Investors were revved up Tuesday about SurModics Inc.'s deal granting rights to its biodegradable microparticles drug delivery system to Genentech Inc. for use in developing and commercializing a sustained formulation of Lucentis (ranibizumab injection), a vascular endothelial growth factor inhibitor approved to treat wet age-related macular degeneration.
Shares of SurModics (NASDAQ:SRDX), which stands to gain $3.5 million up front and a potential $200 million more in milestone payments under the partnership, climbed 19.7 percent Tuesday, or $4.77, to close at $29.04.
The Eden Prairie, Minn.-based company, which specializes in drug delivery technologies, such as coatings, microparticles, nanoparticles and implants, also is entitled to receive undisclosed royalties on product sales.
South San Francisco-based Genentech, which will pay SurModics for development services, has the option to develop additional ophthalmic disease compounds, said SurModics CEO Bruce Barclay.
Genentech, a subsidiary of Roche AG, also has the right to obtain further manufacturing services from SurModics, an element of the agreement which Barclay said "reinforces our recent strategic decision to invest in clinical and commercial manufacturing capabilities," through the construction of the firm's new Alabama facility.
"We believe this capability, coupled with our extensive experience in microparticle technology, helps reduce the risk inherent in development programs of this magnitude and could add value to Genentech and other current and future partners," he told investors and analysts Tuesday during a conference call.
While the agreement grants licenses to Genentech for microparticle formulations for use with Lucentis and potentially other compounds, the deal does not preclude SurModics from working with other partners who have compounds not included within the scope of the collaboration, Barclay said. "Accordingly, we are free to continue development of all of our customer programs currently under way and to pursue new opportunities with other customers in ophthalmology, subject, of course, to the various pre-existing rights granted to our customers," he said.
But Barclay said the Genentech deal "validates the investment and development efforts we have made in ophthalmology and sight-specific drug delivery and underscores the significant breadth and depth of SurModics' offerings." He noted that the partnership also marks SurModics' first license involving a protein therapeutic using the firm's microparticle sustained drug delivery system in the ophthalmology market.
"Our unique ability to work with protein therapeutics has strengthened SurModics' value proposition to commercial partners and the clinical community as a whole, while providing significant benefits to patients suffering from debilitating diseases of the eye," Barclay said.
The demand for sustained-release formulations of ophthalmic therapies "is significant and growing and spans a broad range of ophthalmology diseases," Barclay said.
AMD, which occurs in two forms - wet and dry - is the leading cause of blindness and severe vision loss in people older than 55. The National Eye Institute estimates that there are 1.7 million people in the U.S. with an advanced form of AMD, and that figure is expected to grow to more than 2.9 million by 2020. About 200,000 patients are diagnosed with AMD in the U.S. each year.
Diabetic macular edema, the leading cause of blindness in people younger than 65, affects about 1.3 million people in the U.S, with about 260,000 new cases diagnosed each year. And about 1 million people have retinal vein occlusion, the third-leading cause of visual disability, with about 160,000 new diagnoses in the U.S. each year.
The aging population in the U.S. has helped fuel the growth of AMD, and the growing problem of obesity has created a surge in serious ophthalmic conditions in patients with diabetes. "Demographic trends indicate that these diseases are likely to grow more prevalent in the years to come," Barclay said.
The unmet clinical need relating to sustained delivery of drugs to the eye is "significant," Barclay added. He noted that industry experts anticipate that ocular drug delivery will have a "major impact on the market in the years ahead."
Current therapies for eye diseases like AMD and DME require frequent injections into the eye about every four to six weeks, which poses a high treatment burden for patients and physicians, Barclay noted. Recognizing that challenge, SurModics "set out early" to investigate a variety of sustained technologies to deliver small molecules and protein therapeutics for the eye, he said.
"Our biodegradable microparticle formulations offer a considerable advantage over existing therapeutic treatment options by delivering virtually any drug to the back of the eye over a sustained period of time, which provides the opportunity to reduce the frequency of administration," Barclay noted.
While Lucentis has been "phenomenally successful," with more than $2 billion in annualized worldwide sales, a sustained formulation could be administered through a "minimally invasive" delivery system in an office-based procedure, he maintained. "A microparticle formulation could require administration on a less frequent basis than is necessary today and would present a significant benefit to both patients and treating physicians."
SurModics' focus on ophthalmology began in 2005 and was further expanded in July 2007 through its acquisition of Brookwood Pharmaceuticals, now SurModics Pharmaceuticals, and later with the acquisition in November 2008 of additional microparticle technologies from PR Pharmaceuticals Inc., Barclay said.
The collaboration with Genentech will "leverage technologies and know-how from all of these acquisitions as well as other SurModics capabilities that have been developed during our long and successful history in drug delivery," he added. Before the Genentech deal, SurModics already had a "very productive working relationship" with the biotech giant involving evaluation of microparticle ophthalmic drug delivery, which Barclay said made the signing of the license and development agreement possible.
"We are very optimistic about the products we will jointly pursue, as they have the potential to offer dramatic benefits to both patients and treating physicians," Barclay said. "We believe that this collaboration is an excellent fit for both organizations."