Teva MS drug stumbles in key study

Awkwardly for Teva, while its new drug failed to show an improvement over placebo in either relapse rates or disability progression, the study did show a benefit for Biogen Idec's rival beta-interferon injection Avonex.

Patients on Avonex had a lower annualised relapse rate (ARR) than those on placebo, although, like laqinimod, it did not improve disability progression as measured by the expanded disability status scale (EDSS).

Teva officials told analysts on a conference call it remained committed to laquinimod and stressed that not only will it have no trouble getting regulatory approval, the drug is safe and should find a market among those with MS.

"It's a bit of disappointment for investors. It's not something the market expected from Teva," said Sabina Podval, an analyst at Leader Capital Markets. "The drug launch and approval process now looks more complicated."

Laquinimod is jockeying for position in the emerging area of oral treatments for multiple sclerosis (MS), where Novartis' recently approved Gilenya has a leading position.

Given the tough competition, the results from the second of two pivotal Phase III clinical trials will undermine faith in Teva's medicine, on which it is relying to make up for lost sales of its older MS treatment Copaxone.

Although the trial was not powered to compare laquinimod and Avonex directly, analysts said the picture emerging of greater benefit from the older Biogen product was not encouraging for Teva and Active Biotech.

Nonetheless, Teva said it still believed that clinical trial results to date showed the drug had a clear ability to reduce disability and brain tissue loss.

It plans to push ahead with submitting applications to regulatory authorities in the United Stated and the European Union. In a conference call, Teva said it aimed to submit the product for regulatory approval with the U.S. Food and Drug Administration by early 2012.

Harel Finance analyst Steven Tepper said that while laquinimod was not yet dead, the drug faces an uphill battle with the FDA, which may require more analysis or another experiment to verify efficacy.

"A bigger issue is where the drug will be positioned in the commercial space," said Tepper. "Teva is trying to play the card of 'it may not be the best drug to reduce the annual relapse rate but it is good in reducing the rate of progression to disability."

"Even if the FDA approves it ... it looks like the chances of being a leading choice of therapy are relatively low," he added.

Adjusting results

The primary target of the latest study, known as BRAVO, had been to show that laquinimod significantly reduced ARR for patients with MS.

Although it failed to do so, Teva said that after a standard adjustment in a predefined sensitivity analysis to account for dissimilarities between the placebo and treatment arms, there was a significant improvement.

Mark Schoenebaum, an analyst with ISI Group, said it was unclear how much weight the sensitivity analysis would carry with regulators since the trial missed its primary endpoint.

"We now believe there is material risk that laquinimod is not approvable -- perhaps 50 percent risk at this point," he said.

The problems facing laquinimod could benefit Biogen, which is developing a new competitor MS treatment called BG-12.

Tepper said BG-12 is considered safe but there are a few issues of tolerability of the drug.

Israel-based Teva is best known as the world's largest maker of generic drugs, but it also has a leading position in MS with its branded injectable drug Copaxone.

Copaxone now faces the threat of generic competition and laquinimod is viewed as important in protecting Teva's MS franchise.

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