Sometimes good news can be almost overwhelming.
That seems to be the case at Wellcome PLC, the British pharmaceutical company whose drug AZT is being hailed as the first significant breakthrough in treating AIDS.
Wellcome, whose stock closed at $11.20 Friday on the London Stock Exchange, is playing down what promises to be a multibillion-dollar bonanza after an Aug. 17 report from the U.S. National Institutes of Health.
”Wellcome doesn`t know what has hit it,” said Erling Refsum, a pharmaceutical industry analyst in London for Nomura Securities, the giant Japanese investment house.
Indeed, the company refuses to comment on the National Institutes of Health findings or even to issue a preliminary response to the U.S. government`s unofficial but unprecedented near-guarantee of quick Food and Drug Administration approval for wider use of AZT.
”It`s far too early for the company to say what sort of impact this will have,” Claire Brown, a spokeswoman at Wellcome`s north London headquarters, said of industry predictions that AZT will soon be the world`s best-selling pharmaceutical product.
She said Wellcome and its U.S. subsidiary, Burroughs Wellcome Co. of Research Triangle Park, N.C., will not rush into an FDA application. ”It will take several months for the data to be analyzed and for the company to get together a submission to the FDA. All we`re saying is that this is
encouraging,” she said.
The new National Institutes of Health report said AZT, which came on the U.S. market in March, 1987, with FDA approval limited to certain patients suffering from acquired immune deficiency syndrome, not only slows the syndrome, but also prevents potential sufferers-people who carry the HIV virus but have not developed AIDS-from becoming ill.
The crux of the report was that AZT could effectively fight AIDS in doses small enough to avoid the common side effects of larger doses, ranging from nausea to anemia.
It is believed that perhaps 25,000 AIDS sufferers in the U.S. receive AZT. In contrast, the new potential market-virus-carriers who presumably would be eligible for AZT treatment-is set by the World Health Organization at 1.5 million people in the U.S. and 5 million to 10 million worldwide.
Based on expectations that the wider FDA approval will increase AZT`s global market 40 or 50 times, stock market analysts in London predict that Wellcome`s sales of AZT, sold under the brand name Retrovir, may approach $2 billion a year in the mid-1990s, matching Wellcome`s sales for all its products last year.
With its limited U.S. approval, Retrovir`s worldwide sales rose from $26 million in 1987, its first half-year with FDA approval, to $144 million for the year ended August, 1988, to $94 million in half-year results in April.
That could put Retrovir ahead of the world`s pharmaceutical best-seller, the anti-ulcer drug Zantac, which had sales of $1.6 billion last year for Glaxo Holdings PLC, another British company.
U.S. investors may buy Wellcome stock directly through the over-the-counter market or in the form of American depository receipts, said Earl Silver, senior vice president at Dean Witter Reynolds Inc. Depository receipts represent negotiable vault receipts for shares of stock of a foreign company held in overseas branches of U.S. banks.
Silver said there has been considerable interest among U.S. investors in Wellcome stock. He said the price to the U.S. is only about 12 cents per share more than the price in London, ”a very minor differential.”
In the week after the National Institutes of Health report, Wellcome`s shares on the International Stock Exchange in London jumped 45 percent, to $12.10 from $8.32, and some analysts said they expect it to keep rising to $12.80 or even $14.40.
Some analysts feared shares might drop if the Wellcome Foundation Ltd., the charitable organization that owns a majority of the drug company stock, would take advantage of the demand to sell some of its 75 percent holdings.
However, because the foundation must maintain majority control of the shares to retain its charity status, most predictions were for a maximum selloff of 15 percent and relatively minor long-term effects on share prices. The financial pages of British newspapers last week were full of comparisons of Wellcome and Glaxo, a similarly large-but-not-huge British pharmaceutical firm until Zantac came along. That drug almost singlehandedly boosted Glaxo`s share prices an inflation-adjusted twelvefold in the 1980s.
In the competitive pharmaceutical industry, where companies spend years and millions to bring their products out months or weeks before their rivals, Wellcome is looking at a long and lucrative period of apparent exclusivity.
The two drugs widely regarded as AZT`s closest clones, Bristol-Myers Co.` s DDI and Hoffmann-La Roche Inc.`s DDC, are believed to be three years or more behind AZT in the arduous testing and approval process.
Peter Smith of Phillips and Drew stockbrokers said the National Institutes of Health endorsement of AZT ”puts several years between Wellcome and its rivals.” Even if DDI or DDC or some other AIDS drug does win FDA approval, recent medical journals suggest that they would be used along with, rather than instead of, AZT.
Though London analysts don`t blame Wellcome for being reticent about its prospects and plans for AZT, they have definite ideas about what the company should do.
”It`s understandable that they would play it close to the chest,” said Nigel Barnes of Hoare Govett stockbrokers. ”They probably haven`t even seen the full results from the American tests yet, and until they do they can`t gauge the full impact.”
He said, however, that Wellcome will no doubt act quickly once it has analyzed the results and predicted that a formal application will be before the FDA by the end of October, with approval for the wider use of AZT coming from Washington by January.
Ian White, an analyst for Kleinwort Benson Securities, said Wellcome should employ a three-part strategy-supply, production costs and education-to capitalize on AZT.
”The most important thing is to make sure there`s enough product, that there`s enough capacity to meet demand. They`ve got to make sure they manufacture enough,” he said.
White said Wellcome, which makes most of its AZT at its laboratories in North Carolina, has offered no indications of its production capacity. However, he said he doubted that the company would need to open new facilities or hire large numbers of workers to meet demand.
”Wellcome must also work at trimming production costs,” White said. Wellcome announced 18 months ago that tighter manufacturing procedures had cut the cost of AZT by 20 percent, but White said the much larger potential market for the drug requires further streamlining to maximize profits and make the drug more affordable.
The typical minimum 500-milligram daily dosage costs patients an average of about $2,750 a year, but the larger dosages of up to 1.5 daily grams for some patients raises the annual cost to more than $8,000.
London analysts, however, believe that political pressure in the U.S. will lead the government to grant financial aid, perhaps in the form of Medicare, for AZT treatments to AIDS patients or virus-carriers who cannot afford it.
Despite the rosy prospects for Wellcome, White sounded a cautionary note: AZT could turn out to be too good to be true. Because the drug has been around such a short time, he said, there is no way of knowing whether long-term side effects may appear, or whether longtime patients may build up a resistance that renders the drug ineffective.
On the other hand, he said, Wellcome should continue its research to determine whether AZT can prevent carriers from passing on the virus and whether AZT can allow pregnant AIDS sufferers to give birth to healthy babies. Smith also said he would like to see Wellcome develop a ”slow release” form of AZT so the drug can be taken once a day instead of the current five to six times a day.
Improvements such as that, of course, would increase AZT`s medical value- and Wellcome`s profits.
