Drug Baron

Soriot and AstraZeneca face increasing headwinds: can the acquisitions of Omthera and Pearl boost the engine?

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The acquisition of Pearl Therapeutics for up to $1.15 billion, hot on the heals of last months $430 million take-out of Omthera, is an important deal for Pascal Soriot and AstraZeneca.  Following the decision on June 4th to return the rights to fostamatinib, further depleting the late stage pipeline, all eyes will be focused on the quality of the substitutes.

The broader context also emphasizes the importance of these deals, as other elements of his Strategy for Growth, only announced in March, look vulnerable.

The centre-piece, Brillanta™ / Brillique™ ticagrelor, faces a substantial challenge to meet the level of sales necessary to arrest the overall decline in the company’s top-line, let alone lead them to exceed consensus expectations by 2018 as Soriot predicts.   The problem is not the drug itself – ticagrelor is a good drug that is under-performing at present, garnering a little under $100m in sales last year, following its 2011 launch.  Surely that is the perfect profile for a driver of revenue growth?

But the strategy to drive sales growth is unconvincing.  A huge sales push has focused on the small improvement in the ratio of benefit (marked by hard cardiovascular end-points) over risk (principally bleeding) compared to the standard of care, clopidogrel, hoping to drive widespread adoption across the huge ACS market.

Clinicians it seems – along with DrugBaron – remain skeptical.  The magnitude of the benefit is small (events in 9.8% versus 11.7% on clopidogrel according to the PLATO trial), and the comparator is now a cheap generic drug.  The UK National Institute of Clinical Excellence (NICE), usually a conservative assessor, concluded that the additional cost was justified (just about).  But few seem enthusiastic adopters.

And yet there may be a better path.  Clopidogrel is a pro-drug, activated by the patient’s own liver enzymes – and as a result varies in effectiveness with genotype at the key cytochrome P450 loci.  Fully 30% of patients are slow activators, and are likely under-treated by existing regimens.  By contrast, ticagrelor is itself the active molecule, and should lead to a degree of anti-platelet efficacy unrelated to genotype (at least at these P450 loci).

With the ready availability of gene tests for P450, this surely represents an opportunity to rapidly acquire substantial market penetration, albeit in a fraction of the total patient population.  And 30% of patients in these huge markets is plenty to drive blockbuster sales.  Such an injection of momentum may even lead to increased use in the remaining patients where the benefit is likely real, but much less clear-cut.

In an attempt to grab all the market, the opportunity to grow rapidly in a sizable sub-population is in danger of being missed.  And unless something (such as the marketing strategy so recently embraced) changes, it is difficult to see Brillanta™ yielding enough of the longed-for revenue growth.

The horizon does not look much brighter for the diabetes franchise, where AstraZeneca bet big in the joint acquisition of Amylin with BMS.  While Bydureon (the weekly GLP-1 mimetic) has gained market share from it daily cousin Byetta, the combined franchise is losing ground.  And with further GLP-1 analogs coming to market that trend could accelerate.

More worryingly, doubts about the safety of the class continue to bubble, evidence this week by the paper in the BMJ accompanying a UK television documentary.  The BMJ investigators, who have reviewed thousands of pages of evidence obtained under freedom-of-information laws, concluded that while “the individual pieces of unpublished evidence may seem inconclusive”, when the new data is considered against the background of published evidence over a decade, then “a more coherent and worrying picture emerges, posing serious questions about the safety of this class of drug”.

The regulators are not yet ready to act – but the scrutiny continues.  There may indeed be smoke without fire, but the level of concern is reaching a pitch where it must surely impact on sales of the class.  And since it is orders of magnitude harder to prove beyond doubt that there is no issue, we will surely see this sentiment weigh down revenues for AZ as one of the pharma companies most exposed to both GLP-1 mimetics and the related DPP-IV inhibitors, with Onglyza™ saxagliptin.

The recent bad news was not restricted to the marketed products – although the decision to return rights to RA drug fostamatinib to Rigel had been widely expected.  Initial optimism on the profile of the syk inhibitor in Phase 2 was dispelled with the early Phase 3 data which confirmed that the product was unlikely to compete with marketed products, such as the anti-TNFs and even the recently launched Xeljanz™ torfacitinib (Pfizer).

From the limited data available, it seems that fostamatinib offers a broadly equivalent clinical profile to the jak inhibitor torfacitinib.  But roughly similar is unlikely to be good enough when you are two years later to market.  As @datamonitormark kindly pointed out “analysis of how market entry timing versus differentiation influence commercial success confirms that later entrants need greater and greater differentiation to succeed in the marketplace”.

Halting further development of fostamatinib in RA was the right decision (if perhaps a little late).  But looking at the details of the recent acquisitions of Pearl and Omethera it is tempting to wonder if the lesson has been learnt.

Pearl’s product candidates – combinations of the LABA formeterol with the LAMA glycopyrolle, with or without corticosteroid – began Phase 3 only weeks ago, and consequently have a regulatory submission date penciled in for mid-2015.  That’s some two years behind similar products Umec/Vi from Theravance and GSK (with a PDUFA date in December) and QVA149 from Novartis and Vectura (slated for European approval by the year end).

It’s hard to see what unique selling points the Pearl combo might offer when (and indeed if) it hits the market.  Indeed, the once-daily format of its more advanced competitors appears to give them the edge.

Until the clinical data is collected and published it will be impossible to know which of these similar products will prevail, but AZ are clearly betting now on a substantially superior clinical profile for Pearl’s PT-003.  If that doesn’t materialize, as they discovered with fostamatanib, equally good doesn’t cut it unless you cross the finish line roughly together.

The lack of differentiation and innovation in the Pearl product candidates seems to be part of an emerging pattern.  Soriot’s other recent late-stage acquisition, Omthera, yielded another Phase 3 candidate with little in the way of unique positioning.  Epanova™ is a mix of purified DHA and EPA – omega-3 fatty acids abundant in fish oils – reinforcing the recent trend to produce prescription-grade versions of fish oil preparations long used as food supplements.

Sentiment has weakened considerably for Vascepa™ from Amarin (itself once touted as an AZ takeover target), a closely related EPA preparation already approved in the US, and also for Lovaza™ from GSK.  While Vascepa™ (unlike Lovaza™) lowers LDL-cholesterol as well as triglyceride, it has recently become clear that expansion of the label beyond those with extremely high triglycerides is unlikely to be achieved without hard-end point cardiovascular event data – and it is no certainty that the class can deliver that.  Trials are underway, but a failure for Vascepa™ would surely harm, if not destroy, the sales potential for Epanova™.

Even if Vascepa™ passes its stern test when the hard end-point data emerges, it is hard to see how other prescription-grade omega-3 blends can compete.  Epanova™, then, like Pearl’s PT-003 before it, and fostamatanib before that, risks being two years two late for a poorly differentiated product.

In defense of Soriot and his team, it was never going to be easy to repair a damaged pipeline in a matter of a couple of years.  Prime Phase 3 product candidates leading the pack with the promise of clear differentiation are few and far between, even for buyers armed with a large cheque-book.

Indeed, predecessor David Brennan snaffled one of the more impressive candidates in Ardea’s gout treatment lesinurad in a $1.26 billion deal in April 2012, which ironically offers perhaps the brightest hope of boosting mid-term revenues.  But that purchase was insufficient to save Brennan and his senior management from the wrath of investors.

It remains to be seen whether the Pearl and Omthera deals will satisfy analysts about the performance of the current team.  Both deals are highly conservative (in the sense that there is little risk that the products will fail to meet their Phase 3 end-points) – probably inevitable given the need for some good news.  But both deals run the same risk: that, even if approval is won, the poorly differentiated clinical profiles arriving at market a couple of years behind the curve will garner disappointing sales.

With headwinds facing Brillanta™ and the diabetes franchise, Soriot faces a nerve-wracking few months as analysts dispense their judgment on these deals.  DrugBaron, for one, is not expecting the smoke to be white.