Garnier & Co. in Paris, to 85 percent by Helvea SA’s Olav Zilian in Geneva. The median was 63 percent.

The outcome will determine the future of the Allschwil, Switzerland-based company that Clozel and his wife Martine started in 1997. Success would propel Actelion’s stock and make it a takeover target, said Michael Leuchten, an analyst at Barclays Capital in London. Failure may mean Europe’s biggest biotechnology company ends in a fire sale.

“It’s make or break,” Leuchten said in a telephone interview. “If macitentan fails, what’s left to manage?” Leuchten, who rates Actelion “overweight/neutral,” is the top- ranked analyst on the company in the past year, according to data compiled by Bloomberg. Investors who followed his advice would have made 42 percent on the stock.

‘All Options’

Actelion has fallen 39 percent since Nov. 19, 2010, when speculation peaked that the company would attract a bid from Amgen Inc. or another potential acquirer. The stock fell 2.7 percent to close at 34.68 Swiss francs in Zurich trading yesterday, giving the company a market value of 4.5 billion francs ($4.9 billion). Actelion shares are worst performers in the Bloomberg Europe Pharmaceutical Index of 18 companies over the past year.

Actelion is banking on macitentan to replace sales of its top-selling lung drug Tracleer, which accounted for 90 percent of product revenue in 2010 and starts to lose patent protection in 2015. Macitentan has a “very high” probability of success, Clozel said in a Jan. 10 interview in San Francisco.

“There are big chances that macitentan works so we are trying to prepare its future launch,” he said. Should it fail, the company’s board would be forced to consider “all options,” he added, declining to elaborate.

Roland Haefeli, a spokesman for Actelion, declined to provide a more specific estimate of the likelihood that macitentan will meet its primary goal, and declined to comment on the future of the company after the trial.

Market Share

Tracleer is losing market share to Gilead Sciences Inc.’s Letairis after U.S. regulators in March allowed the Foster City, California-based company to remove a reference to the risk of liver damage from the drug’s label. Actelion said Jan. 10 that revenue will fall this year because of greater pricing and competitive pressure. GlaxoSmithKline Plc sells Letairis outside the U.S. under the brand name Volibris.

Tracleer, macitentan and Letairis are all designed to treat pulmonary arterial hypertension, or PAH, a condition in which the arteries that move blood from the heart to the lungs narrow, forcing the heart to work harder and causing elevated blood pressure. Over time the heart muscle can weaken and fail, causing death. The three drugs block a chemical called endothelin that causes blood vessels to constrict.

“The best way to think about macitentan is as the son of Tracleer,” Leuchten said. “It’s basically the same mechanism of action, but it’s turbo-charged.”

Clinical Trial

Actelion is testing macitentan in 742 patients with an early stage of PAH, to determine whether the drug can delay the time either to the disease worsening or to death.

Because it’s comparing macitentan with a placebo, rather than with Tracleer or Letairis, the trial has an 80 percent chance of meeting at least the target of delaying disease progression, Leuchten said. Whether it will prevent earlier deaths is less certain, he said.

That may make it a tough sell to persuade doctors to switch patients to macitentan from Tracleer or Letairis, especially when cheaper copies of Tracleer become available.

“It’s really going to come down to pricing, and getting physicians and payers to recognize the benefits,” said Peter Welford, an analyst at Jefferies International Ltd. in London. “Which is going to be an uphill battle, there’s no doubt about it.” He has a “buy” rating on Actelion.

‘Mortality Benefit’

Bryan Garnier’s Malafosse is even less optimistic. There’s no previous data on macitentan in patients with PAH on which to make a judgment, and the drug in August failed in a study of people with a lung ailment called idiopathic pulmonary fibrosis, he said.

John Wort, the clinical lead for pulmonary hypertension at Royal Brompton Hospital in London, said he would hope to see a “clear mortality benefit” in the PAH trial, as well as fewer side effects and interactions with other drugs.

“There would also need to be a significant improvement in patients’ functional outcomes, such as the walking test as well as a cost benefit, for clinicians to look at changing their prescribing practices,” Wort said in an e-mailed response to questions.

The failure of macitentan in idiopathic pulmonary fibrosis followed a string of other setbacks. Actelion scrapped development of an insomnia pill a year ago, after abandoning another drug called clazosentan that didn’t help patients with bleeding in the brain. The company also failed in 2010 in an attempt to have Tracleer approved for wider use.

‘Pure Gamble’

“It’s a pure gamble,” Malafosse said in a telephone interview. “A positive surprise is still possible, but at the current price the risk is too high and for now that’s not something I’m advising my clients.” He recommends selling the stock.

The current price doesn’t include any value for the likelihood of a successful trial, an event that would propel the stock into the “high 40s,” said Adrian Howd, an analyst with Berenberg Bank in London. He recommends buying the stock.

“If there’s one area that Actelion have typically been successful in, it’s PAH studies,” Howd said by phone. “This is their market. They know the levers to pull, they know how to get things on to the market and how to sell them.”

A successful trial result may also attract interest from suitors such as Bayer AG or Amgen, according to Jefferies’s Welford. Bayer plans to announce results this year of a late- stage trial of its own drug for PAH called riociguat, Joerg Reinhardt, chief executive of the Leverkusen, Germany-based company’s health-care division, said in a Jan. 10 presentation.

Amgen’s Interest

Christian Hartel, a Bayer spokesman, declined to comment on speculation about Actelion, as did Mary Klem, a spokeswoman for Thousand Oaks, California-based Amgen.

Amgen considered making an offer for Actelion, two people familiar with the situation said in November 2010. Clozel subsequently fought off an attempt by Elliott Advisors (UK) Ltd. to oust several board members and force Actelion to consider options including a sale, citing the future success of macitentan as a reason for keeping the company independent.

Failure would also put a sale back on the table, Andrew Oakley, Actelion’s chief financial officer, said at a conference in June.

“The board would have to reconsider the strategy of the company in terms of whether we’re better off as an independent company or perhaps better off as part of a larger concern, whether that’s -- we’re talking about a merger or we’re talking about outright sale,” Oakley said, according to a transcript of the event.

--Editor: Phil Serafino, Tom Lavell, Heather Harris

To contact the reporter on this story: Simeon Bennett in Geneva at sbennett9@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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