UPDATE: Genzyme, Isis Cholesterol Drug Data Raise Questions

Genzyme Corp. (GENZ) and Isis Pharmaceuticals Inc. (ISIS) reported the success of a late-stage trial of cholesterol treatment mipomersen, but Wall Street is worried that side effects could reduce its potential in broader populations, cutting sales by hundreds of millions of dollars.

The companies said mipomersen cut so-called bad cholesterol levels by 25% in patients with homozygous familial hypercholesterolemia, a rare genetic disorder of severely elevated cholesterol that affects only a few hundred people in the U.S. The results should help secure regulatory approval, but the study's 18% dropout rate among the severely ill patients suggest less-severe patients aren't as likely to use the drug.

"That calls into the question the ability to develop the drug in the larger market opportunities," said Leerink Swann analyst Joseph Schwartz.

The worries comes from elevated liver transaminases, a signal of liver damage, being one of the most common side effects that caused one patient to drop out and could raise questions from regulators. Other patients left the study because of injection-site reactions, rashes, non-compliance and personal reasons.

The dropout rate was surprising because patients in the study have extremely high cholesterol that doesn't respond to typical therapies. They often have had cardiovascular events and face significantly shortened lives, which makes their decision to stop using the drug alarming.

Isis shares, up 33% before today from their March 5 low, fell 6% Wednesday to $14.54 on more than twice its average daily volume.

Schwartz said the drop in the stock is "not very much considering the severity of the dropouts" and the implications for the future use of the drug.

Genzyme has touted the potentially huge target number of patients that could use mipomersen, alluding to annual sales eventually reaching $2 billion.

It would be a long road to get to that population. JPMorgan analyst Geoffrey Meacham projects a relatively modest market for homozygous familial hypercholesterolemia with 550 to 600 patients in U.S. and Europe paying about $200,000 a year.

"We have a difficult time modeling much more than $100 million in [annual] sales," he said.

Genzyme partnered with Isis in early 2008 with an upfront payment of $325 million, an unusually large payment for a drug that had no late-stage data at the time. The deal also includes more than $1.5 billion in potential milestone payments to Isis that are backweighted to its later success.

Any problems in getting the drug to wider populations could significantly alter those payments, thus impacting the market valuation of Isis.

Mipomersen cuts production of a protein critical to the production and transport of low-density lipoproteins, or LDL, often called bad cholesterol. It is intended for patients who are unable to achieve target cholesterol levels with drugs known as statins alone or who are intolerant of statins.

In the study, patients had a baseline LDL of more than 400 milligrams per deciliter of blood despite being on the maximum amount of lipid-lowering therapies. The American Heart Association describes LDL under 100mg/dl as "optimal" and above 160mg/dl as "high."

Regardless of any impact on wider sales, Wall Street is generally expecting mipomersen to be approved for these niche patients that have few alternative options.

The companies reiterated their expectations to file for marketing approval in the second half of 2010, based on these data.

-By Thomas Gryta; Dow Jones Newswires; 201-938-2053; [e-mail]