Big downgrades outweigh upgrades for pharma’s biggest products

Gilead Sciences’ hepatitis C franchise has been the beating heart of the biotech boom – but the pulse rate has slowed in the last 12 months as analysts have trimmed $2.1bn from the 2018 forecast of the company's marketed products to adjust for an evolving competitive outlook.

On the winning side, a surprise $1.8bn consensus upgrade has been in order for AbbVie’s rheumatoid arthritis beast Humira. Boosts to Ibrance and Opdivo, meanwhile, show that the sellside’s enthusiasm for all things oncology has yet to be sated (see tables below).

Biosimilars are coming

Analysts seem convinced that AbbVie can pull off the trick of growing sales of Humira in spite of an impending patent cliff – but they could be underestimating the threat from biosimilars. The drug, due to come off-patent in December 2016, has seen a $1.8bn upgrade, with analysts now expecting 2018 sales of $15.6bn.

Five biggest upgrades to marketed products over the last 12 months
Product Company Therapeutic subcategory 2018 WW sales
Humira AbbVie Other anti-rheumatics 15.60 +1.81
Opdivo Bristol-Myers Squibb Anti-neoplastic MAbs 5.35 +1.43
Ibrance Pfizer Other cytostatics 3.27 +1.02
Xarelto Bayer Anti-coagulants 3.31 +0.93
Tradjenta Boehringer Ingelheim Anti-diabetics 2.23 +0.93

Humira’s outlook has been helped by a strong first quarter performance and double-digit price increases, but lurking in the wings is Merck & Co/Samsung’s biosimilar SB5, along with a host of other agents hoping to have a run at the world’s biggest selling drug. If biosimilars live up to expectations, the next couple of years could see a shift in market dynamics and, perhaps, a downgrade for Humira.

Similarly, Bristol-Myers Squibb’s cancer immunotherapy Opdivo might be facing a re-evaluation after less-than-emphatic Asco data, which could dent previously positive analyst forecasts. The Checkmate 057 study in lung cancer suggested that the drug is only effective in PD-L1-positive patients, wiping $7.6bn off Bristol's market cap. Before these data were presented, Opdivo saw the second-biggest upgrade, increasing by $1.4bn, but the effect of the latest Asco results remains to be seen.

Bayer’s efforts at expanding the market for anticoagulant Xarelto appear to be paying off. The firm, which has rights to the product outside the US, has been investing in trials of Xarelto in various new indications; if successful, the biggest of these could each add sales of $0.6-1bn, Morgan Stanley analysts estimate. Geographic expansion could be another contributor to the upgrade. In May, Xarelto was approved in China for three new indications and Bayer is expecting a decision this year in Japan in pulmonary embolism, deep vein thrombosis and venous thromboembolism.

Ibrance saw forecast upgrades shortly after its February launch as its initial sales numbers impressed and the early stop of the Paloma-3 trial in HR-positive, HER-negative metastatic breast cancer because of a clear benefit over placebo.

Clinical setbacks, price wars and innovation

As expected, Roche’s breast cancer drug Kadcyla was again a big loser, as it continues to suffer from the negative outcome of the Marianne trial. The study read out in December and effectively ended the drug’s hopes in the first-line metastatic breast cancer setting, worth $1.6bn according to Morgan Stanley analysts. So the latest $1.7bn downgrade comes as no surprise – but is a blow to a drug that, a year ago, had been forecast to bring in sales of $3.5bn by 2018.

Five biggest downgrades to marketed products over the last 12 months
Product Company Therapeutic subcategory 2018 WW sales
Lantus Sanofi Anti-diabetics 5.56 (2.56)
Sovaldi/Harvoni franchise Gilead Sciences Hep-C antiviral 10.22 (2.07)
Kadcyla Roche Anti-neoplastic MAbs 1.32 (1.71)
Kalydeco Vertex Pharmaceuticals Other respiratory agents 0.92 (1.57)
Anoro Ellipta GlaxoSmithKline Anti-cholinergics 0.90 (0.9)

Innovation and pricing have been the two main pressures that have driven the big changes among the remaining entries on the downgrades list. Lantus’ travails are well-known – while it has managed to push off competition from Eli Lilly’s Basaglar in the key US market until mid-2016, it miscalculated on price increases last year and lost market share to Novo Nordisk.

A similar situation occurred with GlaxoSmithKline’s respiratory franchise, and new product Anoro Ellipta has seen its 2018 forecast halved to $900m. Anoro, Glaxo’s new combination therapy for chronic obstructive pulmonary disease, has struggled with Advair and Breo Ellipta in a fierce US pricing environment.

Meanwhile, given Gilead’s role in helping to create the biotech boom, the $2bn falloff in the combined forecast for its marketed sofosbuvir franchise of Sovaldi and Harvoni ought to be cause for considerable alarm. There are multiple factors at work in that change, namely payer pressure pushing Sovaldi’s price down since introduction and new competition from Merck’s phase III hep C project grazoprevir/elbasvir.

Sovaldi and Harvoni sales will probably also be cannibalised from within by a triple combination codenamed GS-9857/ SOF/GS-5816, now reckoned to launch in 2018. This prospect that cannot be seen as a negative for Gilead.

Vertex Pharmaceuticals’ Kalydeco presents a similar scenario. The 2018 projection is down significantly, but there has been a $3bn upgrade to its follow-on cystic fibrosis project Orkambi, which contains the Kalydeco active ingredient ivacaftor and a second agent called lumacaftor.

Vertex and Gilead demonstrate that downgrades are not always bad news. On the other hand, AbbVie and Opdivo suggest that upgrades may not necessarily be good news – sellside bullishness can lead to later disappointment.

To contact the writers of this story contact Jonathan Gardner or Madeleine Armstrong in London at [email protected] or follow @ByJonGardner or @medtech_ma on Twitter

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