When a brand new class of cholesterol-lowering drugs called PCSK9 inhibitors won Food and Drug Administration (FDA) approval in 2015, it was heralded as the biggest advance in battling heart disease since the invention of statins. The launch of PCSK9 inhibitors was accompanied by billion-dollar-plus predictions for sales. However, revenue has fallen far shy of blockbuster status, leaving drugmakers Amgen Inc. (NASDAQ:AMGN), Regeneron Pharmaceuticals (NASDAQ:REGN), and Sanofi SA (NASDAQ:SNY) in the lurch.
Lately, sales of PCSK9 drugs have started accelerating, though, and that's rekindling investor interest. Will these drugs finally deliver on their promise?
What they do
PCSK9 inhibitors lower cholesterol by increasing the number of bad cholesterol receptors in a patient's liver. They do this by inhibiting the activity of a gene responsible for creating a protein that naturally breaks down these receptors. In trials, adding PCSK9 inhibitors to statins was proven especially effective, with their use decreasing bad cholesterol levels by about an additional 60%.
Importantly, large cardiovascular-outcome studies have been conducted to demonstrate that PCSK9 inhibitors’ ability to lower cholesterol also lowers the risk of heart attack, stroke, or death. These studies have panned out, resulting in doctors increasingly considering their use in patients who are at risk of heart disease.
A big market to target
Cholesterol-lowering drugs are the most commonly prescribed medicines in the world. In America alone, about 1 in 5 people between the ages of 40 to 75 are prescribed statins. Their widespread use has been a boon to their developers, but no one manufacturer has benefited more than Pfizer, the company that markets Lipitor.
Lipitor won FDA approval in 1996 and didn't lose its patent protection until 2011. From 1996 through 2012, it racked up more than $140 billion in sales for Pfizer, including nearly $14 billion per year at its peak.
The list of billion-dollar cholesterol drugs is a long one. Crestor had peak sales of $6.6 billion per year, Pravachol had nearly $3 billion in peak annual sales, and Zocor had peak sales of roughly $4 billion. Merck & Co.'s Zetia, a drug that can be used as an add-on therapy with statins, also consistently sold more than $2 billion annually prior to losing patent protection.
PCSK9 drugmakers face off
Regeneron and Sanofi won FDA approval of their PCSK9 inhibitor Praluent in July 2015, and Amgen's PCSK9 inhibitor Repatha secured the regulatory green light only about one month later. Both drugs launched with similar price tags of roughly $14,000 per year, a price that caught many by surprise because statins cost hundreds of dollars per year, thanks to the availability of generics.
The drugmakers have argued that Repatha and Praluent's price is reasonable given that statins fail to work adequately for millions of people and their side effects often lead to patients discontinuing them. This exposes payers to higher costs if discontinuation results in more heart attacks or strokes. Furthermore, drugmakers have said that a high price for these drugs is necessary because PCSK9 inhibitors are complex biologics grown in living organisms that are expensive to manufacture.
Those arguments failed to convince payers, though. Unwilling to spend money on medications that they weren't certain would reduce major cardiac events or deaths, insurers created obstacles to patient access that limited Repatha and Praluent's use. Insurers justified their actions by claiming that widespread use of PCSK9 inhibitors could effectively break the bank.
They have a point. There are more than 10 million Americans who could benefit from a further reduction in bad cholesterol, but at $14,000 per year, it would cost payers $140 billion per year to treat that many patients!
The logjam is broken
The ability of payers to block the use of PCSK9 inhibitors has declined significantly in the past year following results from cardiovascular outcomes studies that prove Repatha and Praluent can reduce cardiac events or save lives. Amgen reported cardiovascular outcomes data for Repatha in early 2017 showing that Repatha reduces the risk of a heart attack by 27%, stroke by 21%, and coronary revascularization by 22%. Based on those results, the FDA approved Repatha for the prevention of a heart attack or stroke in December 2017.
Regeneron and Sanofi unveiled cardiovascular outcome results for Praluent in March 2018. In their study, Praluent similarly reduced the risk of major cardiac events, and there was an observed reduction in overall mortality of 29% in patients with stubbornly high bad cholesterol levels that were north of 100 mg/dl. It's expected that when those findings are submitted to the FDA, the regulator will approve Praluent for the prevention of cardiac events, too.
In addition to having proof of improving outcomes, the drugmakers also appear willing to get serious about reducing prices to boost volume. On March 10, Regeneron and Sanofi reported they're going to discuss with payers various options, including price reductions, and on May 1, Express Scripts agreed to make Praluent the exclusive PCSK9 inhibitor for the 25 million patients who are enrolled in plans relying on Express Scripts' drug formulary.
In exchange for exclusivity, Express Scripts is securing an undisclosed -- and likely significant -- discount. Prior to this deal, payers were reportedly paying about $9,000 per year for Praluent after rebates and discounts, and I bet Express Scripts' price will be much less than that.
Repatha and Praluent revenue made big leaps in the right direction last year, and sales are off to a great start so far in 2018.
In 2017, Repatha's global revenue was $319 million, up 126% year over year, and Praluent's global sales were $194 million, up 68% year over year. In Q4, 2017, Repatha's sales increased 69%, to $98 million, giving it a nearly $400 million annualized sales run rate. Praluent's sales increased 53%, to $63 million, giving it a nearly $250 million annualized run rate.
The sales momentum has carried over into 2018, too. In Q1 2018, Repatha's global sales were $123 million, up 151% year over year, while Praluent's sales were $60 million, up 67% year over year.
Are these stocks a buy?
PCSK9 inhibitor demand is growing, and that's good news for both of these companies. But there's a fly in the ointment that investors should know about.
Amgen is pitted in a heated patent battle against Regeneron and Sanofi. While the companies are currently awaiting an appeal decision, the court sided with Amgen in early 2017 telling Regeneron and Sanofi that they had to pull their drug from the market. Regeneron and Sanofi's appeal delayed that order, but there's still uncertainty in how this will shake out in the court system. If the two companies don't settle beforehand, a new jury trial is scheduled to begin in February 2019.
It also shouldn't be ignored that all of these companies are biopharma giants, so despite PCSK9 inhibitors generating hundreds of millions of dollars, their ability to move the needle for these companies is limited.
Nevertheless, the PCSK9 story is a compelling one. Once the patent dispute is over, investors will want to consider picking up shares in one or both of these companies.