QLT says long-term vision unobscured by rivals

The stakes are enormous and the field is getting a little more crowded. But QLT Inc. isn't blinking as competitors line up to challenge its hot-selling blindness drug Visudyne.

After a nearly five-year monopoly treating back-of-the-eye diseases to arrest vision loss in some patients, Visudyne's first competitor is expected to be cleared by the U.S. Food and Drug Administration next month.

Macugen, a drug developed by Eyetech Pharmaceuticals Inc. of New York and its marketing partner Pfizer Inc., went before an FDA panel in August and was declared a safe drug to slow the progression of "wet" age-related macular degeneration (AMD), the leading cause of blindness in seniors.

"Macugen may be introduced [in the first quarter next year] but it does not appear to pose a huge threat to Visudyne," said QLT president and chief executive officer Paul Hastings. "There's nothing to say Visudyne is in trouble."

Investors disagree. QLT shares began tumbling at the end of April after reaching a 52-week peak of $30.70 (U.S.) in response to the competitive threat. They continued to lose ground after the company announced a big cash and stock merger for Atrix Laboratories Inc. of Fort Collins, Colo., which was approved on Friday. The stock closed at $15.42 on the Nasdaq Stock Market Friday.

"A large component of the trading action can be attributed to market perception of risk due to impending competition from potential new entrants in the AMD market," First Associates analyst David Washburn said in a recent research report.

But like other analysts, he figures the market has overreacted because there isn't a "demonstrably superior alternative [to Visudyne]to this point."

Visudyne, which is injected into the bloodstream and then activated by a cold laser light, has treated more than one million AMD patients so far, with worldwide sales this year targeted to approach $455-million, a nearly 27-per-cent year-over-year increase. It is sold by marketing partner Novartis AG.

Whether Pfizer can out-muscle Novartis for the pocketbooks of 1,400 retina specialists in North America remains to be seen.

"For QLT's position in the market to be seriously eroded, one of these competing drugs is going to have to show substantially better data than they've shown to date," Raymond James analyst Brian Bapty said.

Then there's the comfort level. Macugen is injected directly into the eye, with as many as 16 injections required over a two-year period, compared with four laser treatments with Visudyne.

Also working in Visudyne's favour is its established position with doctors, who may be eager for an alternative treatment but reluctant to change course unless they're convinced of better outcomes for patients.

At an ophthalmology conference last month, Eyetech disclosed additional data from its late-stage clinical studies that showed Macugen had a 45-per-cent relative benefit against a placebo. That compares with an earlier study by Vancouver-based QLT, suggesting a 49-per-cent benefit with Visudyne.

Wet AMD is caused by the growth of abnormal blood vessels at the back of the eye. These vessels are fragile and leak fluid and blood, leading to the development of scar tissue that can destroy central vision.

There are three categories of wet AMD: predominately and minimally classic, and occult, depending on the pattern of leakage. While Visudyne has been cleared to treat only predominately classic AMD, the U.S. Centers for Medicare and Medicaid is now reimbursing doctors who treat patients with the other sub-types.

Macugen, on the other hand, is seeking approval for all three types of AMD. And analysts are betting Pfizer will use the drug's broader range of coverage for a huge sales and marketing push next year.

Even with a new kid on the block, Visudyne's outlook brightened last month when competitors Alcon Inc., Iridex Corp. and Miravent Medical Technologies each reported clinical and regulatory setbacks.

That gives Genentech Inc.'s Lucentis drug the best chance to follow Macugen into the AMD market. But Lucentis is expected to compete with Macugen since both drugs are designed to block a protein involved in the formation of new blood vessels at the back of the eye.

"After all the noise competitors have been making in the past couple years, the one thing that's clear is that AMD is a much more difficult disease to treat," Mr. Bapty said.