MedImmune's Psoriasis Drug May Go More Than Skin-Deep

Shares of MedImmune(MEDI) are up 4% Monday after the biotech firm released positive test results for a new psoriasis drug over the weekend.

The midstage tests for MEDI-507 suggest the drug will be just as effective as similar psoriasis drugs under development by Biogen(BGEN) and a joint venture between Genentech(DNA) and Xoma(XOMA).

MedImmune presented results from three studies at the European Society of Dermatological Research. The company said that approximately 39% of patients taking MEDI-507, also known as siplizumab, by injection were able to reduce their psoriasis symptoms by 75%, a level considered to be the gold standard by dermatologists.

The company did not release details about how long patients were able to maintain these improvements in their psoriasis symptoms.

MEDI-507 works by suppressing the function of certain types of immune cells, or T cells. This has raised concerns among researchers because T-cell suppression can lead to increased rates of infection. But over the weekend, MedImmune said MEDI-507 did not lead to problems with patients' immune systems.

Biogen's experimental psoriasis drug Amevive also works by suppressing T cells. The drug is currently awaiting review by the Food and Drug Administration.

MedImmune's biggest challenge with MEDI-507 might not be the drug's effectiveness or safety, but the fact that at least two other psoriasis drugs are likely to hit the market sooner. Biogen's Amevive could be reviewed by the FDA at the end of 2002; while Xanelim from Genentech and Xoma could be reviewed in early 2003.

MedImmune is still conducting mid-stage tests of MEDI-507. Even if all goes well, the drug is not likely to hit pharmacy shelves until 2005. Immunex(IMNX) is conducting similar tests to expand use of its rheumatoid arthritis drug, Enbrel, into the psoriasis market.

But new drugs aimed at attacking the root causes of psoriasis are expected to be big sellers, mainly because existing treatments are not entirely effective or carry dangerous side effects. About 6 million Americans suffer from chronic psoriasis -- which causes skin to break out in itchy, painful rashes and blisters.

MedImmune has licensed MEDI-507 from biotech firm BioTransplant(BTRN), which also stands to profit if the drug is a success. MedImmune is funding the development of the drug in psoriasis, but will pay BioTransplant a royalty rate in the low double-digits of the drug's sales. BioTransplant retains the rights to develop MEDI-507 for other uses, including an experimental system to re-educate a patient's immune system to prevent organ transplant rejection.

"There is good reason to believe that MEDI-507 may prove to be the magic bullet for immune-based diseases," says Dr. Jeff Paley, a physician who consults for biotech hedge funds. "Physicians have long awaited a potent T-cell-targeted drug without global immunosuppression, and MEDI-507's target has now been successfully validated in psoriasis, organ transplantation, and certain cancer applications.

"MedImmune and BioTransplant offers the keen investor the ability to ride the coattails of a potential biotech blockbuster at compelling valuations," he adds. Paley owns long positions in Medimmune and BioTransplant.

Shares of MedImmune were up $1.28, or 4%, to $33.29. Shares of BioTransplant were up 45 cents, or 10%, to $4.76.

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