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Evolutec Group plc
Introduction
Evolutec is a publicly listed biopharmaceutical company developing novel protein drugs for the treatment of allergic, anti-infl ammatory and auto-immune diseases. Evolutec?s lead protein rEV131 is currently being evaluated for the treatment of allergic rhinitis (severe hay fever) in a 112 patient clinical trial. The result of this clinical trial will be announced later this year. Evolutec is planning additional Phase II clinical trials in post-cataract surgery and dry eye. Therefore the company expects to have proof of concept data in 3 separate disease areas by the end of 2006.
rEV131 appears to work in an unusually wide range of diseases which may be the result of its novel mechanism of action (see below). Early stage results indicate potential efficacy in asthma, conjunctivitis, and post-cataract surgery. Evolutec has two other preclinical stage molecules, rEV576 and rEV598, which are currently being evaluated.
Exciting technology
Evolutec was founded in 1998 to exploit the therapeutic potential of the tick. The tick has proved a rich source of potential drugs. This is perhaps unsurprising given what the tick has to achieve in order to survive. In contrast to other blood sucking arthropods, ticks can remain undetected on the human body for up to 10 days. The tick achieves this by managing the human body?s immune and infl ammatory responses. Evolutec refers to this as the ticks? stealth technology.
Another benefit of the ticks? approach is that its salivary proteins will likely have good safety profiles since the tick cannot afford to provoke a response in its host. This has indeed proved to be the case with rEV131 in the clinic.
Evolutec has identified a family of proteins which it intends to use for the very same purpose that nature intended (i.e. to act against infl ammation or unwanted immune responses in the human body). These proteins can all be manufactured using standard biological techniques.
Balanced commercial strategy
Commercial strategy is important in the biopharmaceutical sector where direct revenues can often be a number of years away and the costs of bringing a particular drug to market are significant. Finding the right balance between value retention within the company versus licensing out commercial rights to the company?s drugs can be challenging.
Evolutec?s strategy is clear. Management intend to create a range of commercial options across its family of proteins including licensing out the sales rights in generalist markets and retaining the rights in specialist markets. For example, Evolutec will seek a partner for rEV131 in respiratory indications, including allergic rhinitis and asthma, but will retain the rights to rEV131 in ophthalmic indications, including dry eye and post-cataract surgery.
The respiratory market is a primary care market well served by the large pharmaceutical companies. By contrast, many ophthalmic indications are specialist markets where a relatively small sales force can target the high prescribing ophthalmologists.
Biopharmaceutical companies are increasingly opting to market their own products in specialist markets. Evolutec plans to follow this route beginning with the US, the world?s largest healthcare market. In short, Evolutec aims to leverage the broad therapeutic potential of its drugs in order to offer investors a balanced strategy between risk and reward.
Novel mechanisms of action
It is perhaps not surprising that the proteins developed over millennia by the tick employ very novel mechanisms of action. Many interactions in the human body are caused by signalling molecules docking in receptors on cells thereby triggering a reaction. Drug research often targets specific receptors. rEV131, by contrast, acts on the signalling molecule itself, in this case histamine. rEV131 binds tightly to histamine thereby preventing it from reaching the histamine receptors.
rEV131 has a higher affinity for histamine than the natural receptors. In the last few years, scientists have discovered a fourth histamine receptor, the H4 receptor. It is believed that H4 plays a role in late stage or chronic infl ammatory conditions such as asthma. This may help explain why traditional anti-histamines, which target the H1 receptor (discovered in the fist part of the 20th Century) show little effect on late-stage infl ammatory symptoms, such as mucus and congestion.
It is exceedingly difficult to design a drug that will block both the H1 and H4 receptors; and it would appear that blocking both these receptors is required to down regulate the body?s late stage or chronic infl ammatory response.
The tick has found a neat solution. By binding with high affinity to histamine itself, rEV131 automatically prevents histamine activation of the H1 and H4 receptors. Evolutec believes that rEV131 is the only drug in clinical development which impacts both these histamine receptors. The benefit of this is that rEV131 can be used to treat both acute and chronic infl ammatory conditions.
There are commercial parallels for this rather clever approach by the tick. The blockbuster monoclonal antibodies, Enbrel and Remicade, used to treat rheumatoid arthritis, act on another signalling molecule, TNF alpha. Enbrel and Remicade have revolutionised the treatment of this condition and in 2004 had combined sales of some $3.3 billion.
Significant market opportunities
The allergy, infl ammation and autoimmune area represents a huge commercial opportunity. The market for drugs against allergies, infl ammation and auto-immune diseases totals some $35 billion. There are significant commercial opportunities in many indications, particularly for a drug that can offer benefits in both acute and chronic conditions.
For example, the US market for allergic rhinitis is approximately $5 billion. There are a number of treatments for rhinitis including anti-histamines and corticosteroids.
Unmet need arises since the anti-histamines mainly impact the early phase symptoms (itch and redness) but have little impact on the late stage symptoms (mucus and congestion). By contrast, the steroids, which offer relief from congestion and mucus, can take 6 hours or more to work. Furthermore, the prolonged use of steroids can have other implications, particularly for children and the elderly.
Another exciting opportunity is dry eye where the US market is estimated to be worth around $1 billion. This serious often intensely painful condition arises when poor quality and quantity of tear fl uid leaves the surface of the eye exposed to the air. As a result, the eye becomes increasingly sore and infl amed.
The unmet need in this market is clear. Until recently, the only available products, such as artificial tears, simply alleviate the symptoms of dry eye and do not address the underlying cause. This is illustrated by the FDA approval of cyclosporine ophthalmic emulsion, the first prescription product for dry eye, in 2004 which has generated sales of over $100m. This is despite the fact that some patients need to take cyclosporine ophthalmic emulsion for 3 to 6 months before seeing significant improvement.
The tick is a rich source of drugs
Evolutec has identified a number of active proteins in the saliva of various ticks and is currently assessing the therapeutic potential of two of these proteins, rEV576 and rEV598 at the preclinical stage.
rEV576 targets C5a, part of the body?s innate immune system known as the complement system. For some patients with rheumatoid arthritis or following certain types of stroke or coronary thrombosis, C5a can cause damage to the joints or heart muscle. Alexion Pharmaceuticals has developed two monoclonal antibodies pexelizumab and eculizumab which are in clinical trials for heart attack and rheumatoid arthritis. Evolutec?s molecule targets the complement system at the same point as Alexion?s antibodies but may have the advantage of smaller molecular size and hence greater bioavailability. rEV598 binds two signalling molecules, serotonin and histamine.
Serotonin is important in a number of conditions including the nausea and vomiting associated with chemotherapy and radiotherapy (CINV). CINV appears to be driven by both serotonin and histamine and so rEV598 may be particularly well suited to treating this indication. Evolutec has also discovered anti-tick and anti-tick bourne disease vaccines from the same source. Evolutec has partnered the animal vaccine rights with Merial. Evolutec is seeking a partner to develop the human applications of the vaccine technology, which include Lyme?s Disease and tick-bourne encephalitis.
Well supported by shareholders and stakeholders
Evolutec has been well supported by its private and institutional shareholders. Evolutec raised £6 million on IPO in August 2004 and a further £10 million via a secondary placing in April 2005.
Further details can be obtained from the company?s website www.evolutec.co.uk or directly from Mark Carnegie Brown (CEO) or Nicholas Badman (CFO) on 0118 922 4480.