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Statins are a major tool in lowering cholesterol levels by inhibiting the enzyme HMG-CoA reductase, which plays a central role in the production of cholesterol in the liver.

In 2008 Lipitor, made by Pfizer (NYSE:PFE), was the best-selling pharmaceutical of all times with sales of $12.4 billion. In 2011, worldwide revenues from Lipitor were $9.6 billion, or 14 percent of total Pfizer revenues, and in the first 9 months of 2012 Lipitor still brought in $3.4 billion worldwide.

Lipitor lost exclusivity in the US in November 2011 and in most countries in the world by 2012. Since then, generics have eaten up much of Lipitor's sales.

Now the race is on to find a successor to Lipitor.

Why?

Why in the world is a new cholesterol-lowering drug needed?

After all, statins like Lipitor, Crestor and the others work well, have been on the market for over a decade, are taken by hundreds of thousands of patients around the world, and are generally regarded as safe.

But statins don't work for everyone nor are they tolerated by all patients.

Also, for people with genetic abnormalities causing their LDL levels to rise well above 400mg/dL, statins are not nearly potent enough to lower their LDL concentrations to recommended levels.

PCSK9 inhibitors: My enemy's enemy is my friend

The new agents most likely to succeed are PCSK9 inhibitors.

The PCSK9 gene provides instructions for making a protein that destroys LDL (bad cholesterol) receptors, which are very important for the removal of LDL cholesterol from the blood stream. This action of the PCSK-9 protein results in high levels of LDL cholesterol, which can build up in artery walls leading to atherosclerosis.

The new experimental drugs work by blocking the PCSK9 protein, which is responsible for the slow removal of bad LDL cholesterol from the blood. The drugs, generally proteins known as monoclonal antibodies, block PCSK9 from binding to the receptor.

The idea may have come from observing people who were born with a genetic defect that prevents them from producing PCSK-9. These people have very low LDL cholesterol levels and little evidence of atherosclerosis. They also don't seem to suffer any consequences from missing this protein.

Inhibitors of PCSK-9 have been pursued for almost a decade. The clinical data are just now emerging and highly promising. While these results are cause for optimism, the road to FDA approval is long and costly.

When and if approved, these PCSK9 inhibitors may be worth at least $10 billion on the market, according to Adnan Butt, an analyst with RBC Capital Markets in San Francisco. In the U.S. alone about 1 million people cannot take statins because of side effects such as muscle soreness.

Several major pharmas are taking part in the race, but Regeneron (NASDAQ:REGN) and Amgen (NASDAQ:AMGN) have developed the two most advanced compounds.

Sanofi/Regeneron

The team of Sanofi (NYSE:SNY), the big French drug company, and Regeneron Pharmaceuticals, a biotechnology company in Tarrytown, N.Y, are developing a compound called SAR236553/REGN727.

Clinical data published in the New England Journal of Medicine in March showed that when this compound was administered either intravenously or by injection, LDL cholesterol was rapidly lowered by as much as 64% and this effect lasted for 4 - 6 weeks.

It worked even in people already on statin therapy.

The statins increase the number of LDL receptors in the liver and PCSK-9 antibodies increase the viability of these same receptors. Thus, the two mechanisms are complementary.

In November 2012 a phase 3 trial called Odyssey was launched with 18,000 patients who had suffered a recent cardiovascular event.

The trial will compare the efficacy of REGN727 plus optimal lipid lowering therapy against placebo plus optimal therapy. Patients will then be followed for a number of years to see if the addition of REGN727 is more effective than current therapy in reducing heart attacks and strokes.

Amgen

Amgen is not far behind. It announced similar results for its AMG145 and plans to begin Phase 3 trials early in 2013.

The phase 2 GAUSS study demonstrated the safety, tolerability and efficacy of subcutaneous AMG145, which binds to PCSK9 in the circulation and blocks its interaction with LDL. Its use was compared with that of Zetia, made by Merck (NYSE:MRK), in statin-intolerant patients at high cardiovascular risk.

The 12-week, randomized, double blind study was conducted between July 2011 and May 2012 and enrolled 236 patients. AMG 145 and a placebo were administered subcutaneously every 4 weeks.

Patients receiving AMG 145 experienced an average reduction in LDL cholesterol of 41 to 51 percent after 12 weeks, depending on the dose. Those who received both AMG 145 and Zetia had an even greater average reduction - 63 percent. By contrast, those who received Zetia and a placebo had a drop in bad cholesterol of only 15 percent.

Pfizer

Pfizer (PFE) has recently released data on its PCSK9 inhibitor, RN 316, showing the drug at its highest dose lowered bad cholesterol in patients on statins by 80 percent after their first treatment. Cholesterol fell so low for some in the 135-person study that the patients did not qualify for a second injection, according to Barry Gumbiner, lead researcher studying the medicine for Pfizer.

At the end of the 12-week study, those getting the highest dose had a decline in LDL of 56 percent. Pfizer did not observe any unusual safety signals.

The Pfizer drug was administered intravenously once every four weeks for a total of three dosings in the brief proof-of-concept trial.

Subsequent trials will use a version injected under the skin, with the next Phase II study designed to determine which doses of the drug will be advanced into much larger, late-stage studies.

Others in pursuit of PCSK9 inhibitors include Roche, with its closely guarded RG7652 program at Genentech, and also Eli Lilly (NYSE:LLY), and Alnylam (NASDAQ:ALNY).

Question marks

Although the trials are promising, questions remain, some clinical and some financial.

While the drugs lower cholesterol, they have not been shown to actually reduce the risk of heart attacks, strokes or other cardiovascular problems.

Furthermore, many of the studies so far have lasted no more than 12 weeks and involved fewer than 200 people. Far longer and larger studies are needed to show that the drugs will keep working over a lifetime and are safe.

Also: the drugs have to be injected, typically every two to four weeks, as opposed to statins which are pills. That may limit their wider appeal.

And then there is the matter of cost.

The reason these drugs cost so much to develop is partly because the FDA places a high safety bar for these types of drugs.

They are intended for a mass market, for usage for a lifetime, as Lipitor was.

To avoid surprises later, tens of thousands of patients have to be treated over a prolonged period of time to prove to the regulators the drugs are safe. If any of the trials cannot demonstrate solid efficacy combined with a clean bill of safety, these medications will be dropped in a heartbeat.

Sanofi and Regeneron's Odyssey trial is praiseworthy in its goals but very expensive: this study alone will likely cost about half a billion dollars. Obviously, these companies are hoping the addition of REGN727 will bring about results superior to those achieved with statin therapy alone: in other words the REGN727 cohort will cause an impressive reduction in the number of heart attacks and strokes.

But there are questions beyond that.

The most advanced candidates in the pipeline are biologics, compounds not administered orally but instead injected twice a month. Such a treatment regimen is more complicated than taking a pill at home once a day.

And because they are biological, the annual cost of such drugs will be at least $10,000/year and maybe even 2 - 3 times that. The annual cost of the generic statins is a fraction of that.

What would induce payers and patients to shell out huge amounts of money to lower cholesterol, when generic statins, with their track record of safety and efficacy, are available?

Most likely these agents initially will be reserved for people at high risk and for whom statins are not very effective or for whom statins are not tolerated.

Investor summary

Amgen and Regeneron are the front runners in the PCSK-9 race.

Amgen's revenues in the third quarter increased 10 percent to $4,319 million, earnings per share grew 19 percent to $1.67.

The key drivers of the growth were Enbrel, Prolia, XGEVA and the newer growth phase products Sensipar, Vectibix and Nplate.

The company generated $1.6 billion of free cash flow in the quarter versus $0.9 billion in the third quarter of 2011.

During the quarter, Amgen repurchased approximately 10 million shares of its common stock at a total cost of $797 million at an average price of $82.18. This brings the total shares repurchased under its $10 billion authorized stock repurchase program to 131 million shares.

The company raised $2 billion from bond sales and the funds will be used to retire the $2.5 billion convertible bonds due in February 2013.

The company declared a $0.36 per share dividend for the fourth quarter of 2012. The dividend will be paid on Dec. 7, 2012.

The share price ranged from $55.03 to 89.95 in the past 52 weeks.

Regeneron had net income of $217 million in the third quarter, which translates into an earnings per share of $1.89.

Profits mainly came from Eylea sales, but also included two one-time milestone payments: $15 million from Sanofi for the FDA approval Zaltrap for patients with metastatic colorectal cancer and a $15 million milestone from Bayer Healthcare for the approval Eylea in wet AMD in Japan.

2012 may become Regeneron's first profitable full year in its unique history.

The company has been in business for 24 years, it has three Nobel Prize winners on its board, an acknowledged genius inventor George D. Yancopoulos for chief scientist and yet it has shown mostly failures or very modest successes in its long history. It has been piling up a cumulative loss of $1.2 billion.

But the approval of the eye drug Eylea last year has changed everything. Eylea sales are growing so fast that the company had to adjust its sales guidance upward four times this year and now the forecast stands at over $800 million for the whole year.

The company's market cap is $14.57 billion and the share price's 52 week range was $49.58 - 166.39, a tremendous run.

Can the stock go any higher?

By all means, if the sales keep going up and new drugs in its pipeline prove to be successful.

To keep the Eylea sales going, Regeneron will have to take market share from Roche's Lucentis.

Analysts are expecting Eylea to peak at $1.1 billion in annual sales by 2021, provided it wins approval for other eye disorders. Lucentis brought in $1.4 billion last year and now has about 40% of the market.

Citigroup's Yaron Werber figures Eylea can grab some 16% of the market from Lucentis. "We think doctors want to experiment with the drug and there's a lot of interest," he told Bloomberg.

Regeneron has a long way to go.

Source: High Stake Search For The Next Lipitor