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Abraxis BioScience, Inc. (Nasdaq: ABII) is an American biotechnology company that specializes in reformulating existing drugs to increase their efficacy or decrease side effects. For example, the company might change the way an existing drug is disolved in water, or add an accompanying chemical to change the properties of the drug. In both cases, the underlying drug is the same, but its efficacy or toxicity can change dramatically. A great example of this is the company's signature cancer drug Abraxane. Abraxane is simply a reformulation of the preexisting, generic cancer drug Taxol, sold by Bristol-Myers Squibb Company (BMY). Taxol is not naturally soluble in water, so pharmaceutical companies have traditional used camphor oil to dissolve the drug in the bloodstream. Camphor oil is toxic to patients however, which makes Taxol unpleasant to take and limits the dose that can be given. Moreover, the camphor oil gave rise to several side effects including nausea and in some cases allergic reactions to the drug. Abraxis found a new way to dissolve Taxol in water which does not require the use of camphor oil, and was able to patent the new, reformulated Taxol and call it Abraxane. The company's Nab delivery system dissolves the drug using albumin, a naturally occurring human protein. As demonstrated by Abraxane clinical trials, this method of drug delivery is safer for the patient, allows for the delivery of larger payload of the drugs and is more potent; Abraxis has a response rate almost double that of solvent-based therapies.^[1] Abraxis is playing a significant role in using technologies like nanoparticle and polymeric drugs to target diseases like cancer and chronic infections.

Abraxane is the company's only FDA approved drug and it is used primarily to treat metastatic breast cancer (cancer that has spread from the primary site to other locations in the body). Although Abraxis' fortunes are dependent on Abraxane's success in the near term (the drug accounted for 97% of revenue in 2007) the drug is only part of Abraxis' story. The company's future prospects are tied more broadly to its ability to adapt its nab drug delivery platform to other drugs - IE, the company hopes to find other drugs which it can improve by reformulating them.

Using its new technology the company plans to develop safer and more potent drugs for a number of different types of cancer, including ovarian, prostate, gastrointestinal, pancreatic, head and neck, cervical, and lung cancers.^[2] As of January 2008, Abraxis has three other drugs entering FDA clinical trials that use the nab technology platform to treat tumors. ^[3] Additionally, as of January 2008, there are approximately 30 company-sponsored and 90 third-party clinical studies designed to investigate additional uses for Abraxane^[4] and by the end of 2008 Abraxis hopes to have started five Phase III trials for new uses of Abraxane. ^[5] Besides discovering and developing new drugs for use with the nab technology, Abraxis plans to redevelop other firms’ existing treatments for use with the nab platform. ^[6]

[edit] Business Financials

Abraxis is a fully integrated Biotechnology firm that discovers potential therapeutics used in the treatment of cancer and other serious illnesses and then develops and delivers them for patient use. The company’s revenue is driven primarily by the sale of Abraxane, which uses the company’s innovative nab technology. Abraxane is used in the treatment of metastatic breast cancer and has been approved for commercial use in the United States, Canada, India, and the European Union and is awaiting approval in Australia, Russia, Korea, and China.^[7] Since Abraxane was approved by the Federal Drug Administration in 2005, Abraxis’ net revenue has risen over 140% to $324 million and gross profit has increased 168% to $299 million.^[8] A fraction of the Abraxane revenue stems from a June 2006 co-promotion agreement with AstraZeneca (AZN) ^[9], where Abraxis funds half of the marketing program and AstraZeneca (AZN) uses its sales force to promote Abraxane. ^[10] Gross profit, as an absolute figure and as a percentage of net revenue, has also increased the past 3 years. Abraxis has recently invested in research for needleless vaccines.

ABII Annual Report^[11]

The reason for the substantial increase in Abraxis’ net revenue and gross profit is due to increasing sales of Abraxane. In 2007, revenue from sales of Abraxane increased by over $149 million to $324 million, accounting for over 97% of the firm’s revenue.

ABII Annual Report^[12]

However, despite increasing revenues, Abraxis has been operating at a loss from 2004-200, due mainly to large Research and Development Expenses.^[13]

ABII Annual Report^[14]

[edit] Key Trends and Forces

[edit] Abraxane Growth as a First-Line Treatment of Metastatic Breast Cancer

When an individual is diagnosed with cancer, a physician prescribes a specific beginning treatment. This initial drug or therapy is known as a first-line treatment. Only after the first-line treatment proves to be ineffective, are second- or third-line treatments given. Consequently, the first-line market for cancer drugs is generally the largest and most profitable. After going through Clinical Trials, the FDA decides the lines of treatment in which a drug is approved for use. In 2006, Canada became the first country to approve Abraxane for use as a first-line treatment of metastatic breast cancer.^[15] As of March 2008, however, Abraxane has yet to be approved as a first-line treatment in any other country. In the United States, for example, Abraxane is approved for use after failure of first-line chemotherapy or a relapse within 6 months after first-line treatment.^[16] Abraxis is actively trying to prove the effectiveness of Abraxane as a first-line drug in order to receive additional regulatory approvals for use as a first-line treatment. In June 2007, Abraxis presented results from Phase II comparison trials that showed that the administration of Abraxis as a first-line treatment of metastatic breast cancer resulted in longer patient survival and a better toxicity profile than Sanofi Aventis’ Taxotere.^[17] Additionally, in the second half of 2008, Abraxis plans to undertake a number of Phase III trials with the goal of demonstrating Abraxane’s superiority to Taxotere as a first-line treatment of metastatic breast cancer. ^[18]

[edit] Ongoing Health Care and Medicare Reform

While the Federal Drug Administration is prohibited from taking into consideration a drug’s price during the approval process, the success of a cancer drug often relies on whether third party insurers like Medicare and Medicaid agree to reimburse patients for its use.^[19] In response to cut costs, Medicare and Medicaid have demonstrated a renewed emphasis on the marginal benefit of drugs when compared to their prices. In 2006, one dose of Abraxane cost $4,200; approximately 25 times more than Bristol-Myers Squibb’s Taxol, a drug that also treats metastatic breast cancer.^[20] In order for Abraxane to continue to receive Medicare and Medicaid reimbursement, it will have to prove that its results merit the significant additional costs. A 2006 Phase III trial that compared Abraxane and Taxol as treatments of metastatic breast cancer yielded unclear results. While targeted tumors were almost twice as likely to respond to Abraxane as Taxol, there was no statistically significant difference in the overall survival rate of patients treated with the two drugs.^[21]

[edit] Growth in the Market for Cancer Treatments

The market for cancer treatments is one of the fastest growing markets within the pharmaceutical industry. Sales of cancer drugs increased by 17.9% to approximately $27.6 billion in 2006 and cancer treatments are the third largest source of revenues within the pharmaceutical industry.^[22] While the overall market is growing rapidly, the direct market in which Abraxane competes, the taxane market, is beginning to slow down. A taxane is a type of chemotherapy that stops cell division in order to fight tumors. Sales of taxanes were approximately $2 billion in 2007, but that number is only expected to grow about 5% annually until 2010. After 2010, the taxane market is actually projected to decrease by 1.5% per year.^[23] A decrease in the size of the market in which Abraxane competes would hurt Abraxis' future growth, however Abraxane has the potential to stimulate more demand in the taxane market since it is safer and more efficient than traditional taxanes.

[edit] Competition

Abraxane is essentially an improved version of a widely available drug known as Taxol (or, by its generic name, paclitaxel). As taxol is not soluble in water, which means it can't enter the bloodstream on its own, different companies have employed different strategies to make the drug soluble. It's the way in which Taxol is made soluble that distinguishes Abraxane from its competitors and makes the drug less toxic.

Abraxis’ main competitors are other companies selling taxanes and paclitaxel.

Bristol-Myers Squibb: produces Taxol, a drug used for the treatment of several tumor-based cancers.^[24] There are also generic forms of Taxol under the name of paclitaxel, which have significantly reduced Taxol the past three years.^[25]

Sanofi Aventis: sells Taxotere, the only chemotherapy treatment approved for use in five different types of cancer. Since it is used for treatment in a greater number of cancers, sales of Taxotere are much higher than both Abraxane and Taxol.^[26]

In 2007 Abraxane had the lowest revenue of the three drugs. Abraxane did have the highest growth rate in 2007 at 85.6%,^[27] compared to an 11% increase in Taxotere revenue^[28] and a 25% decrease in Taxol sales.^[29] Abraxane is the taxane leader in treatment of metastatic breast cancer with a market share of 37%. Within the metastatic breast cancer market for taxanes, Abraxane is the strongest of the third line treatments with a market share of 57%, but also had an 11% increase in market share as a second line treatment in 2007.^[30]

ABII Annual Report^[31], Sanofi Aventis Full-Year 2007 Report^[32], Bristol Myers Squibb 2007 Annual Report^[33]

[edit] References

1. ↑ Bio-Medicine.org, “Abraxis Presents Results from Pre-Clinical Study,” 4/19/07
2. ↑ “Abraxis BioScience: A SPARC for Explosive Growth?” SeekingAlpha.com, July 19, 2006
3. ↑ 2007 10-K pg. 6,7
4. ↑ 2007 10-K pg. 8
5. ↑ Nanotech-now.com, "Abraxis BioScience Reports 83% Revenue Growth to a Record $334 Million for 2007" 4/2/08
6. ↑ 2007 10-K pg. 7
7. ↑ Nanotech-now.com, "Abraxis BioScience Reports 83% Revenue Growth to a Record $334 Million for 2007" 4/2/08
8. ↑ 2007 10-K pg. 42, Item 6
9. ↑ 2007 10-K pg. 5
10. ↑ “Abraxis BioScience: A SPARC for Explosive Growth?” SeekingAlpha.com, July 19, 2006
11. ↑ 2007 10-K pg. 42, Item 6
12. ↑ 2007 10-K pg. 42, Item 6
13. ↑ 2007 10-K pg. 23
14. ↑ 2007 10-K pg. 42, Item 6
15. ↑ Business Wire “Abraxis BioScience Receives Approval in Canada for Abraxane to Treat Metastatic Breast Cancer Including First-Line Disease” 6/7/06
16. ↑ Yahoo Finance. “Abraxis Bioscience Announces Approval to Market Abraxane for Metastatic Breast Cancer in Korea” 4/9/08.
17. ↑ 2007 10-K pg. 8
18. ↑ 2007 10-K pg. 8
19. ↑ Slate.com “Why are the New Cancer Drugs so Expensive?” 6/23/04
20. ↑ New York Times “Hope at $4200 a Dose” 10/1/06.
21. ↑ Results of the Phase 3 Clinical Trails of Abraxane vs. Taxol in Metastatic Breast Cancer
22. ↑ “Cancer Market Outlook,” Reuters, 2/15/08
23. ↑ “Sanofi’s Taxotere Keeps Top Spot,” United Press International, 3/27/07
24. ↑ Chemocare.com, “Taxol”
25. ↑ Bristol-Myers Squibb 2007 10-K pg.9
26. ↑ Taxotere
27. ↑ 2007 10-K pg. 42, Item 6
28. ↑ "Sanofi Aventis Full-Year 2007 Report"
29. ↑ Bristol-Myers Squib 2007 10-K pg.5
30. ↑ Nanotech-now.com, "Abraxis BioScience Reports 83% Revenue Growth to a Record $334 Million for 2007" 4/2/08
31. ↑ 2007 10-K pg. 42, Item 6
32. ↑ "Sanofi Aventis Full-Year 2007 Report"
33. ↑ Bristol-Myers Squibb 2007 10-K pg.5