Alcon Boosts Presence In Eye Disease Market

• Peter Benesh
• On 6:39 pm EST, Friday November 6, 2009

Ophthalmic drug and device maker Alcon eyes big returns from a pair of deals it signed over the past two months.

Both transactions are designed to boost Alcon's (NYSE:ACL - News) presence in the treatment of age-related macular degeneration, or AMD. That includes both the dry kind -- which currently has no treatment -- as well as wet age-related macular degeneration, which is caused by proliferation of blood flows at the back of the eye.

Together, they are the leading causes of vision loss in people over 50. Both obscure central vision, leaving peripheral vision. Blindness is possible.

On Sept. 14, Alcon bought Swiss biotech ESBATech AG for $150 million in cash plus milestone payments of up to $439 million. ESBATech is a development-stage firm with no products on the market, but is working on treatments for AMD and other conditions.

On Oct. 23, Alcon inked a deal with privately held Potentia Pharmaceuticals of Louisville, Ky., for a license to develop Potentia's POT-4. It's intended for both wet and dry AMD.

Thanks to two drugs from Roche (Other OTC:RHHBY.PK - News) unit Genentech, wet macular degeneration can be treated. Genentech makes Lucentis specifically for wet AMD. It costs about $2,000 per injection. Some doctors use its older cancer drug Avastin at $50 per injection.

Since there's no specific treatment for dry AMD, patients usually take high doses of vitamins and omega-3 oils to slow the disease.

About 1.75 million Americans live with advanced AMD. Estimates say the number will grow to 3 million by 2020, meaning 2.7 million will have dry AMD.

'Tremendous Opportunity'

Alcon wants to have AMD products on the market within five to seven years, says Doug McHatton, the company's U.S. vice president and spokesman. "It's a tremendous opportunity."

There's also plenty of competition. Many firms, most of them small and private, are working on treatments.

"They're banging away at it, taking a lot of shots on goal," said Peter Bye, an analyst with Jefferies & Co.

Alcon bought into two of them when it acquired ESBATech AG and partnered with Potentia.

Alcon can acquire Potentia, too, if the AMD drug hits key milestones. POT-4 has made it through phase one clinical trials for wet AMD. The drug is aimed at inflammation, which is thought by scientists to be a cause of both kinds of AMD.

Alcon will pay royalties based on sales to Potentia's shareholders on products that get regulatory approval and make it to market.

Bye expects the AMD market to be "gigantic." Alcon has plenty of financial might to make a move. It boasts a market cap of $44 billion and annual revenue of more than $6 billion.

Its stock price has been on a steady rise since late February. Shares currently trade near 147, up from 89 at the beginning of the year.

"Big companies will be prepared to spend a lot of money for the right compound," Bye said.

As well they should, says Dave Weber, chief executive of MacuSight, a privately held firm in Union City, Calif., working on dry AMD.

His firm's research concludes that the total worldwide market for dry AMD is $3 billion. The wet AMD global market could be worth $2 billion.

MacuSight focused on dry AMD because there was plenty going on in wet AMD research and development.

"Avastin and later Lucentis reduced the urgency for wet AMD," Weber said.

Merck Takes A Pass

In fact, several firms have dropped out. One is Merck (NYSE:MRK - News), which bought Sirna Therapeutics for $1.1 billion in 2006 for its RNA interference technology. The purchase price was a record for that science.

RNAi, as it's called, turns off misbehaving genes by interfering with the message-carrying RNA. The closest drug Sirna had to market was SIRNA 027, for macular degeneration.

Merck has since dropped development of SIRNA 027, a Merck spokesman said in an e-mail. Merck has "no publicly announced programs in either wet or dry AMD," he said.

Meanwhile, another Big Pharma has moved into the macular degeneration field. On Oct. 1, France's Sanofi-Aventis (NYSE:SNY - News) announced the purchase of another French firm, Fovea Pharmaceuticals SA, for a total prospective value of $538 million, depending on milestones.

One of Fovea's areas of research is AMD.

There's no lack of interest in financing AMD research, MacuSight's Weber says. His own firm has received lots of attention from wannabe backers for its drug, Perceiva.

On Oct. 21, the Food and Drug Administration gave Perceiva fast-track status. The first disease for which the company seeks approval is diabetic macular edema, an eye condition caused by diabetes.

Perceiva is also intended for dry AMD, its main future target. A small phase one study is under way in conjunction with the National Eye Institute.

MacuSight has had no trouble finding funds. To avoid dilution for private investors, it has limited venture capital to $25 million.

Breakthrough financing came from Japan's Santen Pharmaceutical, a major ophthalmic firm. Santen paid $50 million plus milestone payments for marketing rights in Asia -- not equity in MacuSight.

MacuSight will have phase two data from multiple trials in 2010. As phase three trials begin late in 2010, it might then look at partnerships, an IPO or a merger.

"We've already had lots of discussions," Weber said.

He would not say whether Alcon was one of the companies interested in MacuSight.

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