Putting a value on US priority review vouchers

Analysis

When two years ago the US FDA’s priority review voucher scheme was extended to include rare paediatric diseases it became clear that the easy transferability of such vouchers gave them immediate value. Yesterday that value was quantified.

The $67.5m that Sanofi and Regeneron handed over to get their hands on the voucher Biomarin had been awarded back in February seems like an extraordinary amount of money for a four-month review advantage. But the circumstances are pretty unique, and EvaluatePharma’s NPV calculator matches the cost to the value that would crystallise in the event of faster approval (see table below).

Of course, in the PCSK9 inhibitor alirocumab Sanofi and Regeneron have a potentially huge product that is neck and neck with Amgen’s evolocumab (Down to the wire in the PCSK9 class, July 31, 2014). For such a potential blockbuster first-mover advantage is essential, and in a discounted cashflow model just a small change in timing makes a big difference.

Biomarin’s voucher will give alirocumab a six-month rather than a standard 10-month US review. And using EvaluatePharma’sMy NPV Editor tool to bring forward alirocumab’s launch by four months raises the product’s NPV by $99m – in line with the $67.5m for which the companies bought this advantage.

A four-month advantage for alirocumab
Default NPV My NPV Editor
Launch date Jun 30, 2015 Feb 28, 2015
Current status Phase III
Probability to launch 75%
Tax rate 29%
WACC 9%
NPV (after tax) 2,505 2,604

True, February 2015 is a very bullish approval time frame, but either way the analysis does illustrate the four-month advantage. For Biomarin’s part, its monopoly position undoubtedly helped in negotiations. The company is the first and so far only one to be awarded a paediatric priority review voucher since these came into force in 2012.

A separate question is whether the US government had intended it to be used this way. However, there seems to be no loophole here: the transferability and inherent value that this brought was a deliberate aspect of legislation – to incentivise research into rare diseases – under section 908 of the FDA Safety and Innovation Act.

Rare accolade

However, a predicted market in trading these vouchers has not materialised, largely because so few have been issued – only four to date, the first three having related to rare tropical diseases rather than paediatric conditions.

Biomarin’s was given after US approval for Vimizim for the genetic disorder Morquio A syndrome. Johnson & Johnson and Knight Therapeutics each still hold priority review vouchers, related to Sirturo for tuberculosis and Impavido for leishmaniasis respectively.

Novartis was issued one for Coartem in malaria, but decided to redeem it with a supplemental BLA for Ilaris for treating gout; however, it was slapped with a complete response letter, so all the voucher did was speed up non-approval.

So do Johnson & Johnson and Knight now have unrealised lucrative assets on their hands? Not so fast. Under the initial 2007 legislation, rare tropical diseases vouchers are less flexible, have limits on transferability and need a full year’s notice to the FDA before filing.

In a situation where speed is of the essence this requirement likely limits the attractiveness. Paediatric vouchers, however, have no transfer limit and only a 90-day notice period, meaning that Sanofi/Regeneron could file by the end of October.

One final twist is that the paediatric voucher scheme is at present experimental and finite; after the third paediatric priority review voucher the regulator can issue as many as it likes for 12 months and then no more.

For now, however, only one such voucher exists, and Biomarin looks to have made the most of it.

To contact the writers of this story email Jacob Plieth or Amy Brown in London at news@epvantage.com or follow @JacobEPVantage or @AmyEPVantage on Twitter

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