In the first half of 2013, two drugs will have launched in the US priced at $250,000 per patient annually: Both address serious, ultra-rare diseases and are backed by KOLs and patients. But the similarities stop there. Three months into its launch, one is encountering minimal resistance among payers. Although it’s too early to know how payers will cover the other drug, the expectation is that it will face a hard road.
The received wisdom about ultra-high priced drugs for ultra-rare conditions is that they’re a blip on payers’ radar screens. The idea that payers are attuned to blips on radar screens is laughable. Many don’t have the basic IT capability to track drug utilization, physician prescription patterns, or therapeutic outcomes.
But payers are waking up to high-price drugs. What’s getting their attention is not so much the impact of a particular drug and its price tag, but rather the aggregate of rare diseases, and the drugs that treat them, represented in their plans. Over the past decade FDA has approved 27 drugs for rare diseases.
Some big pharmas, like Pfizer Inc. and GlaxoSmithKline PLC, have recently started rare disease initiatives, while others, like Roche, believe rare disease R&D is a specialist’s game. Pfizer has had its share of disappointments, most notably with Vyndaqel (tafamidis meglumine) for transthyretin amyloid polyneuropathy, which it acquired along with FoldRx in 2010. The drug received a complete response letter in June 2012 after a mixed advisory committee review.
And GSK has recently retreated somewhat from its focus on rare diseases, preferring to invest its R&D dollars in “sound opportunities in major markets,” according to CEO Andrew Witty. Its head of rare diseases, Marc Dunoyer, bailed a few weeks ago to sign on with AstraZeneca PLC as EVP global portfolio and product strategy. (AstraZeneca isn’t a rare-diseases powerhouse and the company tells Deals of the Week that Dunoyer’s appointment shouldn’t be taken as a sign that its rare disease ambitions have changed.)
But with some 7,000 rare diseases still to be investigated, and with new orphan disease start-ups being minted every week, the rate of rare disease drug approvals is set to accelerate.
How payers respond to the stratospheric prices for rare disease drugs has to do with many factors whose weights are constantly changing, including the gravity of the condition, presence of existing drugs in the category, Phase III data, the age of the population, and the tenacity and resources of the disease foundation.
Aegerion Pharmaceuticals Inc.’s Juxtapid (lomitapide) launched in January 2013. The drug controls LDL cholesterol in patients with homozygous familial hypercholesterolemia (HoFH), a disease that causes premature and progressive atherosclerosis in approximately 3,000 patients in the U.S. It is priced at what amounts to $235,000 per patient per year for initiation, rising to $295,000 per patient per year for maintenance. The existing treatment for HoFH, diet and LDL apheresis, is inadequate to control LDL levels.
On an April 30th first quarter earnings call, Aegerion CEO Marc Beer said the drug was seeing an accelerating uptake among cardiologists and lipidologists. His national accounts team was calling on over 100 payers. “The prior auth process is on or slightly better than plan from a timing standpoint. We do see appeals – you see this in the ultra orphan space – it’s just the way insurance companies manage their business. We’re working through them effectively. I don’t see an access problem right now.”
Raptor Pharmaceutical Corp.’s Procysbi (cysteamine delayed release) was approved on the day of Aegerion’s earnings call. Raptor expects to launch it in six to eight weeks to a US population of about 500 people. The drug acts against nephropathic cystinosis, a lysosomal storage disease that leads to progressive irreversible tissue damage and organ failure, particularly of the kidneys. Its price will be based on each patient’s weight and dose; Raptor expects the average annual cost per patient to be around $250,000.
Now here’s the thing. Procysbi is a delayed release formulation of an existing drug, Cystagon (cysteamine bitartrate), sold by Mylan Inc. for $9,000/patient/year. Its chief benefit over Cystagon is its 12 hour dosing schedule, a significant convenience over Cystagon’s six hour dosing schedule, which is particularly burdensome for children and leads to poor compliance.
The FDA label for Procysbi states that it is non-inferior to immediate release cysteamine, but does not indicate that it improves compliance or kidney function over the standard of care.
So, the drug is no more effective than the standard of care in controlling the disease, it brings a dosing convenience, and it costs a whopping $250K/patient.
Gary Owens, chair of Tower & Watson Rx Collaborative P&T Committee, said that Procysbi will surely be excluded from closed formulary plans, or only covered under exception. About 20%-25% of plans are closed formulary. He does not envision that new patients will be started on Procysbi, unless they have trouble tolerating Cystagon. And he expects use of the drug to be hemmed in by clinical edits to verify that it isn’t being wrongly prescribed or a patient being controlled on Cystagon isn’t requesting Procysbi for what the plan considers a trivial reason.
The U.S. has prided itself on its relative freedom to price drugs. But pride, goes the proverb, hath a fall. Richard Pops, CEO of Alkermes PLC, recently said at BIO 2013 that treatment of orphan and ultra-orphan diseases won’t significantly impact health care costs. “The country isn’t going to go bankrupt because of diseases like cystic fibrosis.” But it’s not about a few diseases and a few drugs. It’s about 7,000 diseases like cystic fibrosis. (Vertex Pharmaceuticals Inc.’s Kalydeco launched last year to a population of 1,200 CF patients in the U.S. who harbor a specific gene mutation, at an annual per patient price of $294,000.)
Forces new and old are at work that will push down the pricing of orphan drugs. They include the glacial move from fee-for-service to bundled services and outcomes-driven payment. The increasing competition in rare disease categories driven by the gathering stream of approvals. New stakeholder pressures, like the hundred-plus oncologists from around the world who charged the industry with “profiteering” through high drug pricing in a recent issue of the journal Blood. The head of the National Organization for Rare Disorders, Peter Saltonstall, said that he expects Congress to start engaging with NORD about the cost of drugs. “It’s going to be an issue that we’re going to have to start to deal with in one fashion or another.” NORD advocates for millions of rare disease patients.
Ben Bonifant, of consultancy Bonifant Insights Group, comes at the pricing issue from another angle. “You look five years out, and [analysts] are still putting annual price increases into their U.S. models, but flat pricing in Europe and declining pricing in Japan”. He projects that we’re heading for an unsupportable separation in revenue per patient between the U.S. and Europe.
Things will really start getting interesting when researchers, harnessing massively parallel sequencing, start parsing large-population diseases into tiny, high-value sub-populations based on somatic mutations, methylation patterns, DNA copy number, etc.--Mike Goodman
Maybe the brave new world we’re hurtling toward will be one where precision medicine and rational drug prices co-exist? Until that happy day, kick back and enjoy this week's cavalcade of deals in . . .
Celgene/Forma: Drug discovery play Forma Therapeutics Inc. has intentionally, with each Big Biotech or Big Pharma deal it signs, moved further down the road toward becoming an integrated R&D company. With this week’s Celgene Corp. deal it may for the first time find itself playing the role of development partner. And importantly for its long-term ambitions to remain an independent and fully integrated company, Forma has hung onto U.S. rights to programs that emerge from the alliance.
The small, Watertown, MA-based biotech now has seven strategic alliances that it expects to generate $350 million in partnership revenue through 2017. This latest effort, focused on the intriguing but nascent field of protein homeostasis, “is the largest deal we’ve done, in terms of scale, but also in terms of capabilities and responsibilities for Forma,” CEO Steven Tregay said in an interview with “The Pink Sheet” DAILY.
The alliance will tap Forma’s translational development capabilities secured through a strategic relationship with Translational Drug Development (TD2), the oncology development group run by Daniel Von Hoff out of the Translational Genomics Research Institute. Forma, with TD2, will be responsible for the first time for early clinical development of the compounds it discovers for a partner, handing off potential drugs to Celgene after Phase I. Forma receives an undisclosed upfront payment and is eligible to gain up to $200 million in research and early development payments from Celgene, which will be responsible for full global development for each candidate it options at Phase I. Milestone payments – including payments for hitting certain sales targets – range from $315 million (for the first selected asset) to a maximum of $430 million per program.
Forma also will get undisclosed royalties on ex-U.S. sales and further milestone payments based on pre-defined cumulative development and sales objectives for projects in the partnership.--Chris Morrison
Bayer/Conceptus: Bayer AG is adding to its women’s health unit with the $1.1 billion acquisition of contraceptive device maker Conceptus Inc. Bayer is paying $31 per share for the California-based company and its nonsurgical, permanent contraceptive solution for women, Essure. The deal is expected to close by mid-year. Essure was approved by FDA in 2002. It is the only surgery-free, hormone-free permanent birth control option available to women in the U.S. Conceptus had net sales of $141 million in 2012 – Essure is its only marketed product. The company is currently developing a follow-on product that works to block the fallopian tubes immediately. Essure is not effective until three months after it has been implanted.
“Both Bayer and Conceptus are focusing on innovative solutions to advance women's healthcare. Essure completes Bayer’s portfolio of long-acting intrauterine systems and short-acting oral contraceptives. Our experience in the field of gynecology combined with our sales and distribution expertise will help to further develop Conceptus’ business,” said Andreas Fibig, President of Bayer HealthCare Pharmaceuticals, in a statement.
The deal comes on the heels of Bayer facing scrutiny for its own birth control products. The German company has faced a slew of lawsuits related to its failure to inadequately inform patients about the risks of thrombosis related to its Yaz franchise. Yaz and Yasmin have both lost patent protection and face generic competition.--Lisa LaMotta
Soligenix/Intrexon: Princeton, N.J.-based Soligenix Inc. has partnered with synthetic biology specialist Intrexon Corp. to develop treatments for melioidosis, a bacterial infection prevalent in Southeast Asia. In lieu of an up-front cash payment, Intrexon received 1.03 million shares of Soligenix stock, representing 8.5% of its total shares outstanding after the deal. Soligenix also owes Intrexon milestone payments and royalties, while Intrexon received the right to take more Soligenix shares in future public offerings or other transactions. The biopharma, traded over-the-counter, receives access to Intrexon’s antibody discovery and manufacturing technologies; Soligenix will also pay for pre-clinical and development of products discovered as part of their collaboration.
Backed by billionaire chairman Randal Kirk, Intrexon has raised at least $509 million as of mid-2011, and has taken equity in similar partnerships with Oragenics Inc., Ziopharm Oncology Inc., and AmpliPhi BioSciences Corp. Melioidosis is caused by aerosol forms of Burkholderia pseudomallei, which the U.S. Department of Health & Human Services considers a potential bioterror agent; Soligenix has previously developed vaccines against ricin and anthrax.--Paul Bonanos
Auxilium/Actient: Auxilium Pharmaceuticals Inc. is buying – not selling. In a move intended to diversify beyond its leading Testim testosterone gel product, the company announced April 29 it has acquired Actient Holdings LLC for $585 million upfront plus contingency payments. The company said the deal will create a leading urology company and add nine commercial products to Auxilium’s portfolio, which also includes Xiaflex (collagenase clostridium histolyticum) for Dupuytren’s contracture. Actient generated $125 million in revenues in 2012 and EBITDA of $61 million, sales and earnings that will help pad Auxilium’s top- and bottom-line as it looks for ways to grow amid increasing headwinds. Testim, which accounted for 78% of Auxilium’s 2012 sales, will face generic competition in 2015.
But some Auxilium investors may have been hoping for a sale of the company rather than an expensive acquisition, as sales of the company’s own products are slowing. CEO Adrian Adams, who joined the company in December 2011, has the closing of several sales on his resume: the acquisition of Inspire Pharmaceuticals Inc. by Merck & Co. Inc., the sale of Sepracor Inc. to Dainippon Sumitomo Pharma Co. Ltd., and Abbott Laboratories Inc.’s buyout of Kos Pharmaceuticals in 2006. Actient was founded in 2009 by the private equity firm GTCR, which put up $200 million to build the company through acquisitions. The bulk of the company’s products were acquired from UCB Pharma SA in July 2010.--Jess Merrill
Selexis/Ligand Pharmaceuticals: San Diego-based Ligand Pharmaceuticals Inc., which focuses on the acquisition of royalty-generating products, bought out on April 30 the potential milestone and royalty payments for more than 15 biologic products in development at Selexis. Deal terms were not disclosed.
Based in Geneva, Selexis SA is a clinical-stage biotech that uses its proprietary SUREtechnology platform, which uses novel DNA-based elements that control the organization of chromatin in all mammalian cells, for drug discovery and cell-line development in the creation of new therapeutic protein drugs. Programs and indications also were not disclosed but the related product candidates are in various stages of preclinical and clinical development, Selexis said.
The biotech, which retains earn-out rights to another 14 biologics in development, said it will use the funds from Ligand to cover R&D expenses around the next generation of candidates to emerge from the SUREtechnology platform. During a 14-month span beginning in late 2009, Ligand built its portfolio through acquisitions of Neurogen, Metabasis and CyDex. Each of those transactions were structured to include contingent-value rights going back to investors in the acquired firms.--Joe Haas
Merck/Abide Therapeutics: Just a week after announcing its tie-up in the diabetes space with Pfizer Inc., Merck & Co. Inc. has signed another diabetes collaboration with San Diego-based biotech Abide Therapeutics.
Merck will potentially pay $430 million in upfront, milestone and research funding. Abide is also eligible to receive royalty payments. Further financial details were not disclosed. The collaboration is around three novel targets involved in metabolic diseases. Abide develops drugs using serine hydrolases, an enzyme class that plays a key role in regulatory processes like metabolism, signaling, and digestion.
The deal comes just days after Merck announced it had signed a collaboration with Pfizer to develop and commercialize ertugliflozin, a Phase III sodium glucose co-transporter 2 (SGLT-2) inhibitor. Merck has already paid $60 million in upfront and milestone payments to Pfizer, but would not reveal the total deal value.
Merck currently only has one diabetes franchise, the dipeptidyl peptidase-4 (DPP-4) inhibitor Januvia (sitagliptin) and products that use Januvia in combination. Januvia sales came in shy during the first quarter at $884 million, prompting worry from investors and analysts.--LL
Regeneron/Sanofi: Regeneron Pharmaceuticals Inc. has acquired full exclusive rights to two antibody programs invented at Regeneron and included in the biotech’s fruitful, longstanding antibody alliance with Sanofi. The assets are both in preclinical development for ophthalmology and have potential in other indications. In exchange for $10 million upfront and up to $40 million in development milestones, as well as royalties on sales, the biotech announced on May 3 that it is taking control of the entire platelet-derived growth factor (PDGF) program. It is making another $10 million upfront payment to Sanofi, and offering a $5 million development milestone, as well as sales royalties for rights to ophthalmology indications for antibodies targeting the angiopoietin2 (ANG2) receptor and ligand. The partners continue to work jointly on development of ANG2 antibodies in other indications, and have an ANG2 antibody in Phase 1 in combination with their jointly developed oncology drug Zaltrap (ziv-aflibercept), which is already on the market.
On a quarterly earnings call, also on May 3, president of Regeneron Research Labs George Yancopoulos explained that both pathways appear to play an important role in angiogenesis and therefore the antibodies could be used in combination with the company’s lead drug Eylea (aflibercept), an anti-VEGF therapy. Sanofi has an ophthalmology business, Fovea. But the partners believe it makes sense for Regeneron to take over the programs, given Eylea’s success and the potential for combining the antibodies with Eylea to create best-in-class anti-VEGF, ANG2 and PDGF therapies, Yancopoulos said.
Regeneron plans to submit an IND to develop the ANG2 antibody target in an ophthalmic study later this year, and to submit another IND for a combination trial of the PDGF receptor antibody with Eylea in second half of year.--Wendy Diller
Bristol-Myers Squibb/Ambrx: In its third collaboration with Bristol-Myers Squibb Co., Ambrx Inc. will team again with the pharma to discover and develop next-generation antibody-drug conjugate (ADC) products for oncology indications. Under the deal announced May 3, Ambrx will receive $15 million upfront, as well as R&D funding and potential development, regulatory and sales-based milestones that could reach $97 million. Bristol obtains worldwide rights to develop and commercialize candidates, to be generated using Ambrx’s protein medicinal chemistry platform, from the collaboration, with the biotech holding rights to potential sales royalties.
Previously, in 2010, Ambrx signed a pair of agreements with Bristol to develop biologic therapies for type 2 diabetes and for heart failure. Those two candidates now are in development at Bristol. With a proprietary long-acting growth hormone in Phase IIb, Ambrx also partnered last month with Astellas Pharma Inc. on the development of ADCs and in 2012 with Merck on biologic drugs against undisclosed targets.--JH