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No Pain, Potential for Lots of Gain

Anti-NGF drugs are a risky bet but could be a bonanza opportunity for Pfizer, Lilly, and Regeneron.

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The history of pain drugs that target nerve growth factor has been a roller-coaster ride for drug developers and investors. In 2010, expectations were that anti-NGF drugs would emerge as the first new class of painkillers in decades, with analysts predicting $11 billion in annual sales for the multiple drugs in development. However, significant setbacks, notably the U.S. Food and Drug Administration placing clinical holds on the drugs due to safety concerns in 2010 and 2012 and the recent decision by Johnson & Johnson (JNJ) to terminate the development of its NGF program, have resulted in investors largely writing off the value of the drug class. We view this pessimism as overdone and think that, while risky, the phase 3 programs from  Eli Lilly (LLY) and  Pfizer (PFE) (tanezumab) and  Regeneron (REGN) (fasinumab) represent significant blockbuster opportunities that are not adequately reflected in company valuations.

Pain is a huge and complex healthcare problem and is the most common reason patients seek medical attention. In the United States alone, tens of millions of patients suffer from conditions that cause chronic pain, and that number is increasing with the aging population as a result of demographic trends. Distinguishing among different types of pain is complex but necessary for proper treatment. Pain can be classified by its duration as acute (short-term) or chronic (long-term) pain, with chronic pain further classified by the source of pain production. Nociceptive pain is transmitted from the site of injury or tissue damage, such as from inflamed joints in osteoarthritis patients. Neuropathic pain, such as a migraine, is initiated or caused by a primary lesion or dysfunction in the nervous system. Visceral pain, such as pancreatitis, involves the internal organs; mixed pain, which includes common afflictions like lower back and cancer pain, is of mixed origin.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.