Growth hormone pact a perplexing deal for post-Astra Pfizer
It is difficult to determine what Pfizer is trying to achieve by stumping up $295m to finance Opko Health’s pivotal programme for the long-acting growth hormone project hGH-CTP.
A weekly product, as hGH-CTP has the potential to become, would no doubt represent an advance in patient convenience and compliance, but the space has mostly become genericised and will test the ability of an innovative product to win over payers. Making it even stranger is Pfizer’s use of its US-domiciled corporate entity to fund the deal – it might have made more sense as an overseas tax-sheltered transaction that made use of offshore cash.
Pfizer pledged the $295m to Florida-based Opko in return for commercial rights to hGH-CTP, which Opko has called Lagova. As is becoming increasingly common in these meaty deals, the junior partner will have to fund development, which is likely to consume much of the up-front payment as the clinical programme is probably years from completion.
The promised $275m in milestones plus royalties and profit sharing on both hGH-CTP and Pfizer’s daily somatropin injection Genotropin may be more of an enticement.
hGH-CTP is closest to market in adult growth hormone deficiency, where a clinical trial is due to read out in 2015. A phase II study has been completed in the paediatric setting, making the product some three years from market.
For Opko this is a more clearly sensible deal. The company had acquired hGH-CTP with a 2013 all-share takeout of Israel-based Prolor Biotech, which specialised in the carboxyl terminal peptide (CTP) technology that when attached to therapeutic proteins leads to stabilisation and extension of life span without additional toxicity or loss of activity.
The group has been busy on the acquisition front and has developed revenue-generating pharmaceutical businesses in Central and South America, along with a US laboratory services business. But in the first nine months of 2014 total revenue of $65.6bn has been nearly consumed by the R&D spending alone – $57.7m – and the company as a whole is running a net loss of $121m.
Opko shares rose 10% in early trading to $8.99.
On the other hand, Pfizer’s decision has many in the sector shaking their heads today. The top-selling product in this space is Novo Nordisk’s Norditropin, a blockbuster franchise in the paediatric setting alone and forecast to sell $1.2bn in 2014 in all indications combined. Its formulation patents fall in 2015, although patents on its syringes are protected through 2019.
Novo has managed blockbuster sales despite US payers putting Norditropin on speciality drug lists and subjecting it to prior authorisation. This is because of competition among recombinant somatropin products as most others have lost market exclusivity.
For a weekly product, Pfizer most likely is thinking premium pricing that would throw it onto the same speciality drug tiers as Norditropin. This can only mean slow uptake, and will necessitate strong pharmacoeconomic evidence backing up Pfizer’s case – Opko argues that weekly injections will improve patient compliance, but it will be up to the senior partner to demonstrate this.
In addition, a competitor, Versartis, is in early phase II testing of a semi-monthly to monthly dosing for a project called VRS-317, potentially wiping away hGH-CTP’s advantage after too long.
Stung by the failure to secure AstraZeneca, Pfizer is in an acquisitive mode. Biotech is an arguably overvalued sector right now so good values are hard to find, but surely there is a better use for $295m.