Valeant Pharmaceuticals (NYSE:BHC) is going through a major restructuring that it hopes will allow it to return to growth, and investors who've endured big losses are eager for new drugs to launch that could help the company get back on its feet. This week, the U.S. Food and Drug Administration gave Valeant's psoriasis drug brodalumab a green light, but while this drug targets a multibillion-dollar blockbuster indication, investors might not want to pin high hopes on it to move the needle for the company.
A rocky history
In mid-stage, phase 2 studies conducted by the two companies, the drug put up solid results. In moderate to severe plaque psoriasis, an indication that accounts for 20% of the 7.5 million Americans with psoriasis, 62% of patients taking Siliq every other week achieved PASI 100, or total skin clearance.
The mid-stage performance had Amgen and AstraZeneca thinking that Siliq could have a billion-dollar blockbuster future. But phase 3 trials revealed a worrisome safety profile that included suicidal thoughts, and sadly, resulting patient deaths.
Following that revelation, Amgen abruptly announced it was abandoning its previous plan to file for FDA approval, and while AstraZeneca was tempted to go it alone, it eventually sold Siliq's rights to Valeant for $100 million in 2015. As part of that deal, Valeant agreed to pay AstraZeneca pre-launch milestones of up to $170 million, and sales-related milestones of up to $175 million. Furthermore, Valeant agreed to share profits on global sales with AstraZeneca, excluding certain Asian markets where Siliq had already been licensed to another company by Amgen.
Valeant's acquisition of Siliq's rights, however, was done prior to revelations of a relationship with Valeant's drug distributor, Philidor, that was too close for comfort. Scrutiny of Valeant's drug pricing, its marketing strategy, and its relationship with Philidor eventually led to Valeant's CEO Michael Pearson testifying before Congress, his departure from the company, and the shuttering of Philidor. Key Philidor executives were arrested and charged with giving illegal kickbacks late last year.
Valeant's struggles, and the resulting payer pushback, have taken a big toll on Valeant's sales, profitability, and share price. To get the company back on track, Valeant's board hired seasoned industry veteran Joseph Papa to overcome a heavy debt load incurred under Pearson's leadership, and return the company to growth.
As part of his mission, Papa sold Valeant's rights to market Siliq in Europe last summer, in a move that provided Valeant with some financial wiggle room, but that in the process, significantly capped Valeant's chances to benefit from Siliq abroad. Valeant got an undisclosed sum of money up front and a reduction in a payment it was scheduled to make to AstraZeneca, and it will receive an undisclosed sales milestone tied to European commercialization, but it won't share in profits on European sales.
Tapping a crowded U.S. market
The market for psoriasis is big, but it's also very competitive.
Siliq is a human monoclonal antibody that blocks signaling via the IL-17 receptor, disrupting an important inflammatory pathway. It competes directly against other medications targeting IL-17, including Cosentyx and Taltz. However, unlike those two drugs, Siliq blocks several IL-17 ligands at once, while Cosentyx and Taltz target individual IL-17 ligands.
Siliq's broader targeting of the IL-17 receptor could be behind its safety worries, and that difference could mean that it struggles to win market share against Cosentyx and Taltz. In approving Siliq, the FDA included a black box on Siliq's prescribing label warning of "completed suicides." The FDA is also requiring a risk-management program that could be burdensome. Since Cosentyx and Taltz were each approved without such a warning or program, Siliq's efficacy might take a back seat to its safety, and if so, it could end up being a niche drug, rather than a top-seller.