Acceleron, Celgene Vs. Amgen In The Anemia Drug Race

| About: Acceleron Pharma (XLRN)

Acceleron Pharma (NASDAQ:XLRN) will receive a $7 million milestone payment from partner Celgene (NASDAQ:CELG) for the initiation of a Phase 2 clinical trial of sotatercept in patients on dialysis with end stage renal disease. The company is also eligible to receive future milestones of up to $360 million for the sotatercept program.

The giant of the anemia business is, of course, Amgen (NASDAQ:AMGN). Amgen became the largest biotech company chiefly on the back of a drug it developed in the 1980s for treating anemia and maintaining its monopoly for over two decades. A number of companies have tried, and failed, to knock Amgen out of that position throughout the years. But now an alliance of Celgene and Acceleron is taking another serious shot at the industry giant with sotatercept and ACE-536.

Not many people know that several current members of Acceleron's management team, including CEO John Knopf, were bloodied in a court battle with Amgen. In the 1980s, as members of the Cambridge, MA-based Genetics Institute team they were at the losing end of a court fight over patents with Amgen, which was won, as usual, by Amgen. In the current reincarnation they have been extra careful to avoid giving another opportunity to Amgen's lawyers. Also, this time they have the backing of another powerful company, Celgene.


Sotatercept, Acceleron's lead drug, increases hemoglobin levels and the mass of red cells by a novel mechanism. It is not an EPO (erythropoietin)-based product, it does not bind the EPO receptor, but works on a pathway that is fundamentally distinct from EPO.

Hemoglobin is the oxygen-carrying protein inside red blood cells. It gives red blood cells their red color. People with anemia do not have enough hemoglobin.

Sotatercept's target is a protein, known as activin receptor type IIA, which is involved at a different stage in the process of red blood cell formation. Sotatercept regulates the differentiation and maturation of the precursor cells that will become red blood cells. Sotatercept also helps bone formation. One of the functions of activin A is to inhibit bone growth. By blocking signaling by Activin A, sotatercept stimulates bone formation. Sotatercept is currently in multiple phase 2 clinical trials.

Acceleron is developing sotatercept in collaboration with Celgene for the treatment of anemia in rare blood diseases, like beta-Thalassemia, myelodysplastic syndromes, and Diamond Blackfan. But the main emphasis is on treating anemia in chronic kidney disease and multiple myeloma. Acceleron's approach is different from Amgen's.

Amgen's drugs are genetically engineered forms of a hormone called erythropoietin that stimulates the production of red blood cells. Amgen's Epogen is used for treating patients on kidney dialysis, while Aranesp is a longer-lasting version of the drug that requires fewer injections, and treats patients mainly with cancer chemotherapy-induced anemia.

Although many parts of the body help make red blood cells, most of the work is done in the bone marrow. Bone marrow is the soft tissue in the center of bones that helps form all blood cells.

MDS (Myelodysplastic syndrome) is the name of the condition that occurs when the blood-forming cells in the bone marrow are damaged. This damage leads to low numbers of blood cells being produced.

Healthy red blood cells usually last between 90 and 120 days. The body then removes them. A hormone called EPO (erythropoietin) made in the kidneys signals the bone marrow to make more red blood cells.

Instead of EPOs, Acceleron's interest is focused on the TGF-beta (transforming growth factor beta) protein superfamily, a large and diverse group of molecules that are key regulators in the growth and repair of tissues throughout the body and play critical roles in cancer and other diseases.

ACE-536, the second drug Celgene and Acceleron are working on, is made to block a member of the TGF-beta superfamily of proteins that are involved in the late stages of red-blood cell formation. Animal studies have shown the drug can promote red blood cell growth even when there's no sign of the usual erythropoietin around.

A third drug, dalantercept, which is not part of the Celgene collaboration, is a cancer drug that is tested in three different Phase 2 trials against various types of cancers. Celgene pays all development, manufacturing, commercialization and certain patent costs for sotatercept and ACE-536.


Sotatercept's recently announced Phase 2 trial in kidney failure patients will be conducted in two parts. Part one is a dose-escalation study of the drug administered either intravenously and by injection in 60 patients to find the right dosage that can be applied in the next segment of the trial. Part 2 is a controlled study of about 230 patients to compare the new drug to existing drugs used in standard of care to stimulate the production of red blood cells.

Kidney failure patients are people who have reached the final stages where they require either a kidney transplant or dialysis for survival. Anemia, which means low levels of red blood cells, is a common symptom at this point. The condition worsens as the disease progresses.

Disturbance in mineral and bone metabolism, known as Chronic Kidney Disease Mineral and Bone Disorder, is also a common complication. CDK (Chronic Kidney Disease) is most often caused by diabetes or high blood pressure.

Patients included in the trial have been on dialysis at least 6 hours per week, have been on dialysis at least 12 weeks before the trial starts and are on a stable dose of ESA agents to maintain hemoglobin levels before switched to sotatercept. The switch is effected after an ESA treatment is paused for at least five days.

In part one of the trial the patients are given sotatercept once every fourteen days up to a total of eight doses, experimenting with different doses for different groups, and followed up for approximately four months. 60 patients are involved in this.

Part two of the trial is a randomized, controlled study in about 230 patients to evaluate the efficacy and safety of sotatercept versus an ESA drug. Investigators will measure the change in hemoglobin concentration compared to baseline and sotatercept's ability to maintain the patients' hemoglobin levels within a range. Biomarkers will also be used to measure the impact on the bones.


In current practice patients with MDS (Myelodysplastic syndrome) are treated with iron chelation therapy, immunomodulators and various chemotherapies. In addition, erythropoiesis stimulating agents and red blood cell transfusions are extensively used to treat anemia in MDS. Amgen's Aranesp is currently tested for MDS in Phase 3 trials.

Sotatercept and ACE-536, if approved, would compete with all of these. In the treatment of chemotherapy-induced anemia or anemia of chronic kidney disease, they would compete with Epogen and Aranesp, marketed by Amgen, and Procrit, marketed by Johnson & Johnson (NYSE:JNJ).

Other therapies, including oral, small molecule EPO treatments are in development by Astellas Pharma, Fibrogen and AstraZeneca (NYSE:AZN). These are potential future competitors. Currently there is no drug approved for the treatment of anemia in beta-thalassemia, and therefore red blood cell transfusions are extensively used. Sotatercept or ACE-536 would have to compete with this therapy.

HQK-1001, a hemoglobin stimulating agent is being developed by HemaQuest Pharmaceuticals. It is in a Phase 1 & 2 clinical trial and an investigator sponsored Phase 2 clinical trial in patients with beta-thalassemia.

Dalantercept is designed to inhibit blood vessel formation in tumors through a mechanism that is distinct from, and potentially compatible with the VEGF (vascular endothelial growth factor) pathway inhibitors, the currently accepted class of cancer drugs.

The VEGF pathway inhibitors, the most famous being Roche's Avastin, generate worldwide sales over $8 billion annually. Acceleron is developing dalantercept primarily for use in combination with these successful products.


These are huge markets.

In CKD (Chronic Kidney Disease) patients, anemia is associated with increased hospitalization rates, increased mortality, and reduced quality of life, but the condition tends to be undertreated due in part to the cost and the complexity of treatment with injectable ESA agents and intravenous iron supplements. All currently available EPO treatments are injectables.

Nearly all patients on dialysis have easy access to ESA therapy, but only 2 percent of CKD patients receive treatment with ESAs prior to referral to a nephrologist in the U.S.

Under-treatment of anemia in the primary doctor's office in the U.S. can be attributed in part to the rules that require physicians to buy ESA inventory and bill after procedures. This deters doctors, especially since anemic patients make up a small portion of their clientele. There are an estimated 1 million late-stage CKD patients with anemia in the U.S., and less than 20 percent are treated with ESAs prior to starting on dialysis.

Prevalence of CKD has increased dramatically in the past 20 years, from 10 percent of the U.S. adult population (approximately 20 million adults) as surveyed by the National Health and Nutrition Evaluation Survey for the years 1988-1994, to 15 percent in the same survey for 2003-2006. 15 percent amounts to about 30 million adults. In 2009, total Medicare costs for CKD patients were $34 billion, a major burden on the healthcare system.

By the Thalassaemia International Federation's estimate around 7 percent of the global population carries an abnormal hemoglobin gene and over 300,000 children are born with clinically significant hemoglobin disorders annually.

These people are dependent on frequent blood transfusions. It is thought that a large proportion of beta-thalassemia patients do not receive frequent blood transfusions, as they need it. Many of these people live with hemoglobin levels that are half that of normal individuals and experience significant complications accordingly.

Many patients with chronic kidney disease suffer from both anemia and bone loss. Although not approved by the FDA for MDS, anemia drugs are used in these patients to the extent that they generate an estimated $500 to $700 million in annual U.S. sales, according to Acceleron's market research, as published in its S-1 document.

Sotatercept and ACE-536 have similar effects on red blood cells, but sotatercept has also been shown to increase bone mass. To take advantage of this, sotatercept is being studied in an investigator-sponsored Phase 1 and a Celgene sponsored Phase 2 trial in multiple myeloma patients.

The current standard of care for anemia is a combination of iron supplements and injectable erythropoiesis-stimulating agents, which stimulate the bone marrow to produce more red blood cells and decrease the need for blood transfusions. Currently used EPO agents, according to the FDA, carry cardiovascular risk like heart attacks and strokes.

For that reason and others, new drugs are urgently needed.

Investors' summary

Acceleron's collaboration revenue for the third quarter of 2013 was $4.3 million and $45.7 million for the nine months ended September 30, 2013, compared to $3.9 million and $11.3 million for the comparable periods in 2012. The increase in collaboration revenue was the result of the termination of the Shire collaboration in the second quarter of 2013, when the deferred revenue had to be recognized in a lump sum.

Cash and cash equivalents at the end of September were $116.5 million, compared to $39.6 million at the end of December, 2012. A source of the cash increase was the net proceeds of $96.8 million from Acceleron's successful IPO which included a $10 million private placement of the company's common stock to Celgene Corporation.

Acceleron expects that its cash and cash equivalents will fund the company into the second half of 2015. The company's net loss was $18.5 million for the third quarter and $3.8 million for the nine months ended September 30, compared to a net loss of $7.2 million and $22.2 million for the comparable periods in 2012.

The company has incurred losses during most fiscal periods since its foundation. As of June 30, 2013, the accumulated deficit amounted to $286.1 million. The company has no approved product and it is uncertain when it will become profitable.

The anemia business is huge. The worldwide market for anemia drugs is an estimated $10 billion in sales each year and growing, for patients with various states of kidney disease, and cancer patients who get anemic from chemotherapy that kills off otherwise healthy red blood cells.

Acceleron is a small company that is ready and willing to join the elite class in the biotech business. Joining the biotech elite comes with huge opportunities and equally huge and aggressive competitors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.