Friday Five - 5 questions raised last week in pharma

AstraZeneca has strong start in SGLT-2 market | Bayer upgrades pharma forecasts | UK politicians say no to price cap on orphan drugs | Pfizer's Prevnar data 'mixed' | Should AstraZeneca jump on the PCSK9 bandwagon?

Can AstraZeneca demonstrate its diabetes credentials?

AstraZeneca is arguably in need of demonstrating its credentials in the diabetes market since acquiring outright the joint venture it previously operated with Bristol-Myers Squibb. The US SGLT-2 market – where AstraZeneca became the second entrant via the launch of Farxiga in February – may provide the perfect opportunity.

Following the launch of Johnson & Johnson's SGLT-2 inhibitor Invokana last year, revenues initially caught analysts off-guard. Now, according to analysts at Bloomberg Industries – Farxiga is outperforming Johnson & Johnson's launch during its first three weeks on the market, helped by a more aggressive co-pay strategy and a 10 percent price discount. Invokana's launch was achieved with virtually no use of co-payment assistance programme, while around 36 percent of Farxiga's third-week prescriptions were 'sourced' this way, noted Bloomberg analysts.

They also suggest that greater physician familiarity with the class is helping to drive Farxiga uptake, and in terms of the broader oral diabetes market, the 2 SGLT-2 inhibitors currently account for around 9 percent of new prescription share, up from 6 percent in early December. The outlook for both the Invokana and Farxiga franchises has been boosted by confirmation that the launch of Eli Lilly's product empagliflozin will be delayed in the US – see ViewPoints: An avoidable setback? - Eli Lilly's new launch aspirations undermined once again.

See also Physician Views Poll Results – Aggressive formulary placing key to Farxiga's success in US diabetes market despite anticipated strong growth for SGLT-2 inhibitor class.

Can Bayer deliver on its promises?

Bayer has been in bullish mood recently and was maintaining this stance earlier this week ahead of an investor meeting by increasing its mid-term guidance through 2016. Pharma revenues between 2013 and 2016 are now expected to expand at a compound annual growth rate (CAGR) of 8 percent, in line with consensus expectations, which have become increasingly enthusiastic due to continued strong performance of key growth driving products.

Bayer is also suggesting its 2016 pharma division margin will be at least 33 percent, the achievability of which will primarily be driven by the performance of its oral anticoagulant Xarelto, argue analysts at Bank of America Merrill Lynch. Bayer recently upped its peak year forecasts for Xarelto and feedback from cardiologists based in the EU5 and US polled by FirstWord this week indicates that the drug is likely to retain its competitive edge in the mid-term – see Physician Views Poll Results – Convenience factor looks poised to ensure market-leading status for Bayer, Johnson & Johnson's Xarelto in novel anticoagulant space.

Although Bayer's revenue projections look increasingly bullish, "management is sending a key message that pushing margins higher faster would come at the expense of investing for sustainable top-line growth," argued Morgan Stanley analyst Amy Walker. CEO Marijn Dekkers also dismissed the notion of Bayer spinning out the division as a pure play pharma company, and insists that diversification remains a key tenet of the company's strategic model.

What role this decision will play on continued evolution of its pharma division remains unclear. However, the diversified nature of Bayer's business has certainly provided a platform for its drug division to flourish in the past few years.

"Conglomerates give staying power," Bernard Munos - founder of the InnoThink Centre for Research in BioMedical Innovation – told FirstWord. "Pharma is a business in which the probability of ruin is non-trivial. Typically, a company that hits a dry spell is gone. So the business school argument that companies should not diversify because investors can do it in the stock market more cheaply does not apply to pharma. If Bayer pharma had not been part of a conglomerate when it ran into problems with metrifonate for Alzheimer's and Baycol, it probably would not exist today," Munos said.

Furthermore, Munos suggests that Bayer has learnt from these mistakes; "they re-staffed with really sharp people and decided that the only way to innovate is to disrupt. So they reached out to disruptive innovators where they could find them, a trend that remains in evidence given the recent acquisition of Algeta (see Physician Views Poll Results – Oncologists and urologists anticipate broad early usage for Bayer's prostate cancer therapy Xofigo). They re-tooled their culture to make it safe for their scientists to be just as bold. They are getting results."

Will orphan drug makers have backing of politicians in UK when it matters?

The debate around pricing on orphan and ultra-orphan drugs in the UK rumbles on. Results published this week from a survey commissioned by the BioIndustry Association (BIA) revealed that almost two-thirds of UK members of Parliament (MPs) believe that there should be no maximum price threshold for orphan drugs. More specifically, the survey indicates that 68 percent of MPs believe access to orphan drugs should be based on clinical need rather than the ability of the NHS to pay for these therapies.

Although the BIA concede that "being rare is becoming increasingly common" – a reference to the trend for increased industry investment in orphan drugs, which is steadily expanding the cumulative cost of these therapies – the group has questioned the methodology used by the National Institute for Health and Care Excellence, which has recently assumed responsibility for evaluating orphan drugs and suggested that its new Highly Specialised Technologies (HST) programme should look to the previous methods utilised by the now defunct Advisory Group for National Specialised Services (AGNSS).

Transition between the two mechanisms has been highlighted by NICE's assessment of Alexion Pharmaceuticals' Soliris, frequently cited as the world's most expensive pharmaceutical product. Its decision to request additional data pertaining to development costs, which can be used to justify a reasonable price for Soliris, is precedent setting in the UK and will cause consternation among other orphan drug developers, say experts – see ViewPoints: French reimbursement for Soliris provides boost to Alexion, but pan-European consistency on orphan drug pricing remains a pipedream and Spotlight On: NICE's Soliris request – a watershed for ultra-orphan drugs or more of the same?

While some argue that NICE has little choice to pursue this route while it updates its methodologies, others suggest that the agency has little benchmark to assess any data, if and when provided by Alexion. Asked by FirstWord whether it was "making up policy on the hoof," as one key opinion leader has suggested, NICE said "we are in the process of commissioning an evidence review and economic analysis (to include appropriate models as necessary) to support the development of reference points (benchmarks) within the HST programme. This work will inform the development of the final process and methods for HST. These reference points could include what is a reasonable drug cost taking into account the criteria identified in the interim process and methodology – i.e. including a consideration of R&D costs."

Will Pfizer's Prevnar data convince ACIP

Full data presented from Pfizer's 84 000-patient CAPiTA study this week confirmed that patients aged over 65 who received the pneumococcal vaccine Prevnar 13 were 45.6 percent less likely to become infected with serious pneumonia (caused by the bacteria strains covered by Pfizer's vaccine) than those who received placebo.

The commercial opportunity for a vaccine that can prevent pneumonia in elderly patients is clear to see, and further illustrated when one considers that there are approximately 60 million US citizens aged 65 and over.

To gain full access to this patient population, Pfizer will be reliant on a decision by the Centres for Disease Control and Prevention's Advisory Committee on Immunization Practices (ACIP) to recommend usage, which in turn will facilitate insurance coverage.

But as International Strategy & Investment analyst Mark Schoenebaum argues, closer analysis of the CAPiTA data may suggest that Pfizer's negotiations with ACIP are not as straight-forward as they could be. The absolute reduction in primary endpoint (first episode of confirmed VT pneumococcal community acquired pneumonia) was 0.1 percent as there were only 90 events in the 42 000-patient placebo group.

The CAPiTA study was carried out in the Netherlands where Prevnar is approved for use in infants but not as widely prescribed as it is in other countries and Prevnar 13 is not approved. A key issue for the ACIP – in determining whether it is worth recommending use of Prevnar 13 in all over-65s – is whether the so-called 'herd effect' already offers adequate protection, argues Schoenebaum.

The 'herd effect', describes Schoenebaum, is the notion that many over-65s may have effectively been 'vaccinated' by exposure to infants and children who have received Prevnar 13. It should be assumed that presumed herd immunity in the US will be higher, adds the analyst, which could make discussions with ACIP (due in June or October) "tough."
See also ViewPoints: Pfizer banking on M&A asset Prevnar to help drive split aspirations.

Is AstraZeneca the perfect PCSK-9 marketing partner?

Analysts were quick to play down this week the likely impact of the FDA's request that companies developing PCSK-9 inhibitors for the treatment of dyslipideamia – Amgen, Regeneron Pharmaceuticals, Sanofi, Pfizer and Eli Lilly – assess potential neurocognitive adverse reactions, particularly in longer-term studies that are being run.

Analysts at Leerink Swann cited a number of key opinion leaders, none of whom viewed the request as particularly concerning – and likely to stem from similar concerns seen with statin therapy.

With published Phase III data for the most advanced of these compounds so far replicating the robust efficacy witnessed in mid-stage studies, the key questions remain as to whether the FDA and other regulatory agencies will grant approval prior to full outcomes studies and what segments of the dyslipidaemia market these products can realistically target.

On the issue of the PCSK-9 class, Societe Generale analyst Stephen McGarry argued in a note to investors this week that if AstraZeneca's recent spate of product integration (primarily via a series of bolt-on acquisitions) could extend to in-licensing one of the dyslipidaemia-treating biologics it could significantly improve the company's profile.

With the PCSK-9 inhibitors gaining steady Phase III momentum, an in-licensing strategy may minimise the overall risk of AstraZeneca's late-stage pipeline, argues McGarry, with investor attention becoming increasingly focused on the company's immuno-oncology pipeline, despite the notable head-start of Bristol-Myers Squibb, Merck & Co. and Roche – see ViewPoints: AstraZeneca initiates combination study as it looks to accelerate into cancer immunotherapy race.

The benefits of such a deal would also hardly flow in one direction given AstraZeneca's global sales and marketing capabilities in the cardiovascular space, which remain attuned while Crestor retains its status as the only branded statin with patent exclusivity.

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