The American multiple sclerosis drug market is on the verge of dramatic changes, according to the American Neurological Association. A headlong battle between the European bio-technological giant Serono Pharmaceuticals (SRA) and the American giant Biogen (BGEN) is liable to affect the fate of Copaxone, the flagship product and income producing engine of Israel's huge concern

Teva Pharmaceuticals

(Nasdaq:TEVA).

Avonex, produced by Biogen, still enjoys 'orphan drug' status. That's a label the FDA gives to promote the development of drugs for small patient segments of the population, with rare diseases. Exclusivity is granted for a period of seven years and can only be revoked if an equivalent, or more effective drug is discovered.

It is into this precise loophole that Serono is attempting to insert itself. This Swiss giant, traded on Wall Street at a $21 billion valuation, markets Rebif, equivalent to Avonex, in 67 countries. Its global sales in 2000 reached $252.2 million. The Swiss drug is the world's fastest growing multiple sclerosis treatment, but due to Avonex's exclusivity, Rebif has yet to be approved by the FDA and marketed in the U.S.

Serono, which is acquiring an enormous reputation for its drugs' effectiveness, has decided to penetrate the American market, before Avonex's exclusivity rights expire in May 2003. It initiated an experiment, pitching the two drugs against each other, in order to prove the greater effectiveness of Rebif. This was implemented with the close cooperation of the FDA, which provided specific guidelines.

Rebif routs Avonex

Results of the experiment's first stage, over a 24-week period, were so conclusive in Rebif's favor that Serono promptly published some of its findings at the latest Meeting of the American Neurological Association (full findings report will be published on 22 June at the World Neurological Meeting in London). The findings show that Rebif has a 32% advantage over Avonex in preventing deterioration, and a 33% advantage in preventing disease-related sores.

Nevertheless, the findings are not without question, simply as they are only partial and will be so until the entire report is released in June. Not unexpectedly, senior Biogen personnel rejected the findings of the short experiment, stating that there are indications that the effectiveness levels of both drugs are identical on a long-term basis.

If Serono does succeed in proving that Rebif in fact is significantly superior to Avonex, it will be able to demand FDA approval for the very purpose it undertook the experiment: the ability to attack the American multiple sclerosis patient community in the middle of 2002 one year prior to the expiration date of Avonex's exclusivity.

The early assault of an extolled Rebif on the American market may have an earlier-than-expected negative affect not only Biogen, but also on other players in the multiple sclerosis field such as Schering (SHR) and Teva. Or so believes investment house

Salomon Smith Barney

, which says this is a very real possibility in light of Rebif's status and sales level worldwide outside the U.S.

Teva remains tranquil

Teva's representative in this market, Copaxone, is its only originally developed drug and its highest earner ($74 million in the first quarter) as it has the largest profit margin of all products marketed by the company. Solomon Smith Barney estimates that the early entry of Rebif in the American market and the saturation of the multiple sclerosis market, will cause Copaxone's growth to slow to 20% per annum in 2002 and 2003, and believes this will significantly affect Teva's performance.

Teva is, as expected, not accepting Solomon Smith Barney's sentence at face value. Company spokespeople are quick to reiterate that Copaxone is the only multiple sclerosis treatment which is a non-interferon; it is not administered through the patient's immune system and as such does not have some of the side-effects characterized by the other drugs. Copaxone entered the market targeting patients who could not tolerate interferons. It subsequently became the second largest selling drug in this market, second only to Avonex.

Teva is also acting indifferent to the time element of Rebif's entry into the USA market, claiming that Copaxone may in fact benefit from the anticipated wildcat competition between the Swiss drug and its American rival, which could damage both their images.

Teva is also not sitting on its proverbial hands and has plans to assail the American multiple sclerosis market from a novel direction. The company is experimenting with an oral version of Copaxone (presently only available by injection), and will present its results for FDA approval in the middle of 2001.

It is difficult to predict at present the extent of the effect of the early introduction of Rebif into the USA market on the Israeli drug, if this indeed occurs. These two drugs have never previously competed directly with each other. Some 90% of Copaxone's sales are presently in North America, despite Teva's attempts to penetrate the European market, and Rebif's has until now played exclusively in this market.

It will be interesting to see what happens after June 22, if and when the two drugs face-off in direct market competition.