Investors buoyed by signs of speedier drug launches


Can Dendreon’s better-than-expected 2011 sales numbers be taken as a good omen for Human Genome Sciences and other companies struggling with new product launches (HGS suffers the launch blues as Benlysta forecasts slump, September 22, 2011)? Investors evidently think so – shares in Human Genome rose 7% to $7.50 yesterday, in tandem with an impressive 40% surge by Dendreon to $10.62 and smaller increases by the likes of Regeneron, Seattle Genetics and Incyte.

Shares in three of those four companies stand significantly below their year-ago figures – the Washington company is off 70% even after yesterday’s spike. However, the single-day response shows how much is riding on upcoming sales figures as investors look for signs of a reversal in the trend toward slower launches (Tough quarter for new product launches by small pharma groups, May 11, 2011).

Deep hole

To be sure, Dendreon’s prostate cancer immunotherapy Provenge still remains one of the big disappointments of 2011. Observers have pulled back from blockbuster forecasts, and management itself withdrew earnings guidance mid-year; EvaluatePharma’s consensus forecast for 2016 has been slashed by more than two-thirds in the last 12 months, and it now stands at $927m.

As expectations had sunk so low a 25% increase in fourth quarter sales over the previous quarter, to $82m, was seen as positive enough to justify bidding up the price. A large number of investors betting on further falls also contributed to the spike – some 22% of the stock was "sold short" in mid-December forcing those investors to buy back shares to cover positions - a so-called “short squeeze” that often amplifies a share rise.

Dendreon remains in a deep hole to climb from, and it will take a string of similar quarter-on-quarter growth to justify share prices even half that of the $50 values seen following approval and launch in 2010 (Big pharma continues to struggle in first half, Indian generics consolidate gains, July 1, 2010). Given the complexity of its administration and manufacture, not to mention its $93,000 price tag, persuading specialists to offer it and insurers to reimburse it remains a challenge, with some clinics likely still waiting on the sidelines until experience with the unique immunotherapy grows.

Mark Schoenebaum, an analyst with ISI Group, reports that the company’s management says the majority of growth has been driven by adding new clinics, but believes an “inflection point” may occur in the second or third quarter when growth starts being driven more by clinics adding patients. Thus quarterly figures for Dendreon will no doubt be closely watched through the year.

Stumble at the gate

So too with Benlysta, the Human Genome lupus drug heralded as the biggest biotechnology launch of 2011 (Which of 2011's launches will be future blockbusters?, February 3, 2011). As of mid-year, only 10% of lupus specialists had written a prescription for Benlysta, even though nearly all of them intended to add the antibody to their weaponry to fight the autoimmune disorder, the company claimed.

It did not help that Benlysta was the heralded company’s first-ever marketed product, despite having been a publicly traded company since the mid-1990s. The Maryland group reached eight-year highs above $30 a share in 2010 as the compound approached approval in 2010, but reality hit home when early sales failed to meet expectations.

As with Provenge, forecasts for Benlysta have been slashed significantly in the past year, by nearly half in this case, and now stand at $1.08bn in 2016. Thus Human Genome's fourth quarter earnings call will be a well-attended event among biotech investors.

Earlier signs

Seattle Genetics’ blood cancer drug Adcetris launched at the end of August and as such will have its first full quarter of sales to report soon. So far there have been no signs of weakness for the antibody-drug conjugate – forecasts have barely fluttered in the past year – so any sign of significant strength or weakness will produce a considerable investor response. Investors still appear to have relative faith in the company, as shares have risen 12% in the past year.

It should be noted that investors are flying blind - Seattle, as with Incyte in launching Jakafi, have seen how sensitive initial sales figures are to share prices and have employed a strategy of barring release of weekly prescription information to data tracking services (Incyte hoping JAK be nimble and quick, November 17, 2011). Thus the importance of the initial quarterly sales data will be magnified to an even greater degree.

Myelofibrosis treatment Jakafi and Regeneron’s macular degeneration drug Eylea both launched rather late in the year and as such fourth quarter figures will not give as clear a view of their launch trajectory. However, these will be closely watched figures throughout 2012.

The issues that have restrained fast drug launches – reimbursement, regulatory demands and safety worries – have not gone away, in spite of one of the fastest drug launches in history in Vertex Pharmaceuticals’ Incivek also taking place last year (Incivek set to break record for fastest product launch, November 3, 2011). Yesterday's stockmarket surge shows investors are looking for signs that drugmakers have learned how to manage this new normal. Given headwinds show no sign of lessening for these companies, drawing wider conclusions from a small success for Dendreon looks overly optimistic.

Outlook for recently launched drugs
Company Product First Introduction Forecast 2011 WW sales ($m)
Dendreon Provenge  29/04/2010  206
Human Genome Sciences Benlysta  09/03/2011  58
Seattle Genetics Adcetris  31/08/2011  27
Savient Pharmaceuticals Krystexxa  01/12/2010  24
Cadence Pharmaceuticals Ofirmev  18/01/2011 22
AVANIR Pharmaceuticals Nuedexta  07/02/2011  6
Incyte Jakafi  30/11/2011  3
Regeneron Pharmaceuticals Eylea  31/12/2011  1
Source: EvaluatePharma

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