Valeant Pharmaceuticals (BHC -0.92%) has been more bullish about the prospects for brodalumab, now branded as Siliq, than anyone. Amgen bailed out on the psoriasis drug after late-stage study results raised concerns about Siliq causing patients to have suicidal thoughts. AstraZeneca publicly stated that it would move forward without Amgen, but soon afterward began shopping the drug to potential buyers.
Seeing a potential bargain, Valeant scooped up Siliq. The drug won U.S. regulatory approval in February. Valeant recently announced that it is pricing Siliq at a list price of $3,500 per month, making it the least expensive IL-17 inhibitor on the market. But will low pricing for Siliq be enough to really help Valeant turn things around?
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Promising market
There are currently two other IL-17 inhibitors approved to treat psoriasis. Novartis (NVS -0.13%) won approval for Cosentyx in 2015. Eli Lilly (LLY 0.54%) gained approval for Talz in March 2016.
So far, Cosentyx has been the biggest winner. Novartis made over $1.1 billion from the drug last year. Lilly reported 2016 sales for Talz totaling $113 million, but the the company didn't launch the drug until the second quarter.
Novartis priced Cosentyx close to the list price of Johnson & Johnson's Stelara -- around $46,000 for the first year of treatment. Taltz lists for $4,200 per month, which translates to a little over $50,000 over the course of a year.
In theory, Valeant's lower price for Siliq of around $42,000 per year would allow the company to capture a nice chunk of the market. Pharmacy benefits managers (PBMs) like to keep prescription drug costs as low as possible for their customers, so Siliq's relatively low price could be appealing.
It's complicated
That's the theory. Reality is more complicated.
Unlike Cosentyx and Taltz, Siliq comes with a boxed warning related to suicidal ideation. Access to the drug is also restricted through a Risk Evaluation and Mitigation Strategy (REMS) program. The Siliq REMS program requires healthcare professionals to be certified through the program before prescribing Siliq. Patients must be made aware of the risks of the drug and sign an agreement with their prescriber. Pharmacies must also be certified with the REMS program and only dispense the drug to patients who are authorized to receive Siliq.
As you might imagine, this added process could make physicians less likely to prescribe Siliq. And it definitely holds the potential to reduce the number of patients wanting to take the drug.
List prices also aren't what payers ultimately pay for drugs. Novartis has struck a deal with the biggest PBM, Express Scripts, that gives Cosentyx exclusivity in the company's drug formulary. It's a near-certainty that the price tag for Cosentyx paid by Express Scripts is significantly below the drug's list price. More important, the deal leaves Lilly out in the cold with Taltz out of the PBM's network. This agreement will hurt Siliq in the near term also, even with its low price.
It's entirely possible that pricing of Siliq helps payers more than it does Valeant. PBMs and other payers could simply use the low price of Siliq to negotiate better deals with Novartis and Lilly. That would be great for the payers, their customers, and patients, but it could mean that Valeant doesn't grab as much market share as it hopes to do.
The bigger picture
Valeant paid only $100 million upfront for Siliq and another $170 million in pre-launch milestones. It should be possible to make a positive return on investment on the drug in a relatively short time.
However, even if the launch of Siliq goes well, Valeant continues to face huge challenges. The beleaguered drugmaker still needs to sell off more assets to reduce its debt. It needs to achieve consistent growth from its dermatology and gastrointestinal products.
Pricing Siliq below the competition might help Valeant win over some payers. My prediction, though, is that the drug won't be as helpful to Valeant in its turnaround efforts as investors would like.
