The Wall Street Journal - 11 July 1996
Elyse Tanouye, Staff Reporter of The Wall Street Journal

Glaxo acquired the old-line British-owned drug maker to try to offset the loss of patent protection on its big antiulcer drug, Zantac. Among the drugs that came with Wellcome was the Retrovir brand of AZT, which appeared to be only mildly effective in treating AIDS and had been as much of a public-relations headache as a profit center for Wellcome.

Now, partly because of Retrovir, the merged Glaxo Wellcome PLC is suddenly finding itself at the forefront of the market for AIDS drugs. Treatment breakthroughs being reported this week at the 11th International Conference on AIDS in Vancouver, British Columbia, involve combining new AIDS drugs with the older AZT. Prescriptions for AZT are surging as scientific evidence grows that using it in a cocktail with some of the newer drugs, particularly the so-called protease inhibitors and another Glaxo Wellcome drug, 3TC, can make the presence of HIV virus in the blood undetectable.

Glaxo Wellcome also has two other promising drugs in its pipeline that may fill in gaps in current therapies. As a result, its AIDS drug sales could surge from last year's $300 million for AZT alone to $2 billion for four drugs within four years, predicts Marc J. Ostro, an analyst at UBS Securities LLC.

Before the merger, Glaxo's nascent AIDS drug business centered on 3TC, also known as Epivir, which it had licensed from the Canadian biotechnology company Biochem Pharma Inc. Glaxo had searched for a protease inhibitor -- a drug that blocks an enzyme crucial to HIV's ability to reproduce itself -- but hadn't found any attractive candidates, according to James Niedel, head of Glaxo Wellcome research.

Shortly after the merger, Glaxo's 3TC, which is included in many of the combination therapy studies, was approved. And like Retrovir, its sales have taken off. As an added benefit, 3TC appears to reverse some of the drug resistance that the HIV virus develops to AZT. Dr. Ostro believes sales of 3TC this year will approach the $300 million that AZT generated last year.

"We expect 3TC to rival Retrovir as the leading-selling treatment in the HIV arena," agrees Peter Young, marketing vice president for Glaxo Wellcome's HIV products. In addition, the company is working on combining AZT and 3TC into one tablet.

Wellcome also brought to the marriage two experimental AIDS drugs that appear promising and could be on the market by 1998, according to Glaxo officials. Glaxo Wellcome will report today at the AIDS conference, that one of those drugs, code-named 1592, is three times as potent as its cousin, AZT, and appears to be as effective as the protease inhibitors in reducing virus levels. Even better, it may penetrate the central nervous system, which the HIV virus often invades to cause dementia and other neurological problems but which most other AIDS drugs can't reach.

The other experimental drug, a protease inhibitor licensed from the biotechnology company Vertex Pharmaceuticals Inc., also may penetrate the central nervous system. And the drug doesn't seem to have "cross resistance" with other protease inhibitors, meaning that it might work in patients who have developed resistance to those drugs. It will be late getting to market, but Glaxo Wellcome may be able to sell it bundled together with 3TC and AZT or 1592 to large customers, such as managed-care organizations, and end run competitors, suggests Dr. Ostro, the analyst.

Propelling Glaxo's sales is the new science of combination therapy, which may greatly expand the overall market for AIDS drugs. If the combination therapies turn AIDS into a manageable chronic disease like diabetes or asthma, as many doctors are hoping, patients will start treatment early and stay on it longer. That will translate into many more years of sales to each patient.

In addition, as patients learn about the new treatments, more may seek to be tested for HIV, says Mr. Young, noting that a relatively small percentage of HIV-infected patients are diagnosed and receiving treatment now.

But Glaxo Wellcome worries that there could be resistance from groups that will have to pay for the drugs, including managed-care organizations and government agencies. AZT by itself now costs about $3,500 a year per patient. Adding 3TC raises the cost by about $2,800. After adding a protease inhibitor, which costs between $6,000 and $7,400 a year, the cost for a three-drug regimen could be nearly $14,000.

As the market expands, though, prices will probably decline, Mr. Young says. If AIDS treatment becomes chronic therapy, like cholesterol treatments, he says, "I expect we'd be satisfied with a more modest price."

The drug companies have also begun to feel pressure to make the drug treatments accessible in developing countries, where 90% of the people infected with HIV live. At the AIDS conference, researchers, activists and policy makers have repeatedly called the disparity in treatment between wealthy and poor countries unethical and immoral.

"Providing only for the rich to the exclusion of the poor is not only inhuman and unjust; it is also in our own worst interest," said Kenneth David Kaunda, former president of Zambia. "What we allow to persist with the least able among us, we ultimately bring upon ourselves."

Mr. Young of Glaxo agrees that "it will be an untenable ethical standard to simply ignore 90% of the infected population," adding that the company has begun trying to "stimulate discussions" on the topic among government and public health groups.

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