Healthcare companies are constantly seeking new ways of treating chronic illnesses and thus increase the patient's life expectancy. During the year 2015 there have been significant advances particularly in the areas of cholesterol, lung cancer, and multiple myeloma. Join The Motley Fool's Kristine Harjes and Todd Campbell as they go through the top three drug approvals of 2015 and how they are assisting patients achieve long-awaited relief from their illnesses.
A full transcript follows the video.
This podcast was recorded on 12/2/2015.
Kristine Harjes: Top three drug approvals of 2015. This is Industry Focus. Welcome to Industry Focus everyone, Healthcare Edition. I'm your host Kristine Harjes. I've got Todd Campbell on Skype. Hi Todd!
Todd Campbell: Hi how are you? How was your turkey day?
Harjes: Great, I'm still full, still working through leftovers. That is quite literally what I will do as soon as we finish taping this show is go eat some more leftovers. How was yours?
Harjes: Did you have a good one?
Campbell: Yeah it was good. I think I'm done though. I could go another month without some turkey I think.
Harjes: Oh no way. That's my absolute favorite is Thanksgiving food. I'll eat it until it runs out.
So as I kicked the show off with, we are talking about top three drug approvals of 2015. But it's kind of hard to make the statement of top three. I mean that depends on how you measure it, right? So are we talking significance in the indication or biggest needle mover for the company? I mean you could say highest peak sales, biggest patient population. There are a million ways that you could probably answer, "Well what does top mean?"
So for now we're just going to call these some of our favorites. For those of you who follow the industry, let me pose a challenge to you. Go ahead and take a guess at what three drugs you think we're going to talk about. Go ahead and hit pause if you need to. Probably not if you're driving. Don't be playing with your phone while you're doing that. But I'll give you a hint. So two of the three drugs were recently approved -- talking like mid to late November here -- and the third is actually two drugs that make up a new class. If you can guess any of them correctly, honor system here and you want to brag a little bit, hit us up: IndustryFocus@Fool.com. We'd love to clap for you over here.
So meanwhile before we start digging in, I just want to put it out there that the Motley Fool is hiring interns for summer 2016. So our application is officially live. You can find it at Careers.Fool.com. We're hiring interns in international investing software and most exciting of all, editorial which of course is with us your Fool.com team. So I strongly encourage anyone interested to check it out. Mention how much you love our podcasts and maybe we'll see you here in Alexandria this summer.
Okay so let's kick it off. We'll start with the double trouble summer approval of two drugs marking a new class of cholesterol treatment. Todd?
Campbell: Boy I tell you, narrowing this list down to just a few that we talk about in the time that we have was tough because there are a lot of good drugs. I'm sure that when people were thinking of what drugs we would discuss, I'm sure a lot of people will be disappointed -- why didn't you pick my drug? But that being said, we had to make some judgment calls and the first one as you mentioned, that I think is a needle mover and a potential game changer is the approval of two brand-new cholesterol-busting drugs: Sanofi (NASDAQ:SNY) and Regeneron (NASDAQ:REGN), one approval for their drug Praluent back in July and Amgen (NASDAQ:AMGN) won an approval for their cholesterol-fighting drug a month later. And that drug is named Repatha.
Harjes: Right. And these two really just marked a whole new wave of how we look at cholesterol treatments. I mean people have been taking drugs called statins forever. I mean not actually forever, but for years. I mean 25 million or so Americans use statins. And meanwhile 76 million have, Americans have elevated bad cholesterol. So this is a huge, huge market and so to have two drugs that target this problem in a different way, could really be a game changer for a lot of people.
Campbell: Oh big time. You know, you've got 600,000 people a year dying from heart disease. It's a major issue. You've got as you mentioned 76 million people with elevated cholesterol levels. And while you know, these new drugs have not been proven to actually reduce or eliminate the risk of a heart attack, a stroke, or improve mortality for the condition, it's been generally thought that if you can lower cholesterol, then you will lower the risk of these events happening.
Campbell: And I think that that's one of the reasons the statins have become so widely used. I mean this is, it's the most prescribed drug out there. And you know, as a result the cholesterol lowering statins were some of the best-selling drugs over the last 30 years. I think the first one came to the market in the 80s, by the mid-90s this was billion dollar category, in the 2000s Lipitor changed the entire paradigm of what people spend on drugs with the Lipitor that was bringing in $13 billion a year in sales.
I'm not saying that these drugs will get that level, but the ability to lower cholesterol by an additional 60% beyond what statins do, that's already pretty darn game-changing.
Harjes: Yeah it's really interesting when you dig into how exactly these drugs work. So they're called PCSK9 inhibitors by the way. That's the class name. So basically PCSK9 is a protein that destroys bad cholesterol receptors in the liver. So if you limit it, then you get more cholesterol being cleared from the bloodstream. And so this is a totally different mechanism than statins, which reduce cholesterol production.
So the thinking here is you use both of them and you're kind of coming at the issue from both sides of it. And it's worked really well so far in trials.
Campbell: Yeah, I mean lowering cholesterol again by 60% when used alongside maximum statin therapy could be, it's incredibly significant to make a difference for thousands and thousands of patients worldwide every year. There's some challenges obviously as far as pricing is concerned because these are not cheap drugs. And of course this affects millions of people. So figuring out how to pay for it, who should actually get the drugs, who shouldn't, all of that is going to have to be watched very closely over the course of the next year. But without a doubt this is a pretty important set of approvals.
Harjes: One thing to note is that this initial approval is limited to just patients that have suffered a cardiac event or who suffer from high cholesterol that's caused by genetic mutations. So when we talk about how big this market could be, it really depends pretty heavily on label expansion to more people. But that's a separate issue. But you mentioned the payer situation. That is something that I think is really important to talk about with every new drug that hits the market.
We got a really interesting email this past week from Caesar Poleram. Thank you for reaching out. He made some really interesting points about payer reimbursement. And he was talking specifically about the diabetes space and DexCom which we've covered previously on the show. But this is an issue that's relevant in every indication. I mean your drug could be the best in the world but if nobody will pay for it, it's not going to go very far.
So that's when you have to start looking at pricing for these drugs. I mean they're treatments that you will take for the rest of your life. It's not a one and done kind of thing. And so if you're looking at a list price of about $14,000 a year, that's huge when you put it across how big the market is and also that each of these people would be taking it year in and year out.
Campbell: Yeah even with limit the Express Scripts (NASDAQ:ESRX) which is a pharmacy benefit manager that basically runs drug programs for other insurance companies and self-insured employers. They're putting in all sorts of different policies trying to reign in how many people are going to get access to this drug right away in a bid basically to try and temper how much money is going to have to be spent on these drugs over the course of the next year. But even with those discounts that it's getting and by requiring preauthorization, only limiting the use in certain patient populations, they still think that their clients are going to end up paying $750 million on these two drugs alone next year.
And Express Scripts while it's the biggest out there, only covers 8% of the population. So it's likely that these are going to be billion-dollar drugs in spite of all of these actions to try and reign in the use of them. It's something that is, like you said, the payer issue is an important issue and it's something that we have to spend some solid time as investors thinking about. Because it really could impact what the peak sales potential is for a drug if it's not getting used.
Harjes: Indeed, yeah. And that is where you have to keep an eye on your PBMs, your pharmacy benefits managers. So Express Scripts is paying for both of these drugs, both Praluent and Repatha. Interestingly though CVS (NYSE:CVS), which is another major PBM other than just being the retail pharmacy that we all know of, they linked a deal with Amgen for Repatha which presumably carries a pretty heavy discount. I don't know exactly what that number is. I don't think it's a number that out there. But CVS claims that Repatha and Praluent are therapeutically equivalent; meaning that they're just as effective.
And so it came down to Amgen offering a bigger discount. So that will be an interesting space to monitor. I mean I totally understand why Express Scripts chose not to choose one over the other especially after what happened when they choose one Hepatitis C drive over another. And it turned out to be the worst option. But that's kind of a tangent story right there. But definitely worth noting that the payer landscape is something to keep an eye out for and to monitor exactly what's going to happen with this new class of cholesterol treatment.
Moving on, so our second drug that we wanted to talk about was just approved in mid-November, November 13th. This is an AstraZeneca (NYSE:AZN) drug called Tagrisso.
Campbell: Tagrisso is an interesting and potentially very important drug because it does something, or it addresses something that hasn't been adequately addressed before. And that's a specific mutation that occurs in certain lung cancer patients that basically makes it so that current medicines that are available for them to use, no longer work.
So what specifically we're talking about is we're talking about lung cancer patients that have, that are EGFR positive. EGFR basically is involved in cell replication and survival. So by inhibiting EGFR, existing medications have done a pretty good job in slowing the pace of disease progression. However when that drug -- those drugs no longer work anymore, the prognosis gets much worse for patients and there are far fewer treatment options. And overwhelmingly the reason behind that disease progression is because of another mutation that ends up developing that becomes resistant to them. And that mutation is the T790m.
Harjes: Exactly, yeah. And as you mentioned the problem really is that patients will progress. I mean this drug is a tyrosine kinase inhibitor. So I'll just call it a TKI drug and this is a pretty relatively common kind of drug. But the problem again is this resistance.
So basically what we're seeing with Tagrisso is that it's targeting the exact mutation that is responsible for most cases of resistance. And in trials it shrank tumors in more than half of patients who had progressed on after other treatment with other of these TKIs. Medium response lasted over a year -- that's pretty durable, and you can tell that the FDA was also impressed. They approved the drug three months earlier than expected.
One of the things that I really kind of struggled with in researching this was figuring out just how many patients this could possibly affect. And when you start to dig into the numbers I just think it's, it makes it really clear just how difficult it is to put a specific number on a patient population pool -- which makes you want to take peak sales estimates with a grain of salt. But let's take a look at this for a quick minute. So bear with me here.
So the American Cancer Society estimates that about 221,000 new patients will be diagnosed with lung cancer in the coming year. 85% of those are non-small cell lung cancer. EGFR rates vary from country to country, but in the U.S. at least it's estimated to be around 10%. So multiply again by 10%, of those patients a majority progress. Again hard to pin down an exact number on that. But even if we just call it say 60%. So we multiply it by .6 and apparently the T790 mutation, the one that Tagrisso targets, is found in two thirds of these patients. So multiply that all together and you get like somewhere around 7500 or so patients in the U.S. every year.
Now any one of those numbers could be off by a little bit and throw the whole calculation off. And so I am by no means stating the 7500 definitively, but that's the thing is nobody has a definitive number out there. So I mean it's all you can do to try to dig in and extract one. But in the end it's pretty darn hard. And that's why you do see peak sales estimates all over the place. The one that I'm going to stick with is Astra's which is 3 billion in annual sales.
Campbell: Yeah. I think that investors, like you said, you need to take these things with a grain of salt. Studies have been done on peak sales estimates that show that the vast majority of those estimates are way off. So I think you kind of have to do your own diligence. Just recognize that OK, could this be an important drug? Doesn't it address a patient population that needs it? Is it priced at a point where people will be able to use it and pay for it? And when it comes to those kind of categories, I look at this drug, I say, yeah this could be a significant player. This could be a blockbuster drug because the 5-year survival rate is sadly for one patient still around 20%.
So there's a massive unmet need for new therapies that can attack and heal this disease. And even if we adjust your numbers by a little bit on either side, you're still talking about thousands of patients. So I think it's an important drug, it seems to work very well, it could become standard of care and if it does, then I think you're talking about a billion-dollar plus run rate.
Harjes: Yeah it goes without saying that these kind of developments are awesome for patients. And that is what matters most. It's just when you try to stand back as an investor and take a look at all the numbers, that's when it gets a little bit murkier.
One thing that did shine a little bit more of a light on the competitive landscape, so there's a competing, potentially competing drug that was being developed by a company called Clovis (NASDAQ:CLVS). And I think people were a little bit doubtful of AstraZeneca's estimate of 3 billion in annual sales for Tagrisso because of this Clovis drug which was supposed to be approved in March of 2016. But right after Tagrisso got its approval the FDA asked Clovis for basically more information about their drug. Which that doesn't sound too terrible, but it was quite a setback.
Basically the application that Clovis submitted had data that wasn't quite mature. So as time went on, not as many patients as expected went from unconfirmed to confirmed responses. So whereas it looked by all means in the immature data that Clovis had a drug that was about equivalent in efficacy to Astra's. Basically the response rate was cut in half when you actually started getting confirmed responses coming in. So at best approval's going to be delayed a couple of months for Clovis and at worst the FDA will reject it entirely since there's already a better drug arguably on the market for the same exact indication.
Clovis' stock for the record shed about 75% of its value just over the next couple days after that announcement. So really devastating news for shareholders in that company. But good news for Tagrisso.
Alright, so our last drug that we wanted to talk about today is called Empliciti and it is developed by Bristol-Myers (NYSE:BMY) and AbbVie (NYSE:ABBV) and that was just approved a few days ago -- November 30th.
Campbell: Yeah, you know Empliciti is important because again if you look at indication. Is there a need? There is. Empliciti treats multiple myeloma and it's been approved for use alongside two very commonly used therapies for multiple myeloma -- dexamethasone and Revlimid. And because it's being approved as an adjunct therapy, and it is being approved as adjunct therapy to these widely used drugs, there's a very good chance in my view that it becomes part of the standard of care in the second, and definitely in the third line treatment for patients.
And since we're talking about 28,000 or so, I think patients, or 26,000 patients that get diagnosed with multiple myeloma every year, a lot of whom who won't respond, will have to get retreated. I think that this again is going to be a very important drug because it put up very solid efficacy during trials.
Harjes: Yeah this is a really devastating disease. About 11,000 people die from it every year. And so to get drugs that work better and better is a fantastic thing. And it's a huge market too. I mean the multiple myeloma market is expected to rise in value from $8.9 billion in 2014 to just over $22 billion by 2023.
Revlimid is a huge part of that. That's a Celgene drug. Sales should top about $5.6 billion this year and you're going to see Revlimid continue to be used especially because Empliciti is being used alongside it. Just to dig into a couple of the numbers from the trials: 78-1/2% of patients taking the Empliciti combination therapy, meaning alongside Dexa and Revlimid, saw complete or partial tumor shrinkage which was better than the 65-1/2% reported in just the Dexa and Revlimid arm. So clearly this is a statistically significant improvement.
Campbell: Yeah and you've got almost a 5-month advantage in progression-free survival as well by adding that third drug to this cocktail. Revlimid is the most widely used in second-line therapy. It won approvals for first-line therapy early this year. It's getting more widely used there. Theoretically there could be label expansion opportunities that would move this combination into the first-line therapy. There could be use of it off label in the first line, we don't know how that's going to shake out.
But as you mentioned, it's a huge marketplace. I mean you've got Revlimid at $5.6 billion in sales, you've got Velcade which is also another widely used drug in the first and second-line of treating this disease. That's a $3 billion a year drug. You've got Pomalyst which is a third-line drug also made by Celgene. That's selling at a billion-dollar place a year. It's really hard for me to look at the numbers for progression-free survival and tumor shrinkage and not think that doctors are going to want to use this standard of care. And then of course it just comes down to what we talked about before which is will payers pay for it.
Harjes: Indeed. Yeah I mean this is not a cheap drug. It's going to be $10,000 a month versus as compared to Revlimid's $14,000 and Velcade's $9,000. And it's a "me too." You're using alongside the current therapies, so it's just making things even more expensive.
Talking about numbers if you're curious about what the impact could be on the companies that developed this drug, Bristol in the United States will get 70% of the profit from Empliciti, AbbVie will get the other 30%. Ex-U.S. it looks like Bristol is going to pay AbbVie a royalty. So this is definitely more of the needle mover for Bristol than for AbbVie.
Campbell: Absolutely agree.
Harjes: Yeah. So as Todd mentioned earlier, we could extend this conversation to include so many more drugs. There are a ton that would make the cut. I mean this has been a truly tremendous year for innovation in the pharmaceutical and biotechnology sectors.
Of course 2015 isn't even over yet, there are some interesting PDUFA dates coming up just even before the end of the year. I know for one BioMarin has a December 27th date for Drisapersen which is a treatment for Duchenne Muscular Dystrophy and this is a really heavily watched space with some fierce competition going on between BioMarin and Sarepta, but that's a story for another episode.
For now, thanks so much for listening in with us today and we'll be back next week. As always people in the program may have at interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.