Peplin has delivered positive Phase II results
with its compound PEP005 in the treatment of actinic keratosis
(AK) sun spots. In a Phase IIb patient trial, 54% of patients
in the highest treatment group achieved total clearance of all
AK lesions after only three days of treatment. The results indicate
the drug compound is likely to have significant competitive advantages
against competing products on the market.
The trial involved 222 people with AK lesions in a field therapy
application, whereby the topical compound was applied to a whole
area containing several AKs. There were 25 sites across Australia,
New Zealand and the US that took part in this study. The primary
measure was partial clearance of AK lesions, which is defined
as 75% or greater clearance of these lesions.
A secondary endpoint was complete clearance
of all AK lesions whether they were present at the start of the
trial or not. The result was measured at 57 days after the start
Trial results and comparison with existing
On the primary measure, 75% of patients achieved partial (75%)
clearance of AK lesions in the highest dose group after three
days of treatment. This trial did not treat AKs on the face. By
comparison (although not direct) with existing products on the
market, Aldara generates a partial clearance (75%) of 59% of lesions
and 5-FU achieves a partial clearance of 71% of AK lesions on
the face and scalp. Not only did PEP005 generate a better result
than these two products, it did so with substantially less use.
PEP005 was applied for two to three days compared to twice a week
for 16 weeks for Aldara and once daily for four weeks with 5-FU.
For the secondary measure of complete clearance,
PEP005 achieved a 54% clearance of AK lesions on the trunk, extremities
and scalp. Aldara and 5-FU have previously achieved 45% and 48%
complete clearance of AKs from the face and scalp respectively.
On all measures, Peplin's results achieved clear statistical significance.
The compound was found to have a favourable
safety profile and was well tolerated. In the treated group, 15%
could not be treated for a third consecutive day because of local
response to the drug. Of the 222 patients who entered the trial,
remarkably 220 people finished the trial which was not difficult
to recruit, indicating strong interest in this type of therapy.
In comparison with cryotherapy, this successfully
achieves an 83% complete clearance rate if the lesion is treated
for more than 20 seconds (or 39% complete clearance if treated
for less than 5 seconds). However cryotherapy has its limitations.
A small portion of AKs develop into skin cancers if left untreated.
Cryotherapy can only be used for individual lesions and not as
a filed therapy. It also has no impact on the surrounding area
and does not impact on the course of the disease. And cryotherapy
leaves a visibly treated lesion area.
Market for PEP005
The market for topical treatment of AKs and skin cancers was US$150
million according to IMS in 2005 and is estimated to have exceeded
US$200 million last year. This market is expected to increase
to US$400 million by 2010, when Peplin's product is scheduled
for approval if all goes well. We estimate that Peplin’s
product will generate sales in excess of US$200 million.
Of interest to note is the sale of 3M's pharmaceutical
business at the end of last year, which included the Aldara product.
Aldara was one of three core products within the 3M pharmaceutical
business which made up 80% of total sales for that division. The
business was sold to three separate groups for different regions
for a total price of US$2 billion. The business was generating
about US$800 million in sales and Aldara accounted for at least
US$260 million of those sales (in 2005).
What needs to be noted is that about 60% of
Aldara sales go towards treating another disease indication, genital
warts (in 2005). The comments from Swedish group Meda, which acquired
the European 3M pharmaceutical business for US$817 million are
of interest. It refers to the three main drugs it acquired - Aldara,
Minitran and Tambocor - as niche buster products with Aldara having
the greatest growth potential. At the time of purchase, Aldara
was generating sales in Europe of only US$34 million with the
product undergoing registration for the treatment of AKs in Europe.
Aldara was approved for use in the US in 2004 for AK treatment
and treatment of non-melanoma skin cancers.
Another point to note is that the patent on
Aldara expires in August 2009 in the US. Peplin's use patent over
its lead compound expires in 2018 and this is supplemented with
longer lasting formulation patents. Under patent extension provisions
(Hatch-Waxman in the US) Peplin should enjoy at least 10 years
market exclusivity for its product if it gets to market on schedule
in 2010. Another attractive feature is that Peplin intends to
sell its product directly in the US to dermatologists. It will
use distributors in other regions or outlicense the product. The
company's rights to the technology are completely unencumbered.
Peplin expects to begin its Phase III trials in early
2008. These trials are expected to take only 12 months to complete
which should place the company in a position to file for regulatory
approval in the US in 2009. Peplin had $33 million in cash reserves
at the end of March this year and is capitalized at $163 million.
recommendation: Speculative Buy Class A