Aegerion's "HoFH Empire" Is Crumbling Fast Print E-mail
By Brian Wilson - Lead Contributor   
Tuesday, 20 May 2014 07:44
Last year, Aegerion was positioning itself to utterly dominate the drug market for a rare genetic disease known as Homozygous Familial Hypercholesterolemia (HoFH) with its newly approved drug Juxtapid (lomitapide).
HoFH is a progressive and deadly disease that can only be treated by finding a way to reduce LDL cholesterol in patients' blood streams.

In its Phase III trial Juxtapid showed that it was the most efficacious drug aginst HoFH to date, lowering cholesterol consistently by an average 40% after 26 weeks of therapy. Despite some serious concerns over the toxicity of the drug, the FDA agreed to approve the drug with a black box warning. 

Because of its undisputed leadership position in the HoFH drug market, Aegerion looked like one of the surest bets in the rare disease space. Wall Street analysts promoted this idea as well, calling it an exemplary rare disease success story that proved that "the sector was still worth investing in." The stellar performance of AEGR shares lent credence to this argument.

And since sure bets are supposed to be "sure", investors were eventually willing to support a ~$2-3 B valuation for Aegerion based on the $295,000/year price tag for Juxtapid. Despite the measly US HoFH population of 2,000 (if that), the raw cash-generating potential of Juxtapid seemed especially impressive due to the superior bottom line offered by Juxtapid. The future blockbuster was also making good progress with European regulators, moving Juxtapid closer to a launch in the EU under the brand name Lojuxta. In October 2013, at the height of "Aegerion mania," it seemed likely that the stock would make a clean and permanent break of the $100/share level.

Naturally, this event did not materialize. Investors failed to account for the competitive forces that would reduce Juxtapid's dominion of the HoFH drug market to 5-6 years.

Despite the fact that Amgen was very publicly working on its own LDL-lowering therapy, only a handful of commentators discussed the potential threat offered by the PCSK9 inhibitor evolocumab. One is Forbes' Matt Herper, who definitely deserves some credit for his foresight.

Considering that Aegerion has fallen about 51% in the last six months, it seems that the market has officially lost the bulk of its confidence in Juxtapid. Not only has uptake of this drug been slower than expected, but the commercial potential of PCSK9 in its first pivotal trial seems to be incredible. In a recent interim analysis, it was discovered that patients on evolocumab had LDL reduction close to 75% without any adverse side effects. Basically, this is Aegerion CEO Marc Beer's worst nightmare.

Assuming a worst case scenario for Aegerion, we see evolocumab as a true "Juxtapid-killer" that will cut Aegerion's income significantly after it is approved by the FDA and introduced to the US market. Based on this drug's rapid progress, we estimate that this could happen as early as 2018. Since Aegerion derives the vast majority of its revenue from the United States, we see this as a huge impediment to the company's long-term prospects. There are no promising drugs in the pipeline to keep the valuation of this company afloat if Juxtapid sales drop.

No wonder AEGR shareholders are panicking.

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