ViewPoints: FDA approval now more likely for GlaxoSmithKline’s Breo Ellipta but commercial challenges await

GlaxoSmithKline and its development partner Theravance took a closer step to FDA approval for their once-daily chronic obstructive pulmonary disease (COPD) therapy Breo Ellipta on Wednesday, when an advisory committee voted 9-4 in favour of allowing the drug to reach the market. The real battle, however, may be in persuading physicians and payers that Breo offers a sufficient benefit over GlaxoSmithKline's widely used twice-daily treatment Seretide/Advair.

Insight, Analysis & Opinion

It was somehow ironic that GlaxoSmithKline's shares spiked at an 11 year high on the back of the positive AdCom result, for it is around this length of time that the UK drugmaker has been looking to develop a once-daily product to succeed its Seretide/Advair franchise. Its deal with Theravance to collaborate on such an endeavour was signed in February 2003; many investors with a long-standing interest in the US player are hopeful that the 10-year relationship could end in a full buyout by GlaxoSmithKline, assuming that Breo reaches the market, and shares in Theravance were up 19 percent on Wednesday.

Regulatory outcome now looks more likely, albeit if a final decision by the FDA is pushed beyond May (Breo's original PDUFA date currently remains intact despite the AdCom meeting having been delayed by over a month). While approval is not certain, attention among analysts will nevertheless begin to shift towards the commercial opportunity that Breo represents.

GlaxoSmithKline would appear to face something of a paradox in this respect. Despite delivering mixed data in Phase III studies, analysts have remained confident that regulatory authorities will approve the product due in part to physician familiarity with its two active components - long-acting beta agonists (LABAs) and inhaled corticosteroids (ICS), both of which are well established classes of drug. But while this familiarity has de-risked the development programme, physician comfort with existing therapies – in particular the market-leading Seretide/Advair franchise – will be a notable barrier to uptake of Breo, argues Bernstein analyst Tim Anderson.

Anderson suggests that while physicians "seem quite content" with Seretide/Advair, Breo is only minimally differentiated from the older product. He believes that GlaxoSmithKline will therefore face a difficult task in convincing payers that Breo should have favourable reimbursement status. Key to GlaxoSmithKline's strategy, adds Anderson, will be the concept that once-daily dosing (Breo's primary point of differentiation) improves patient compliance and better long-term outcomes. The question remains as to whether this is an argument that payers will readily buy, particularly in Europe where market access constraints remain that much greater than in the US.

Chloe Brown – a director at the UK-based pricing and market access consultancy RJW & Partners – concurs with Anderson's assessment. She told FirstWord that "payers will be a key factor in the uptake and they may not count a new LABA component and once-daily administration as a clear innovation. Without clear clinical benefits over current twice daily ICS/LABA combinations, payers may be reluctant to pay more for Breo than for Seretide/Advair." Furthermore, uptake in the US may be constrained by lack of approval in asthma (unlike Europe, Breo has only been submitted for the treatment of COPD in the US market due to FDA concerns over the use of LABA therapies for the treatment of asthma).

Despite such concerns, many analysts continue to predict peak blockbuster sales for Breo. Nevertheless, consensus forecasts for the product have steadily come down over time, reflecting in part the changing market access landscape that GlaxoSmithKline's second-generation product will enter into – an environment that the UK company is all too familiar with based on CEO Andrew Witty's continued vocal attacks on EU pricing and reimbursement measures.

In addition to its status as a potential key revenue generator, bullish analysts have also pointed to full approval of Breo as an important sentiment driver for GlaxoSmithKline's broader R&D pipeline. The company could secure six approvals over the course of the year including the potential $3 billion a year LABA/LAMA combination Anoro note analysts at Bank of America Merrill Lynch. That drug has now been partially de-risked by Breo's positive AdCom panel, they add.

Other factors impacting on Breo's future success will include an increasingly competitive branded COPD/asthma market, and whether true generic competition for Seretide/Advair ever reaches the market. In a recent investor note, Anderson suggested that he was the only analyst currently modelling any generic competition for Seretide/Advair and anticipates that this could occur from mid-2016 onwards. Such a view remains contentious, but Anderson suggests that there are a number of signs indicating the FDA's willingness to move positively on this front. Should his theory prove accurate, generic competition would create a meaningful price gap that Breo would also have to overcome in the US market.

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