The impact of Advair generics in the US has long foreshadowed their arrival. For years the product lifecycle and pricing strategies at Glaxosmithkline and its rivals have been shaped by the eventuality of lower-cost alternatives to the blockbuster asthma drug, which finally appears to be months away.
Mylan has the most advanced asset that looks like it could be approved as a fully substitutable generic, although Hikma is not too far behind. Still, first-pass approvals by the March 28 and May 10 FDA action dates are far from assured. And with news emerging last week of even steeper discounts from Glaxo to help it retain access to patients this year and next, the shape and size of the US market remains very hard to forecast.
The UK pharma giant’s attempts to protect Advair are understandable – the product remains its biggest seller this year at $3.3bn, even though sales have fallen substantially from their peak, $8.4bn in 2013. Its profitability is likely even more significant, and analysts at Credit Suisse estimate that US Advair sales contributed around 30% of the company’s pharma profits at the drug’s height.
Since then, Glaxo has shaved around 25% off Advair’s price to help retain formulary positions, and its contribution to profits has probably dropped to around 13%, they estimate. And the company is clearly not ready to concede to generics just yet – most recently another huge 20-25% discount offer has been made to payers who commit to keep the brand through 2017-18, according to Bernstein analysts.
This is a clear attempt to protect the brand as Mylan and Hikma presumably launch their generic versions this year, and it could work in the short term. The Bernstein analysts say they would “not be surprised” if Mylan captured less than half the market in its first year.
A Maginot defence?
Its seems unlikely that Glaxo will be willing to push prices much lower, however, and ultimately it will be the generic manufacturers that win the pricing battle. Further extreme discounting of Advair and its follow-ons would inevitably put pressure on other combination respiratory agents, and Glaxo has newer brands like Breo and its triple therapy to protect.
The more immediate question is exactly when Advair will meet substitutable competition. Very few ANDAs (generic drug applications) receive first-pass approval, and the generics in question are incredibly complex, being combinations of two inhaled drugs delivered via an inhaler.
Even Mylan seems to be bracing itself for a delay – at an investor day last week it said it was preparing to launch mid-year, a couple of months after its GDUFA date. Still, the company has previously highlighted three years of interaction with the FDA before the submission, and has expressed confidence in the approvability of its product, which it claims meets all requirements on design and sameness.
This will be crucial: to be granted substitutability a patient must not require any instruction on how to use the new device on switching. And, should the product not pass muster on substitutability, it cannot be approved under the current filing, according to Credit Suisse.
The same goes for Hikma, which acquired its asset from Boehringer Ingelheim and partnered with Vectura for the device.
|Valuing the Advair opportunity|
|Product||Company||NPV||% of Mkt cap||US sales 2020e|
|Wixela Inhub *||Mylan||$1.2bn||5%||$170m|
|*Branded Sirdulpa in other regions|
|^Source: EvaluatePharma, except Hikma consensus, which is an average of Jefferies and Barclays Capital forecasts|
With no data of note released by either generic rival, and questions marks over their manufacturing capacity – neither is thought capable of supplying anything close to the entire US market – it remains very hard to assess their chances of regulatory and long term commercial success.
Glaxo has guided to the worst – should a fully substitutable product reach the US in the middle of 2017, 5-7% of earnings growth this year will effectively be wiped out, it said at its last financial update.
An assumption that a substitutable generic is on the way seems to be the safest bet right now. But further holdups to this highly complex approval cannot be ruled out, for one or both players, and Glaxo’s recent manoeuvring shows that there is fight in it yet.