Pharming took years to get its sole product approved, and nearly went bankrupt in the process. And now, when it should be reaping the fruits of its labour, it instead faces the prospect of marketing Ruconest alone after buying back US rights from Valeant.
Ruconest was probably never a top priority for Valeant, which gained the hereditary angioedema drug through its acquisition of Salix. Despite disappointing sales to date it has managed to negotiate a steep-looking price tag of $60m up front and up to $65m in milestones, meaning Pharming must now raise $80-100m to fund the deal, an amount of cash equal to its market cap. If it cannot, the future of the product – and the company – is far from clear.
Chief executive, Sijmen de Vries, is unfazed, telling EP Vantage: “We’re quietly confident that we will be able to obtain not just the up-front price but also sufficient funds to accelerate the growth of Ruconest.”
Ruconest was first licensed to Santarus in 2010 for just $15m up front and $5m in milestones. “But this was long before it was approved,” Mr de Vries says. “So far, we’ve received $50m in milestones, and we’ve had to pay $60m up front. I think it’s a pretty balanced deal.”
After an FDA refuse to file letter in 2011, Ruconest changed hands again in 2013 when Salix acquired Santarus. It was eventually approved for acute HAE attacks in 2014, four years after first being filed.
Now Valeant is selling off assets to pay back its debts, and Ruconest was one of the first casualties (A new Valeant starts to take shape, and it's still not pretty, August 10, 2016).
Mr de Vries argues that this is a positive development for Pharming: “It’s part of our plan to transform the company to a speciality pharma company.”
But the fact remains that Pharming, with a market cap of €90m ($100m), now needs to raise around the same amount.
The attempted raise will likely comprise 50% equity and 50% debt; Pharming's first-half report reveals that the company already carries some €15m of debt, €5m of which comes due within 12 months. “Because we’re raising an equal amount of equity we feel reasonably confident that we can pull it off,” Mr de Vries says.
So far, Pharming has not had any firm commitment from investors, but “we’ve had a lot of interest from people approaching us spontaneously who we’ve talked to in the past. I consider that a good sign.”
Underlying Mr de Vries’ confidence is his belief that Ruconest has advantages over other HAE therapies, including products developed by Shire, which dominates the space.
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“We’ve developed the only recombinant protein replacement therapy. Both the FDA and EMA have made it clear that recombinant products should be preferred over blood products,” he says – because of the certainty of supply with the former, and the risk of blood-borne infections with the latter.
Being a small player might not necessarily be a disadvantage in an orphan disease like HAE, and Pharming plans to grow its US sales force from 11 reps to only 20 or so. It is not planning to compete on price, however. “We have the best product, I believe, so I think I’d like to leave it at that,” says Mr de Vries.
Pharming also has ambitions to get Ruconest approved for HAE prophylaxis, where Shire's Cinryze is the only available drug. The Dutch company recently reported phase II results that might be strong enough to support an early filing, Stifel analysts believe. But a phase III study – and the associated costs – could also be on the cards.
“First, we have to discuss the next steps with the FDA and EMA, which will probably take place sometime in the fourth quarter,” says Mr de Vries. The prophylactic and acute HAE markets are worth around $700m each, according to Pharming.
Edging Sobi out
As if taking on responsibility for US sales and potentially funding a phase III trial were not enough, Pharming is also planning to sell Ruconest in additional markets in Europe, Africa and the Middle East, where its partner Sobi previously had responsibility.
“Around a year and a half ago we took back the Netherlands, Austria and Germany,” Mr de Vries says. A second agreement will see Pharming market Ruconest in 21 other countries, including the UK, France and Spain, come October.
Sobi had not begun marketing activities in many of these countries, and in the first half of this year Ruconest sales outside the US slipped from €1.1m to €0.7m. Sobi will maintain responsibility for Ruconest in Eastern European countries and Italy, among others. “We’re OK with what’s going on there,” says Mr de Vries.
He continues: “We have to be realistic. We’re a small company, and we have to pick our battles. Obviously the US is by far the most important market – it represents probably 80% of the total market for orphan products.”
US sales of Ruconest have been growing, but perhaps not as fast as Pharming would like. The company logged €3.5m in US revenues in the first half of 2016, up from €3.0m.
If Pharming had been selling the product itself it would have generated sales of €12.4m in the first half and been “much nearer profitability”, the chief executive argues.
He believes that the company could be in the black as soon as next year. But with the fund raising looming it still has mountain to climb.