Teva delivers some good news as pressure builds
Teva managed to deliver investors some badly needed good news last night, in the shape of US approval for its Huntington’s treatment Austedo. After last year’s complete response letter the green light comes as a relief.
The drug is one of Teva’s biggest commercial hopes outside its generics base, and the beleaguered company needs to show that it make can make the most of this opportunity. However, with the search for a new chief executive still under way and concerns about its indebtedness growing, shareholder focus will soon return to the bigger issues.
Investors made that clear today – after climbing as much as 5%, the company's Israel-listed shares closed only 1% higher.
Austedo was approved with a black box warning for depression and suicidality, in line with tetrabenazine, of which it is a deuterated version. They both work by inhibiting VMAT2, which is involved in dopamine transport.
Tetrabenazine is now available generically after Lundbeck’s Xenazine, which sold $327m globally at peak, lost patent protection a couple of years ago – mid-2015 in the US. Xenazine was notable as the only drug approved for Huntington’s, but was hampered by a strict REMS that sought to make physicians and patients aware of its link with depression and suicide. The lack of such a requirement for Austedo should prove to be a benefit.
Austedo’s selling point was always going to be its better tolerability than the incumbent, and data on its label laying out the comparatively lower rates of depression and suicide should also be an advantage, at least according to Evercore ISI’s Umer Raffat. Certain cautionary statements are also notable by their absence, he points out.
However generic tetrabenazine is not the only competition Austedo will face. Neurocrine’s Ingrezza, also a VMAT2 inhibitor, is due an FDA decision on approval by April 11. Neurocrine has pursued tardive dyskinesia as its first indication – tetrabenazine is frequently used off-label to treat the uncontrolled movements associated with this condition.
Valbenazine, the active ingredient in Ingrezza, is a prodrug of (+)-α-isomer of tetrabenazine, and it has also displayed an improved tolerability profile. Neither, of course, has been tested head to head against the original form, although data suggest similar levels of efficacy.
The makers of both compounds will have to hope that better tolerability will be enough, and so far the sellside has been convinced, with forecasts well exceeding Xenazine’s performance.
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Pricing will be crucial here and analysts commented today that Teva appeared to have priced Austedo roughly in line with, or even just below, generic tetrabenazine.
It is hard to see Neurocrine straying far from this strategy, although it will be launching in a different indication. Teva also has this larger patient population in sight, and will have priced with this in mind – FDA approval in tardive dyskinesia is due by the end of August.
The bets are on
With significantly more cash behind Teva, the smart money surely backs it in this race. Numbers for Ingrezza are likely swollen by the sellside’s need to justify Neurocrine’s huge $3.8bn market cap, a valuation that is probably partly based on the $3.6bn that Teva paid Auspex to get its hands on Austedo.
However this buyout was struck in May 2015, at the peak of the biotech boom, and in today’s money it looks steep. Any party interested in Ingrezza will surely have to see evidence of commercial success before coming on board at that sort of valuation.
Teva’s shareholders, meanwhile, are unlikely to be too concerned at the price of Auspex, which pales into insignificance against the $39bn takeout of Allergan’s generics business that happened nine months later.
The launch of Austedo will be watched closely, for sure. However larger concerns prevail for the world’s biggest generics company, and news abounds of building investor disquiet. With management surely distracted, in this situation the smart money should not ignore the underdog.
This article has been amended to clarify the active ingredient in Ingrezza.