Horizant’s US approval in post-herpetic neuralgia (PHN) underscores a challenge for maker XenoPort: Sales of the once-daily pill need to start rising or the company will start absorbing losses under its marketing partnership with GlaxoSmithKline around the end of 2012. With a launch in restless legs syndrome that even executives of the California firm describe as disappointing and the subject of litigation with its big pharma partner, approval in PHN would seem to provide an opportunity to drive sales growth.
However, with generic agents like gabapentin and lidocaine among the first-line agents, Horizant may have as much trouble making headway in PHN as it did in its original indication. Shares dropped 10% yesterday to $5.49 following news of approval yesterday after a 39% run-up in the previous 30 days; attention has moved on to Xenoport’s MS-oriented pipeline, suggesting little expectation that Horizant will be a major value driver.
It is not all bad news for XenoPort. The first US commercial sale in post-herpetic neuralgia triggers a $10m milestone for Horizant, following on an equal fee from Astellas following the approval in restless legs syndrome in January in Japan, where it is known as Regnite. This will be added to a healthy cash pile that amounted to $85m at March 31, bolstered in part by a $31m fundraising at the end of 2010, $30m from Glaxo upon first shipments of Horizant and a $7m milestone from Astellas upon FDA approval, both in June 2011.
Thus, Horizant partnership fees have contributed significantly to company resources at a time when clinical work for its next generation of drugs has been maturing. These include spasticity drug arbaclofen placarbil, now in a 400-patient phase III programme in multiple sclerosis patients under an FDA special protocol assessment, and XP23829, a fumarate described as a prodrug of Biogen Idec’s BG-12 that has just been submitted to the FDA as an investigational new drug in MS.
However, under its licensing pact with GSK, the UK pharma giant absorbs any of XenoPort’s share of net losses through the first $10m; Xenoport’s accumulated share was $7.5m at March 31, and analysts at RBC Capital estimate at current trends the $10m threshold will be met around the end of 2012.
With a phase III programme underway for arbaclofen placarbil and filing anticipated in 2013, another drain on its cash pile would hardly be welcome. This may partly explain the company’s motivation for demanding that GSK ramp up its Horizant marketing effort, an action that has landed the two parties in court.
A look at XenoPort’s strategy helps clarify the challenges it faces. Horizant, known generically as gabapentin enacarbil, is a prodrug of the off-patent Neurontin that is dosed twice a day in PHN, compared with up to three times a day for Neurontin in PHN. In restless legs syndrome, Horizant is dosed once daily. In both cases, conversion to gabapentin in the intestine is believed to inhibit CNS side effects.
The restless legs syndrome market is already fairly genericised with GSK’s own Requip losing market exclusivity in 2008 and Boehringer Ingelheim’s Mirapex losing it in 2010. The fact that Horizant sold just $2m in 2011 after its July launch and first-quarter sales were $1.3m is not a sign of a steep launch ramp.
PHN is not thought to be much more promising; with an estimated 100,000 patients, according to XenoPort, analysts from Leerink Swann believe the PHN market is smaller than restless legs syndrome. And with a decision against pursuing a superiority label, Horizant presents only an incremental gain – two doses versus three - over generic gabapentin, which will likely make it difficult to persuade payers to cover the more expensive branded drug.
Where to go?
The question for XenoPort, then, is whether Horizant can do much better without GSK, and if so, how to do it. Marketing the drug solo is not a likely option, as most restless legs syndrome prescriptions are written by primary care physicians; Xenoport probably does not have the resources to field a large enough sales force to support Horizant.
The RBC analysts suggest a better alternative could be to hire a contract sales force or find a neurology specialist company, but that entails unwinding from GSK. Perhaps the only surprising thing about the litigation is that GSK indeed is willing to fight for a drug that will never equal the chunky sales of predecessor Requip.
Investors are signalling they believe the sun is setting already on Horizant. Excitement will only return with positive data from its new duo of MS-related drugs, news that may not come for months.