Label change gives Gilead's Letairis a chance to prove itself

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After a long string of disappointments, Gilead Sciences has gotten good news on Letairis. In a rare move, the FDA has withdrawn its requirement that the pulmonary hypertension drug’s label contain a boxed warning about liver damage, a regulatory change that potentially gives it a competitive advantage over Actelion’s Tracleer, the biggest seller in this disease.

Gilead shares rose 2% to $40.71 Friday following the news, which some industry observers said was worth as much as half a billion dollars in peak annual sales before the patent expires in 2015. Increases in market share, if they come, would be the result of elimination of the need for patients to undergo extensive testing before and during treatment. But despite this boost Letairis still has some commercial hurdles to overcome.

Challenger

Letairis, which came into Gilead’s portfolio with its $2.5bn purchase of Myogen in 2006, was at one time thought to be a challenger to Tracleer’s crown in the pulmonary arterial hypertension space (Gilead has little to show for its expensive CV push, December 15, 2009).

At that time, industry observers believed Letairis would be a best-in-class treatment because of its superior liver toxicity data – in phase III trials it reported no liver abnormalities - along with fewer drug interactions than Tracleer and once-daily dosing to the Actelion pill’s twice daily.

However, it has struggled to gain a foothold (Event - Actelion entering catalytic phase, at last, May 8, 2009). In March 2008, EvaluatePharma’sconsensus forecast for 2012 sales was nearly $800m, but today less than half that is expected, just $344m.

Tracleer, which like Letairis is an endothelin receptor antagonist, is forecast to sell $1.78bn in 2011, peaking at $2.02bn in 2014.

Letairis sales are forecast to peak at $420m in 2014 before declining to $221m by 2016 following patent expiry in 2015. These sales estimates give the product a net present value of $515m, or 2% of Gilead’s market capitalisation of $32.4bn.

It is thought that the two companies’ marketing approach explains some of the difference, with Gilead targeting key opinion leaders against Actelion’s broad marketing strategy that has emphasised a greater volume of clinical evidence. The fact that Tracleer represents nearly two-thirds of the Swiss group’s value also likely influenced the intensity with which its marketing team pitched the drug.

Marketing advantage

Letairis' market share could increase meaningfully because the label change means Gilead can ease off liver toxicity monitoring. Both Tracleer and Letairis remain available only under their own risk evaluation and mitigation strategies; however, patients taking Letairis will no longer have to undergo screening and monthly tests, as Tracleer patients are.

The FDA’s decision to eliminate the Letairis boxed warning was based on data collected through the Letairis REMS – its initial decision to add the boxed warning was based on assumed class effect.

Analysts from UBS said they expect Letairis market share to increase, suggesting that taking 50% market share by the end of 2012 would add 20 cents to the bank’s current earnings-per-share estimate of $4.66. UBS did not change its share price target, however.

Analyst Mark Schoenebaum of the ISI Group said adding $400m to peak sales of $550m and extending the patent two years to 2017 – as Gilead executives say they are confident of doing - increases Gilead’s target share price from $43 to $45.

Making a similar addition to peak sales using EvaluatePharma’s NPV Analyzerincreases the value of the drug to $876m, and adding two years to intellectual property increases it to $1.09bn, equivalent to more than 3% of Gilead's market cap. Thus, while not having the potential to become a heavyweight in Gilead’s portfolio, it has a chance of becoming the California company’s most valuable non-HIV drug.

New image

Expanded sales in the cardiovascular space could help Gilead shed its typecasting as just an HIV company. Of late it has made strategic acquisitions in oncology and inflammation to expand beyond its strong anti-infective franchise (Gilead making smart early moves in a new direction, February 23, 2011).

Still, it may be a little bit late to salvage its cardiovascular hopes. Patent expiry in 2015, if extensions are not forthcoming, gives it just four years to make the most of its new label. Furthermore, like Tracleer, Letairis has disappointed in expanding to idiopathic pulmonary fibrosis, limiting its line extension possibilities (Gilead gains one and loses one in IPF, December 24, 2010).

Mr Schoenebaum notes that with Tracleer so well-established physician prescribing habits may be hard to change at this point – it launched in 2001, six years before Letairis. In addition, Tracleer is scheduled to lose patent protection in 2015, opening the space to generic competition.

Whilst analysts expect the new data to spur a reinvigorated marketing effort from Gilead, meaningful market share expansion will only be hard-won. Its shift in strategic focus to oncology and inflammation suggests that the company’s heart is no longer in cardiovascular medicine.

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