Diamyd continues winning streak with J&J deal

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Signing a deal with a large pharma player in the form of Johnson & Johnson for its lead type I diabetes product is not so much the validation that Diamyd Medical needed, but perhaps a logical conclusion and justified reward to the group’s impressive efforts to advance the immunotherapy through the clinic. The company has taken the drug into phase III trials not only single-handedly but with the kind of R&D spend that should make more profligate companies blush.

Yesterday, the Stockholm-based company announced that J&J had taken an option to license the product, a novel vaccine for type I diabetes, which also shares its name with the company, resulting in the payment of an upfront fee of $45m and potential milestones of $580m. The news triggered a 28% jump in the group’s share price to SKr139, close to the record high of SKr151.50 achieved in March; the stock has more than tripled in value in the last 12 months.

Taking over the reins

J&J has committed to equally sharing the costs for the development programme until results from an ongoing phase III study being conducted in Europe are published, which should happen in the first half of 2011. If the results are positive it will then assume full responsibility for development, something that Diamyd might almost have found impossible given the large patient trials and the higher hurdles that the FDA is placing on diabetes drugs.

But Diamyd should be praised for managing to come this far and as previously predicted by EP Vantage, the handing over of the baton was inevitable (Sweet times for investors in Diamyd as diabetes vaccine progresses, February 23, 2009).

Novel technology

Diamyd the drug is based around the GAD65 protein found in insulin-producing beta cells in the pancreas, which the immune system targets and attacks, causing type I diabetes. What Diamyd does is to slow the destruction of beta cells, delaying the time that patients start to use insulin. 

In September, Diamyd reported impressive data that showed patients who had been injected with the product in 2005 were showing a significantly better diabetes status compared with placebo, demonstrating the long-term effectiveness of the treatment in halting or slowing the destruction of insulin-producing cells.

The study is due to run for a further three years to determine if the vaccine can produce even longer-term efficacy.

Market opportunity

As such it was unsurprising the company reported that bidding for the product was fierce, with more than one big pharma company putting their hats in the ring to obtain Diamyd.

The fact that there are currently no alternative treatments for type I diabetes outside of insulin would also have increased interest, despite the fact that it is a much smaller market than the type II diabetes space. Between 5-10% of all diabetics are type I however, given that there are an estimated 246 million diabetics in the world the type I indication has the potential to generate significant revenues.

However, with little analyst coverage of the company, despite its $535m market cap and the fact that it has a phase III product in development, there is only one forecast for the product readily available of peaks sales of $800m in type I diabetes. This is a situation that is almost certain to change following the announcement of the deal, which should put Diamyd firmly on the analyst map.

Expansion plans

The drug is also being studied in a rarer form of the disease, latent autoimmune diabetes of adulthood (LADA), and so far phase II trials have been equally encouraging. A 47 patient trial showed that only 14% of adults with type I diabetes treated with Diamyd needed to start taking insulin five years after vaccination, compared with 64% of patients in the placebo arm.

These results are also important because acheiving all the potential milestones under the deal with J&J, which also gives Diamyd the option of commercialising the drug itself in the Nordic region, is dependent on the product receiving approval in more than one indication.

As for the competition outside of insulin treatment, as can be seen from the table below there are a number of other products in development, with Eli Lilly and GlaxoSmithKline’s monoclonal antibody approaches being among the most advanced.

However, interest has been sparked by the tie up between Teva Pharmaceutical Industries and Andromeda Biotech to develop DiaPep277, a T-cell inhibitor which last month announced that it had started a confirmatory phase III trial involving 450 patients, a move that prompted Teva to exercise its option to commercialise the product worldwide.

However, most of the studies involving DiaPep277 have involved adults ranging from 16 years and upwards indicating it does not work well in children, meaning that even if it does beat Diamyd to market, it will have a much smaller slice of the pie.

Late stage candidates for Type 1 Diabetes
Status Product Company(s) Pharmacological Class Lead Indications Launch WW
Phase III Teplizumab Eli Lilly/PDL BioPharma/MacroGenics Anti-CD3 MAb Diabetes, type I (juvenile onset) [Phase III]; Psoriasis [Phase II] 31/12/2012
Otelixizumab GlaxoSmithKline/BTG/Toerx Anti-CD3 MAb Diabetes, type I (juvenile onset) [Phase III]; Diabetes, type II (maturity onset) [Phase II]; Psoriasis [Phase I]; Arthritis, rheumatoid [Phase I] 31/12/2011
Diamyd Diamyd Medical Glutamate modulator Diabetes, type I (juvenile onset) [Phase III]; Diabetes, type II (maturity onset) [Phase III] 30/06/2012
DiaPep277 Teva Pharmaceutical Industries/DeveloGen/Andromeda Biotech T cell inhibitor Diabetes, type I (juvenile onset) [Phase III] 31/12/2013
Phase II TT-223 + EGF Analogue/E1-I.N.T Eli Lilly Epidermal growth factor (EGF) analogue & gastrin analogue Diabetes, type I (juvenile onset) [Phase II]; Diabetes, type II (maturity onset) [Phase II] -
TS-071 Taisho Pharmaceutical SGLT2 inhibitor Diabetes, type I (juvenile onset) [Phase II]; Diabetes, type II (maturity onset) [Phase II] -
AZD6370 AstraZeneca Glucokinase activator Diabetes, type I (juvenile onset) [Phase II]; Diabetes, type II (maturity onset) [Phase II] -
XOMA 052 XOMA Anti-IL-1-beta MAb Diabetes, type II (maturity onset) [Phase II]; Arthritis, rheumatoid [Phase II]; Diabetes, type I (juvenile onset) [Phase II] -
IM-ASN ImmunoMod Anti-diabetic agent Diabetes, type I (juvenile onset) [Phase II] -
C-peptide Creative Peptides C-peptide analogue Diabetes, type I (juvenile onset) [Phase II] -
LSF DiaKine Therapeutics Xanthine Pancreatic islet transplantation [Phase II]; Diabetes, type I (juvenile onset) [Phase II] -
Exsulin exsulin Islet neogenesis-associated protein (INGAP) Diabetes, type I (juvenile onset) [Phase II]; Diabetes, type II (maturity onset) [Phase II] -
PEG-Encapsulated Islet Allograft ViaCyte Islet cell Diabetes, type I (juvenile onset) [Phase II] -

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