By Matthew Willett

Immunex Corp.'s stock dove Friday morning on news of clinical failures of the company's established rheumatoid arthritis therapeutic Enbrel in a new indication, and its asthma candidate, Nuvance.

Analysts throughout Manhattan told industry watchers the company's stock is unpromising in the near term, and they dropped ratings and price targets accordingly.

Immunex's shares (NASDAQ:IMNX) closed at $11.625 Friday, down 38 percent from the previous day's close of $18.875 after reaching a low of $10.75. Only a year ago the company traded in the high $60s, closing on March 24, 2000, at $67.

For its part, Seattle-based Immunex tried to maintain damage control. Company officials pointed to positive results from a Phase III Enbrel trial in psoriatic arthritis that will be the foundation for a regulatory submission to expand the indication for the drug, which works by binding to and neutralizing tumor necrosis factor, a cytokine that's implicated in the rheumatoid arthritis inflammation cascade. (See BioWorld Today, March 23, 2001.)

But though expansion into a fourth indication for Enbrel could open a 250,000-patient market for the drug, stockholders seemed to focus on the drug's failure to show efficacy in a Phase II/III trial in chronic heart failure and an independent data monitoring board's recommendation to halt the study.

Analysts expressed uncertainty for Enbrel's future, most notably in the supply availability issues Immunex plans to address with the opening of a Rhode Island manufacturing facility, and added that Nuvance's failure to show efficacy in a two Phase II trials makes the remaining Phase II trial an unknown variable that could prove an aftershock when data analysis is made public this summer.

Banc of America analyst Eric Ende calls Immunex stock "dead money," and values it at between $11 and $15 for the rest of this quarter and most of next.

"This is just a huge disappointment," Ende told BioWorld Today. "The way we're looking at it now, the stock has gotten beaten up badly. We value the stock in several different ways, in almost the worst-case [scenarios]. The stock is likely to be dead money for several quarters, and we don't expect any potential upside until the third quarter."

Even then, he said, don't call it a comeback. Though Enbrel is a "home run," the future for its production and Nuvance's new riskiness turn him off.

"That's what's so disappointing," Ende said. "Beyond Enbrel the next big upside and potential from the pipeline is Nuvance, and now the problem is if that product doesn't end up being commercialized. Despite the valuation, I think the stock should trade between $11 and $15, which is possibly moderately undervalued, but we still had to take down the rating. I still just don't see the upside and there's still additional risk."

Light At The End Of The Tunnel Appears Dim

Solomon Smith Barney's Elise Wang said the news from the beleaguered Immunex paints a gray picture for the company's future.

"The most significant issue for them, obviously, was the surprise element in yesterday's announcements that they are terminating the study for chronic heart failure," Wang told BioWorld Today. "In the eyes of the investors that represented a significant potential upside for Enbrel sales."

Wang agreed the outlook isn't great for Immunex, also citing the supply issue for Enbrel and the shift the news forces the company to take from a promising late-stage pipeline company to one with a focus on unproven early stage therapeutics.

"Our point of view is pretty cautious on the outlook for what's new," she said. "What this paints is a picture of a later-stage pipeline now taking some major setbacks. What they have now in terms of a pipeline are much earlier-stage products in Phase II or moving into Phase I. It paints a picture of near-term growth prospects slowed down significantly.

"What they need is some catalyst to get the stock going again, but there's no light at the end of the tunnel now. There's nothing in the near term any of us can anticipate," Wang added. "If they resolved the capacity issues on Enbrel it could help them, but right now with the issues that are facing them that's not enough; that's not going to be done until the middle of next year."

Wang fell short of sounding the death knell for Immunex, however. The long-term prospects for the company could still make it more palatable to investors, but that's an outlook toward the future.

"It'll take some time to pass the constraints they have right now. The current plan is not going to get things resolved until the middle of next year. The pipeline issues are what are going to matter. They're pushing forward on what they have on the platform and they have to continue to pursue development on those products. It's just a matter of time now."

Immunex Says Setbacks Part Of The Business

At Immunex Friday the mood wasn't nearly so dark. Officials accompanied the Thursday announcements with caveats on trial risk and their pipeline's real potential, and on Friday they echoed those sentiments.

"I think it's an overreaction, much as the market does for any bit of news these days, it seems," Immunex's Chief Technology Officer Doug Williams told BioWorld Today Friday. "I think certainly people are not looking beyond the news, looking at the overall health of the company or the longer-term prospects for the company. We're on very solid footing as a company, and we've made major investments in infrastructure that will allow us to do what we've already done well, better and faster."

Williams cited the ongoing success of Enbrel in multiple indications. Enbrel was first approved in November 1998 to treat moderately to severely active rheumatoid arthritis in patients who have an inadequate response to one or more disease-modifying anti-rheumatic drugs. Enbrel also gained an approval in May 1999 to treat children and teen-agers with moderately to severely active polyarticular-course juvenile RA. Enbrel gained further expanded approval for treatment of early stage RA last year.

And that's not the end for the TNF receptor antagonist, Williams said. "I think Enbrel stands to potentially be one of the biggest drugs ever, just because the mechanism of action is associated with so many disease areas. Chronic inflammation is sort of a catch-all for a lot of different diseases, and TNF is implicated as a driver in a lot of those."

Immunex revenue in 2000 totaled $861.82 million, up from $541.72 million in 1999 and $243.45 million in 1998. In 2000, the company generated net income of $154.4 million, compared to net income of $44.3 million in 1999 and $1 million in 1998.

Immunex reported sales of $652.4 million for Enbrel in 2000, up from the $366.9 million the drug logged in 1999. Enbrel is by far the revenue leader for Immunex, accounting for 76 percent of the company's total revenue.

Immunex markets Enbrel itself in North America, and Wyeth-Ayerst Pharmaceuticals, of Radnor, Pa., the pharmaceutical division of American Home Products Corp., of Madison, N.J., has rights for marketing and commercializing Enbrel in all other markets.

Realistically, Williams said, the market for Enbrel alone could more than double, should the TNF modulator live up to its potential.

"We've only cracked into about 7 percent of the potential patients who fall under the current label indication in RA," he said. "There's a tremendous upside in terms of gaining a tremendous market share. This is the only TNF antagonist approved as a single-agent therapy, and it's labeled for both late stage and early stage. The opportunity just in the RA market is an enormous upside potential we'll begin to realize."

And though Enbrel stands to face competition from other TNF modulators, Williams maintained that Immunex has only tapped the tip of the Enbrel iceberg.

"[There's a possibility of Enbrel's market] more than doubling, if you look at the whole constellation of diseases we're looking at within the clinical program," he said.

Concurrent to the announcements of failures for Enbrel in CHF and Nuvance in asthma was an announcement of encouraging results for Enbrel in psoriatic arthritis, a potential label expansion that could mean an additional 250,000 patients, Williams reminded questioners Friday. And, he added, the pipeline for Immunex is still strong.

"We're in the fortunate position of having a robust pipeline with a lot of opportunities behind Enbrel and Nuvance," Williams said. "We'll file two new investigational drug applications this year and bring two new candidates into the clinic, and that's just an illustration of the productivity of the pipeline. We're also in the process of bringing in new drug candidates through partnership. An example of that is the VEGF receptor antibody we're doing jointly with Abgenix Inc. [of Fremont, Calif.], and that molecule should move into Phase II this year."

Immunex also markets Leukine, a yeast-produced granulocyte macrophage-colony stimulating factor for facilitating allogeneic and autologous bone marrow transplant therapies, accelerating neutrophil recovery, reducing mortality in patients with myelogenous leukemia and supporting peripheral blood progenitor cell mobilization.

Leukine sales in 2000 generated $88.3 million, up from $69.1 million in 1999.

And Immunex markets the chemotherapeutic Novantrone, the cytotoxic agent Thioplex, and Amicar, an antifibrinolytic.

Williams said the company also is pursuing development of an interleukin-1 receptor antagonist and a psoriasis treatment that are nearing the clinic, and he added the company is preparing to expand its therapeutics development into monoclonal antibody production.

"Yesterday was sort of good news/bad news," Williams said. "It's all a part of the business. We've been here before, and we'll keep pushing what we've got in the pipeline ahead. Any study may turn out negative. This is a tough business, and I think we all recognize that not everything works. We learned from the CHF trial, and that sets us up to hopefully be more successful the next time out. It's all part of the business." n