As they say, all good things must come to an end, and analysts and investors alike are beginning to consider Novartis in a post-Glivec patent expiry setting. Patent exclusivity on the chronic myeloid leukaemia (CML) treatment – which generated global sales of $4.7 billion in 2011 – will begin to expire in a number of countries next year.
Flattening the expiry curve
As CEO Joseph Jimenez recently pointed out, the real impact of patent expiry will occur in 2015 and 2016, when exclusivity expires in the US and Europe. Furthermore Jimenez is confident that the expiry 'curve' of Glivec (i.e. the rate of decline in sales) will not resemble that of a typical small molecule blockbuster, given the lifecycle management programme Novartis is implementing with its follow-on product Tasigna.
Gleevec continues to inspire the R&D landscape
Before assessing the merits of Tasigna and Novartis’ life-cycle strategy, it is worth focusing on the role that Glivec has played over the past decade. Not only in terms of contribution to the company's performance but in the context of the evolution of targeted cancer therapies, which have now become a mainstay of the drug development and commercial landscapes.
In a note to investors published earlier this year, Sanford C. Bernstein analyst Geoffrey Porges postulated that although the "explosive growth" of Bcr-Abl tyrosine kinase inhibitors in the CML space has primarily focused on a company narrative (encompassing not only Novartis, but also Bristol-Myers Squibb) the story of Glivec represents "the poster-child for the evolution and sustained growth of high impact chronic use therapeutics". Such treatments, noted Porges "create and build their own markets, often far beyond the initial expectations of management and investors."
The lessons to be learnt from Glivec are therefore not limited to a historical context. "One conclusion from this year's ASCO meeting is that we are seeing steady progress in the development of dramatic treatments in other cancers as well" added Porges, "across many cancer types, certain subsets of patients are seeing the outlook for their disease dramatically altered, with near-certain fatal outcomes being turned into chronic illnesses maintained on one, or more typically a series, of targeted therapies."
How the numbers stack up
Based on data from the US SEER database and the National Cancer Institute, the annual incidence of CML has remained relatively flat over the past decade, at just over 1.5 cases per 100,000 population. Over the same period, however, the introduction of Glivec (followed by the launch of Bristol-Myers Squibb’s Sprycel in 2006 and Tasigna in 2007) has driven a marked decline in the US CML mortality rate, from approximately 0.8 per 100,000 population in 1998 to 0.3 per 100,000 in 2009.
Over the past decade the number of diagnosed CML cases in the US has trended upwards (from around 4,300 in 2001 to 5,400 in 2012) and the number of deaths has declined from approximately 2000 per year in 2001 to somewhere between 200-400 deaths over the past few years. The net impact has been steady growth in disease prevalence, writes Porges (actually a 3.5x increase over 12 years), which has supported rapid revenue expansion for the Bcr-Abl tyrosine kinase inhibitor class and Glivec in particular.
Is the CML market dynamic enough?
Such commercial success marks Glivec as a high profile target for generic developers, however. Reflecting the 'market creation' that Porges refers to, Glivec has continued to deliver a robust sales growth performance in recent years, measured at a compound annual growth rate (CAGR) of 8.3 percent over 2008-2011. But will Novartis be a victim of its own success and has Glivec become too entrenched as the leading CML therapy?
Put another way, is the tyrosine kinase inhibitor market dynamic enough to support greater prescription of Tasigna (and other second/third generation treatments) as first-line therapies, where Glivec retains a dominant position?
Gleevec entrenchment will be difficult to shift
Analysts at Barclays think not. In a recent note to clients they suggest that current clinical evidence has limited the share of new prescriptions to around 30 percent for newer tyrosine kinase inhibitors. Despite the higher potency of new therapies, they add, lack of a survival benefit will act as the main barrier to growing this share, alongside Glivec patent expiry in a few years time. Such a scenario would see Tasigna, Sprycel and the yet to be launched ponatinib (being developed by Ariad) limited to second/third line use among Glivec intolerant/relapse patients.
That said, there is a school of thought among oncologists that CML could be treated most effectively by hitting patients "hard early" with the more potent compounds in the tyrosine kinase inhibitor portfolio, which could allow patients to achieve a deeper and earlier response. Analysts at Barclays point to this trend driving a small increase in new prescription starts for Tasigna and Sprycel. They reiterate, however, that while earlier use with these drugs results in an improved and more rapid molecular response, this is yet to translate to a survival benefit.
New Trial could bolster Tasigna usage
Research by analysts at Citi Group paints a more positive picture for Novartis. They suggest that results from a proposed randomised discontinuation trial with Tasigna will "materially increase the probability that Tasigna, and Sprycel, are adopted as the dominant first-line treatment options" despite the availability of cheaper generic Gleevec.
The trial will seek to demonstrate that a greater proportion of Tasigna patients can discontinue treatment safely compared to Glivec. Citi Group analysts write that around 5 percent of Glivec patients currently achieve safe discontinuation; their expectation is that 20 percent of treatment naive patients prescribed Tasigna will achieve this.
Novartis is already using higher complete molecular response rates attained with Tasigna as a means to convert Glivec patients to the second generation therapy. Citi analysts believe positive discontinuation data would provide clinical significance "to the importance of CMR as a requisite for discontinuing therapy to achieve functional cure" thus boosting conversion rates. This could, they add, bolster post-2015 Tasigna sales and allow Novartis to retain total CML franchise sales of around $4 billion from 2016 onwards.
A number of caveats remain; post-2016 Citi Group forecasts for Tasigna remain 60 percent above consensus (as of July) they say, while data from the discontinuation trial will read out in 2015; on the cusp of US patent expiry.
Nevertheless, regardless of how this market develops over the next five years, Glivec will continue to be talked about as one of the most important products of its generation.
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