January 7-10, 2013; San Francisco, CA Full Report - Draft

Executive Highlights

The 31st annual JP Morgan Healthcare Conference was held in San Francisco from January 7-10, featuring 398 company presentations and attracting over 8,600 registered attendees (plus an entire slew of people in town and not registered). In our JP Morgan full report, supplemented with our coverage of the coinciding Biotech Showcase and OneMedForum, we include discussion on 51 diabetes- and obesity-related presentations and our main takeaways. As a sidebar, we also attended the Boston Biotech East/West CEO conference on Sunday preceding all the other meetings – this is a can’t-miss meeting as far as we’re concerned for next yea as there were scores of interesting panels, breakouts, and discussions – tiny conference but a startlingly high number of thoughtful CEOs were there and unbelievably successful.

Broadly, company presentations suggested increasing strategic focus on diabetes, with multiple companies highlighting diabetes as a key driver of business. Many diabetes-related pipeline announcements occurred during or immediately preceding presentations – Lilly even released topline phase 3 data for its SGLT-2 inhibitor empagliflozin. We hope companies releasing new scientific data is a trend for JP Morgan. In general, we appreciated that many of conferences’ presenters struck a balance between describing business and pipeline strategies in the context of financial growth and in the framework of how they will help patients.

To this end (and reflective of sentiments we’ve heard in many recent diabetes- and obesity-centric conferences), we definitely heard a greater focus on individualizing therapy. On the genetics side, during one of the conferences’ keynote presentations, US Senate Majority Leader Dr. William Frist spoke about the potential of linking genomic records to clinical records to move medicine away from a “one-size-fits all” approach. Further, a packed (seriously SRO) 23andMe company presentation suggested that genetic research may be reaching a point that will enable HCPs to use this data in an actionable way. On the device side, companies are increasingly developing pipelines to allow for greater choices and more customization. In addition to a growing focus on individualization, we left the conference with the impression that 2013 will be a notable year in the diabetes device arena. Major milestones expected in 2013 (e.g., Dexcom’s US launch of the Animas Vibe CGM-integrated pump, FDA approval of Medtronic’s 530 low glucose suspend insulin pump and Enlite CGM) should help drive growth. We also enjoyed rich discussion on SGLT-2 inhibitors and the potential differentiating factors between companies’ candidates, the expansion of telemedicine, how new biosimilars might (or more likely, might not, at least anytime soon) gain share from established insulin players, and what factors could drive further penetration of the GLP-1 category.

Our compendium of the conference can be found immediately below, distilled into seven themes, followed by our full coverage of company presentations.

• Companies’ focus on diabetes continues to expand. Several diabetes-related announcements took place at or immediately preceding companies’ presentations, including Sanofi’s announcement that it had submitted the once-daily GLP-1 agonist Lyxumia to the FDA, Lilly’s announcement that BI had declined to continue its collaboration on the novel basal insulin candidate, and Lilly’s second announcement of positive topline phase 3 data for its SGLT-2 inhibitor empagliflozin – the release of scientific data during JPM had been virtually unprecedented to us, and reinforces the growing significance of diabetes and obesity. Also of note, this year, 90% of the presenters were CEOs. Companies frequently cited diabetes as a growth driver, highlighting the rapidly increasing number of patients with the disease – we of course view the growing attention to diabetes very favorably, as it reflects the greater public, corporate, and government recognition of diabetes as an incredible public health problem .
• This year’s JP Morgan conference reminded us that 2013 will be a pivotal year for many device companies, especially Insulet, Dexcom, and Medtronic. In his presentation, Insulet CEO Duane DeSisto stated that shipments of the recently approved second- gen pod are expected to begin in February, with the goal of converting the entire installed base by the end of 3Q13. The pod approval should be a huge catalyst this year, both from a profitability perspective (margins in the mid-60% range, compared to the low-50% range previously) and a growth perspective (20-30% growth is expected in 2013, and we would not be surprised to see higher). Meanwhile, 2013 should bring two important milestones for Dexcom: a pediatric indication for the recently launched G4 Platinum CGM and the US launch of the Animas Vibe CGM-integrated pump (the company’s first pump integration). Dexcom CEO Terry Gregg also emphasized that “patients are driving demand” for the G4 Platinum, a trend that we expect to continue in the coming year (especially as word gets out about the product’s improvements over the previous generations of CGM). Medtronic’s presentation certainly had a much “larger company” feel, though there were more mentions of diabetes than we have heard in eleven JP Morgan meetings. Approval of the MiniMed 530G low glucose suspend insulin pump and Enlite CGM is still expected by May 2013, and it was actually the first product listed on the company’s slide detailing upcoming launches. As a reminder, we learned at the company’s 2012 Analyst Day that when the Veo was launched internationally, it doubled Medtronic’s growth rate in insulin pumps and CGM – should this approval come as expected, the MiniMed 530G will almost certainly provide a big catalyst to the diabetes business following modest growth in 2012 (7% in 1Q12, 3% in 2Q12, and 3% in 3Q12 vs. 2011’s stronger growth of 17%, 14%, and 13%).
• JP Morgan 2013 included greater discussion of SGLT-2 inhibitors, coinciding with the FDA advisory committee meeting on J&J’s canagliflozin that occurred later that week. We gained particular insight as to what factors might differentiate SGLT-2 inhibitors – during Q&A for Lexicon Pharmaceutical’s presentation, management explained how slight differences in selective SGLT-2 inhibitors’ mechanisms resulted in differentiated safety profiles: J&J’s canagliflozin (proposed brand name Invokana) produces greater urinary glucose excretion (UGE) compared to BMS/AZ’s dapagliflozin (Forxiga), leading to greater efficacy but also a higher rate of genitourinary infections and adverse events, as well as potentially greater cardiovascular concerns. Management reiterated that because their product LX4211 inhibits both SGLT-1 and SGLT-2, it provides comparable efficacy to SGLT-2 inhibitors, an improved safety profile (due to its lower UGE), and potentially more beneficial use in people with renal impairment. During Lilly’s presentation, management highlighted that Lilly had announced positive phase 3 results for its SGLT-2 inhibitor empagliflozin the day before: in four completed phase 3 studies, empagliflozin met the primary endpoint of significantly greater A1c reduction compared to placebo, with a similar rate of adverse events but a higher incidence of genital infections – we hope to gain a clearer understanding of empagliflozin’s safety/efficacy profile when Lilly releases more detailed results in 2013/2014.
• Obesity companies also had a strong presence –three of the major players in the field (Vivus, Arena, and Orexigen) presented at the conference. These companies echoed each other in depicting the obesity market as segmented and roomy enough for three new obesity drugs (Vivus’ Qsymia [launched], Arena/Eisai’s Belviq [approved, awaiting final DEA scheduling designation], and Orexigen/Takeda’s Contrave [NDA resubmission expected 2H13]) to find their own patient-profile niches. Accordingly, these companies emphasized that the rising tide will lift all boats – efforts by each company to market and gain reimbursement for its own drug will help the market as a whole. We believe that these companies’ presence at the conference (a prestigious distinction to be granted) signifies JP Morgan’s growing confidence in the viability of pharmacotherapy as a treatment for medical obesity, as last year Arena did not present. Another common theme that obesity companies discussed was the issue of reimbursement, and despite the challenges the obesity market still faces, the outlook seemed generally positive. Arena management noted that one-third of insurers have some sort of obesity drug coverage; in December, Vivus secured a spot on Express Scripts’ national formulary; and Takeda management commented during its presentation (albeit) recess that payors are beginning to recognize value in treating obesity.
• Telemedicine was cited by some of the nation’s largest and most innovative not-for- profit health plans and systems as a key strategy for improving outcomes while reducing costs. Kaiser Permanente, America’s largest not-for-profit health plan (with over nine million members, 17,000 physicians, and $50+ billion in annual revenues) is focusing on expanding and improving electronic visits and virtual care – we were shocked by how many patients are now using this. Kaiser CEO Bernard Tyson characterized this strategy as “an unbelievable winner for our members and delivery system.” Five years ago, Kaiser had no e-visits to physicians. In 2012 it had over 20 million visits (quite impressive considering 40 million face- to-face visits occurred in the same year). Geisinger Health System (which serves 2.6 million people in Northeastern and Central Pennsylvania) is also expanding its tele-health services, including primary care e-visits. However, management did not provide the same level of detail as Kaiser. That said, we were encouraged to hear about the growing focus on telemedicine as we agree that it can increase access to care and help patients get answers to simple questions from medical professionals. However, we feel that health care services must be cautious not to sacrifice care quality for the sake of reducing costs. We are uncertain that Apple’s “FaceTime” (or any other video chatting service) can provide the same level of information to a physician or the same level of comfort to a worried patient when there is a more sensitive or complex medical concern. That said – many diabetes patients don’t even routinely see their doctors and anything to make the process easier is a winner in our book.
• Several presentations suggested that genetic research might (finally) allow HCPs to harness genetics data when individualizing diabetes and prediabetes therapy. Former US Senate Majority Leader Dr. William Frist emphatically described the possibility of having genomic records linked to clinical records and how it would help society get away from the “one-size-fits all” medicine that has resulted in failed drug response. His reference to Alzheimer’s medications led us to think about a relevant diabetes example: metformin responsiveness has a well-established genetic component. According to Dr. Eric Topol (Scripps, La Jolla, CA), 22% of patients have a genotype that makes them metformin non-responders; however, to date, it has been cost and “hassle” ineffective to genetically screen every patient prior to prescribing metformin. A possible solution is 23andMe’s $99 DNA “spit kit.” The company’s Founder and CEO, Anne Wojcicki, told one of the most densely packed audiences we saw at the conference how the current kit provides a slew of valuable information to personalize medicine, including one’s genetic disposition for drug response and disease risk relative to the rest of the tested population. We think that a similar kit could prove extremely useful upon a diabetes diagnosis to quickly get people to goal and to save them the trouble of struggling with a drug they will never respond to. Additionally, such a test could be used today to increase patient/HCP awareness of people’s genetic predisposition for type 2 diabetes, hopefully empowering people to adopt preventative behaviors while also reducing the disease’s stigma. So what needs to happen to take the power of genetics mainstream? According to Dr. Frist, the biggest barrier to adoption will likely be data storage, since our ability to create data far outpaces our ability to store it. We hope that continued focus on the benefits of genetic screening will prompt further efforts and funding to make it practical and available to everyday HCPs.
• In coming years, next-generation diabetes technologies will offer greater individualization through tailored devices and more choices. Tandem Diabetes Care made this a focus of its JPM presentation, highlighting its rich pipeline founded on a “one size does not fit all” paradigm. CEO Kim Blickenstaff commented that conversations with patients motivated the company to develop an insulin pump with a larger insulin reservoir – t:flex will hold 500-units (a 200-unit increase over the current t:slim). We also look forward to the commercialization of t:sport, which will cater to Tandem’s most active patients with its smaller size (35-40% smaller than the t:slim) and wireless touchscreen handheld. Further, while the device will be designed with the 300-unit reservoir, it can support the 500-unit t:flex cartridge for patients with greater insulin needs. Dexcom’s myriad partnerships will also give individuals more choice in their care with respect to insulin pump preference. CEO Terry Gregg detailed the company’s CGM-insulin pump integration partnerships, which include Animas, Tandem, and Roche: 1) the Animas Vibe with integrated G4 Platinum is already available in the EU and is pending US approval; 2) Tandem has accelerated its partnership with Dexcom to integrate the G4 Platinum into a Tandem pump (the companies expect to launch the product in 2014); and 3) a Roche insulin pump with CGM integration is slated for a late 2014-2015 launch. Personalization and choice is an important component in consumer electronics’ design, and while diabetes technology still is a far cry from consumer electronics, we believe that efforts by patient-centric companies like Tandem and Dexcom lend to the gradual blurring between the two categories.

 

 

Detailed Discussion and Commentary

Opening Remarks

Opening Remarks

Doug Braunstein, JD (Vice Chairman JP Morgan Chase & Co, New York, NY)

Mr. Doug Braunstein opened the 31st JP Morgan Healthcare Conference in front of a crowd of about 600 in the sleek Grand Ballroom of the Westin St. Francis. Mr. Braunstein highlighted the growth of the healthcare sector over these past 31 years: in 1983 US healthcare expenditures totaled $354 billion, and for 2013, he forecasted costs to total $2.8 trillion – an eight-fold increase. This year, 398 companies are presenting at the conference, and over 8,600 attendees registered to attend, a marked increase compared to the <100 attendees at the first iteration of this conference in 1983. Notably, 90% of the presenters are CEOs. Mr. Braunstein set a positive tone for 2013, forecasting that the improvements in the US economy, combined with the $163 billion in cash reserves held by healthcare companies listed in the S&P 500, would translate into an active year for healthcare investment and M&A. We also believe it will translate into many positives for patients.

Public Drug Company Presentations

AbbVie

Bill Chase (EVP Finance and CFO, AbbVie, Chicago, IL)

AbbVie EVP Finance and CFO Bill Chase provided a high-level overview of AbbVie, reviewing the company’s product portfolio, pipeline, and financials. During his presentation, he focused on the opportunity for continued growth with AbbVie’s TNF inhibitor Humira and highlighted the potential of the company’s phase 3 hepatitis C program. Although Mr. Chase did not discuss AbbVie’s chronic kidney disease candidates during his presentation (including Reata’s bardoxolone), a slide detailing the company’s mid-stage pipeline listed atrasentan in phase 2b, noting that results from dose-ranging trials showed improvement in symptoms predictive of renal function, and that presentation of phase 2 data and initiation of phase 3 are expected in 2013. For more information on AbbVie’s chronic kidney disease candidates, please see our Abbott 3Q12 report at: https://closeconcerns.box.com/s/o2qyq8d5inpnpm6ss72l. Mr. Chase closed his presentation by emphasizing AbbVie’s strong financial position – the company will have close to $6 billion in annual operating cash flow, and an initial cash balance of approximately $7.2 billion.

 

Alkermes

Richard Pops (CEO, Alkermes, Dublin, Ireland)

Alkermes CEO Richard Pops reviewed the company’s commercial portfolio and pipeline at JP Morgan today. We had also seen him present at the most valuable and interesting East/West CEO conference. At the latter, he spoke to the massive need to address diabetes and obesity, urging his colleagues in the room (about 150 very senior company executives and investors and others) to focus more attention on the policy implications of the expanding diabetes and obesity threats. While today at JPM, Mr. Pops did not explicitly provide any new updates on diabetes, his presence as a leader in the field is very known, understood, and admired and we hope he continues to educate peers on policy as he is very active in Washington and elsewhere on the healthcare policy and funding side. On the commercial side, as a reminder, Alkermes receives 8% royalties on the first 40 million units of Bydureon sold per year and 5.5% royalties on any additional units sold thereafter. It also has a once-weekly suspension formulation of exenatide and a once-monthly exenatide formulation. BMS/AZ have previously guided that the once- weekly suspension would begin phase 3 testing in 2H12 and the once monthly would begin phase 3 in early 2013. From Mr. Pops’ slides, it appears that these timelines have not been updated. We would find it unfortunate if BMS/AZ has missed at least the first one, and we'll look forward to 4Q12 results to see if the second target is met. As previously estimated, Alkermes expects to file the Bydureon pen device in mid-2013; at this stage, we would be more skeptical about this timeline, although this has been extended once already, so we certainly hope for the sake of patients that this is achieved. For Alkermes’ F2Q13 (calendar 3Q12) financial results, please see our November 6 Closer Look at https://closeconcerns.box.com/s/a8gxmfcxbr46gi8gjpl7.

Questions and Answers

Q: Could you provide any updates on the timeline for when suspension and once-monthly exenatide would enter phase 3?

A: We leave the timeline updates to our partners. They have not updated their estimates for once monthly.

Q: Can you characterize how BMS/AZ is handling the Bydureon transition?

A: They’re in the midst of wrestling international rights from Lilly, and they’re reconfiguring the whole team in the US. I think they’re just getting going on this thing. I also think the pens will be an important part of the commercial offering as they move into broader primary care. I think they’re proceeding deliberately. They wrote a very big check and I don’t think they’re interested in failing.

 

Amgen

Bob Bradway (CEO, Amgen, Thousand Oaks, CA)

Amgen CEO Bob Bradway did not provide any diabetes-specific updates, but did note that the $700 million acquisition of Turkey-based Mustafa Nevzat (a privately-owned pharmaceutical company) had completed. Amgen’s two diabetes candidates, AMG 151 (a phase 2 glucokinase activator) and AMG 876 (a phase 1 fusion protein for type 2 diabetes), received zero mentions or screen-time during the presentation. As a reminder, Amgen presented very positive phase 2 data for AMG 145, a PCSK9 inhibitor, at AHA 2012. Please see our AHA reports at https://closeconcerns.box.com/s/itv6a8e1tuzhy1yj2zny and https://closeconcerns.box.com/s/yrf9vr48w1f3fa9lirhn for more details. Amgen will report F3Q13 financial results on January 23, 2013 and will hold a Business Review Meeting February 7, 2013.

Questions and Answers

Q: Is diabetes still a focus area? It’s been a while since we’ve heard about progress on AMG 151 or 876.

Dr. Sean Harper (VP Research & Development, Amgen): There are certain kinds of interventions that are only focused on glucose control and A1c. Like other companies around the world, we’re seeing that as less attractive. With our commercial footprint, it doesn’t make a lot of sense for us to be developing primary care glucose control medications, in terms of what our research is focused on. Our research is very interested in metabolic disease, and some of the parameters that are often addressed there are glucose control, type 2 diabetes, metabolic syndrome, obesity, and so on. In that spectrum of metabolic disorders, we have quite a bit of interest and activity. We’re interested in the spectrum more of metabolic syndrome than just isolated A1c.

 

Arena

Jack Lief (President and CEO, Arena, San Diego, CA)

Arena CEO Jack Lief reviewed impending commercialization and regulatory milestones for Arena/Eisai’s obesity medication Belviq. Mr. Lief noted that Belviq is currently in the 30-day public comment period following the Drug Enforcement Agency’s (DEA) recommendation for Belviq to be classified as a Schedule IV controlled substance. After the DEA’s final scheduling designation, Eisai will be able to proceed with its US launch. During Q&A, management commented that they expected DEA scheduling to take four to six months, which could push a US launch into 2Q13 (previously, management had guided for a 1Q13 launch). As outlined in Arena’s 3Q12 financial update, commercialization will involve a sales force of ~200 representatives who would initially target 25-30,000 physicians. When asked as to whether a physician would prescribe Belviq or Vivus’ Qsymia first, management commented that for people with diabetes, prediabetes, or expected pregnancy, they believe Belviq would be the drug of choice. Turning to the international stage, Arena is targeting a 2014 South Korea launch through its partnership with South Korean pharmaceutical company Ildong. In Europe, Arena expects a decision from the European Medicines Agency and Swissmedic (Switzerland’s regulatory body) in 1H13. Further, Mr. Lief commented that Eisai is prioritizing regulatory submission in Mexico, Canada, and Brazil and expects to file NDAs in these markets during 2013. Rounding out Mr. Lief’s presentation on Belviq was brief mention of its patent protection (global patent coverage runs until 2023, but is expected to extend through 2026), manufacturing (the 2008 acquisition of Swiss-based GMP facility), and potential therapeutic combinations (phentermine and metformin are under consideration). While not a focus of Mr. Lief’s prepared remarks, reimbursement dominated the discussion during the breakout that followed. Of note, Arena management commented that one-third of insurers have some sort of obesity drug coverage.

• Mr. Lief also reviewed Arena’s financial agreement with Eisai, which includes a $65 milestone payment following DEA scheduling, 31.5-36.5% of US net sales, and eligibility for ~$1.2 billion in one-time purchase price adjustment payments and $50 million in regulatory and development milestone payments. Further, he remarked that Arena has limited responsibility for expenses (e.g., Arena will pay only 10% of the cost for the cardiovascular outcomes trial).

• For a deeper dive into Arena’s EMA submission and partnership with Ildong, please see our Arena 3Q12 report at: http://www.closeconcerns.com/knowledgebase/r/acb6934f. For greater detail on the scheduling process, please see our December 21, Closer Look at: http://www.closeconcerns.com/knowledgebase/r/d4d78df1.

Questions and Answers

Q: How do you plan to broaden access?

A: One-third of insurers have some sort of obesity drug coverage. Eisai has an extensive group of people who are working on reimbursement for Belviq, as most of you probably know.

We expect DEA scheduling to be around 4-6 months so Eisai is taking advantage of that time to get their sales ready to go. For mega employers, we focus on the benefits of Belviq on their own health care costs, for taking care of their employees’ weight. It’s not just cosmetics, it’s improving the patient’s total metabolic health, which means they (i.e., employers) can spend a little less money on each employee. In our trials we saw patients with diabetes and hypertension taking less of their medication.

For Medicare patients, we have a longer-term approach. Currently we see Medicare cover counseling, and we expect to see that they will do the same with reimbursement. Coverage may also expand through legislation and, if states like Massachusetts, California, or Nevada pass legislation, we may see expansion through that as well.

Q: What will US distribution look like and what will Eisai be responsible for?

A: Distribution will occur through local pharmacies. There is no mail order; it’s traditional distribution methods. Eisai has primary responsibility for commercialization, and the market access and sampling are included in a standard launch.

Q: Where are you in the process for distributing Belviq in Europe?

A: We are working with the United Kingdom to figure out reimbursement, and we have not started with the other countries yet. It has been easier in the UK and we’ll start there first.

Q: Since Eisai is doing the launch, how will Arena track the launch data? Are you going to get the data in real time?

A: When they get data, we’ll get data. We’re working on setting up those channels with Eisai now.

Q: What are the costs of goods (COGs) for producing Belviq?

A: We will manufacture Belviq, and our product has low COGs, traditional COGs.

Q: Can you talk about the side effects profile? What about depression with Belviq?

A: During clinical trials, Belviq was well, well, tolerated. Headache was the only side effect in the Belviq arm that exceeded the placebo arm. Seven percent of patients had headaches in early part of the study and it was transient. This was the most common side effect. We don’t see any depression side effects from Belviq that was higher than the placebo.

Q: Can you give us an update on Arena’s European partners?

A: None that I can share. Clearly Belviq has brought in interest, and we’re looking at this globally. Just as we did in South Korea, we will look for the best company to partner with in the region to market and sell Belviq.

Q: Can you talk about the options for Belviq?

A: We think this is an exciting therapy, we are going through a planning process for phentermine, and we want to run the plan by the FDA from a regulatory and clinical plan point of view. If the FDA buys into the plan, then we will be more specific. We do not want to release information and have the FDA disagree.

Phentermine is low hanging fruit, and it is not the only formulation that we are evaluating. There are other indications for Belviq that we are currently exploring, and there are other indications that we will explore in the future.

Q: Are other dose forms available, or are patches off the table?

A: Belviq is well absorbed. You can measure how much of the drug has been taken just using levels in the blood. There is no need for non-oral routes of administration.

Q: In your opinion, will a physician prescribe Belviq before Qsymia or Qsymia before Belviq?

A: We do not know exactly how that is going to be addressed by physicians. We know that physicians like starting patients out on one drug at a time, then adding or switching from that initial prescription. Our drug is really well tolerated.

What a physician is going to do is match a patient to a drug. Patients who are diabetic, pre-diabetic, or who have a pregnancy potential, they are going to be prescribed Belviq.

Q: One of the major concerns for the drug was a high incidence of patient drop out from the trial. Why do you think Belviq is a better commercial than clinical product? Why not have physicians administer the drug in order to have greater adherence?

A: Third party reimbursers are going to stop the therapy as soon as they feel that the patient no longer needs the drug. During trials, patients did not need to pay for Belviq, while patients will need to pay for the drug (i.e., some form of a co-pay) and when you pay for something, you appreciate the product a little more, at least I do.

Q: Is Eisai marketing other products in the US or their own?

A: They are currently marketing Aricept and their sales were $2 billion. Another product Aciphex is selling at $3 billion dollars. They do have some cancer drugs that they are marketing, but they have said that Belviq will be a first priority for them and their hope is that Belviq will be successful in the long term.

Q: Why was Switzerland chosen as the worldwide manufacturing factory site?

A: We like chocolate. [Laughter from the audience.] We chose Switzerland because: 1) quality is high; 2) in the emerging market, patients put a high premium on a high quality product; 3) we have traditional pharmaceutical tax rates and cost structures; and 4) we acquired the factory at a reasonable cost.

Q: When does your role in distribution end and Eisai’s begin?

A: We take care of production and Eisai takes care of everything else – marketing, sales.

 

Array BioPharma

Ron Squarer (CEO, Array Biopharma, Boulder, CO)

Array BioPharma’s presentation included only a brief mention of diabetes: when discussing anticipated timelines for 2013, Mr. Squarer noted that a phase 2 trial for Amgen/Array’s glucokinase activator AMG-151 is expected to complete this year. We believe he is referring to a currently recruiting, 28-day phase 2a trial examining multiple doses of AMG-151 in 224 people with type 2 diabetes (ClinicalTrials.gov Identifier: NCT01464437). As a reminder, Amgen acquired rights to Array’s GKA program in December 2009 for a $60 million up-front fee. During Q&A, Mr. Squarer remarked that he is unsure whether AMG-151 will be advanced into phase 2b or straight into phase 3. Ms. Squarer also mentioned that Array is developing a GPR119 agonist (ARRY-981), though he provided no details. As background, management had previously forecasted for the start of phase 1 studies in 4Q12; at this time, ClinicalTrials.gov does not list any studies for the candidate.

Questions and Answers

Q: Could you discuss your relationship with Amgen and your expectations for your glucokinase activator [AMG-151]?

A: The phase 2 trial is nearing completion. We don’t anticipate Amgen discussing a phase 3 study; the data is not there yet. We think it will probably move into a phase 2b study. It is a competitive area. We will know the data at some point, probably next year. Since Amgen controls the disclosure of the data, you would need to talk to them about it.

Q: Could you clarify why you think AMG-151 will be moved into phase 2b development rather than phase 3?

A: We do not actually know what that decision will be. I believe that it makes sense to run a 12-week phase 2b study while enabling a phase 3 trial. But Amgen might decide to go straight into phase 3.

 

Astellas

Yoshihiko Hatanaka (CEO, Astellas, Tokyo, Japan)

Astellas CEO Yoshihiko Hatanaka made it clear that Astellas is concentrating on urology, transplantation, and oncology – diabetes complications and kidney diseases were listed, in smaller font, on his slides as categories in which the company hopes, in the future, to be a global leader. When asked why Astellas – despite having an SGLT-2 inhibitor, ipragliflozin, in phase 3 development in Japan – selected diabetes complications and not diabetes for this designation, Mr. Hatanaka described the anti- diabetic field as being very crowded and difficult. He explained that the company’s November decision to discontinue development of ipragliflozin in the US and EU was because they would have been late to the market in these areas (for more details on the drug and this decision see our Astellas F2Q12 report at https://closeconcerns.box.com/s/40jxvzppe365bwvpmu0j). The candidate had been in phase 2 development in these regions, so it would likely have been behind at least BMS/AZ’s dapagliflozin and J&J’s canagliflozin in the US (where both are under FDA review) and EU (where dapagliflozin has already been approved and canagliflozin is under review), if not also behind Pfizer’s ertugliflozin (phase 3-ready). However, Mr. Hatanaka expressed confidence that ipragliflozin could be a market leader in Japan. He did not mention the company’s decision to also discontinue development of its GPR119 agonist PSN821 (had been phase 2) and PSN842 (had been preclinical) after AstraZeneca announced that it would not exercise its option to acquire the compounds. On the diabetes complications front, the company has two candidates for renal anemia, ASP1517 and YM311 (both phase 2 in Europe and phase 1 in Japan).

Questions and Answers

Q: You listed diabetes complications but not diabetes as an area where you hope to be a global leader. Will you not be pursuing more glucose control medications after ipragliflozin?

A: Diabetes blood sugar control is a very crowded and hard market. That is why we have given up the development work of an SGLT-2 in the US and Europe. We saw our potential order in the market to be late compared to competition. In Japan we might be the first to market and we might have a chance to be a leader within that class.

 

AstraZeneca

Simon Lowth (CFO, AstraZeneca, London, UK)

AstraZeneca CFO Simon Lowth highlighted diabetes multiple times as a platform for growth and an exemplary area illustrating the company’s successful strategy in partnership. Mr. Lowth stated that there is “enormous effort” currently behind the new exenatide formulations but did not provide updates on timelines. As a reminder, BMS previously guided that the once-weekly formulation would begin phase 3 testing in 2H12, and during Amylin’s 1Q12 earnings update, management forecasted that the once-monthly formulation would begin phase 3 in 1Q13; however, neither BMS or Alkermes has confirmed whether these timelines have been or will be met. Regarding dapagliflozin’s resubmission in the US, Mr. Lowth reiterated BMS’ sentiment that there is now a “clear path forward” in the FDA review process. During Q&A, Mr. Lowth said, in accordance with what BMS management had expressed the previous day in Q&A, that the Amylin integration was proceeding as planned but that Bydureon’s regulatory or launch status in different countries is very variable and that Bydureon did not have very high visibility in some smaller international markets.

Questions and Answers

Q: How is the integration process with Amylin going?

A: I think overall the process is going well. We’re on track for the timetable for integration that we’ve set up. We took up the promotion of Bydureon on the day we expected in the US. We are working through the first wave of initiating promotion in markets like Japan. Markets like Japan are the next, most important markets. That remains on track. We have to understand now where Lilly got to in each market, and it’s been different in each market. We’ve had to pin down the stage in the approval process and where to pick up. In the big ones, we’re on track. In the smaller ones, we didn’t have as much visibility, and we’ve had to map that out, but we haven’t seen any slippage in time expectations. I would say that the US integration process has gone well. Indeed we’ve established a slightly different model in the US where we brought together BMS/AZ colleagues to drive it so collaboration has really picked up there. That’ll have real benefits for Onglyza and other markets as well. It’s been a catalyst to move toward an even stronger working relationship. I think it’s still very early days for the US. It’s going to be something we really need to step back and look at the end of 2013 because the rest of the world is really important in this proposition for us.

 

Biocon

Kiran Mazumdar-Shaw (CEO, Biocon, Bangalore, India)

Biocon CEO Kiran Mazumdar-Shaw provided a high-level overview of Biocon, and offered some very valuable IMS estimates on pharma growth and emerging markets. As far as Biocon’s business goes, few updates were shared beyond remarks made in the Biocon F2Q13 financial results call. Big picture, Ms. Mazumdar-Shaw emphasized that emerging markets will be the biggest near-term focus for the company’s biosimilar insulins – this is unsurprising based on what requirements seem to be for entering the US and EU markets, which we believe is unlikely to happen before 2015 although it is probably premature to estimate market entry at this point. Ms. Mazumdar-Shaw characterized expectations in the US and Europe as “modest” to start – presumably, to achieve significant growth down the road, lots of things would have to go right on the regulatory, commercial, reimbursement, and competitive fronts. On the pipeline side, no updates came on global trials for recombinant human insulin and glargine. Biocon’s recombinant human insulin has completed a phase 3 study in the EU (n=250 patients), the company is awaiting 12-month safety (immunogenicity) data, and filing in the EU is expected in later FY 14 (calendar: April 2013-March 2014). Meanwhile, the company is currently in talks with US and EU regulators to hopefully start the global phase 3 study for biosimilar glargine in 2013. Regulatory filing is expected in 2015. Both timelines were consistent with previous estimates. The IN-105 oral insulin program was highlighted in the novel molecules part of the presentation, especially the recent option agreement with BMS. Ms. Mazumdar-Shaw noted that although there was a placebo effect in the India trials, “proof of principle was demonstrated.” Going forward, BMS will help Biocon redesign the phase 2 global trials under an already filed US IND. This program was characterized in Q&A as a “game changer if it works.”

• According to IMS, 75% of pharma growth from 2011-2016 is expected to come from emerging markets – the slide showed the global pharmaceutical market growing from $955 billion in 2011 to $1.2 trillion in 2016. Notably, generics are expected to grow ten times faster than branded drugs between 2011 and 2016. IMS estimates also suggest that biosimilars will grow fivefold from $1 billion to approximately $5 billion over the same period. Emerging markets are where most of the growth will come from, with Asia providing about 40% of the growth. Our guess is that over time, this percentage may increase even further, since biosimilars in diabetes in the US sound like they may have a long road ahead.
• Currently, biosimilars account for ~5% of Biocon’s $450 million in sales, expected to grow to 10% of a ~$700 million business in FY15 and 20% of Biocon’s ~$1 billion overall business goal for FY18. Biocon’s biosimilar portfolio includes both insulin and monoclonal antibodies, though Ms. Mazumdar-Shaw emphasized that the business will be “largely insulins.” A major part of this strategy will come through geographical expansion.
• Following the termination of the Pfizer insulin partnership, Biocon has signed several regional partnerships. These have included regions such as Latin America, Southeast Asia, Russia, and China. Partnership discussions are in progress for the US and Europe, though no details were shared. Ms. Mazumdar-Shaw reminded the audience that Biocon’s Insugen (biosimilar recombinant human insulin) is registered in over 40 countries, while Basalog (biosimilar glargine) is registered in over five countries. Basalog sales are growing in India, though it is unclear what the base is.
• Biocon is the fastest growing insulin company in India, registering 33% annual growth vis-a-vis a four-year industry average of 15%. Ms. Mazumdar-Shaw noted that the introduction of the Insupen has also augmented growth, and the company expects to garner much greater market share going forward. As a reminder, Insupen is Biocon’s reusable insulin pen for biosimilar glargine (Basalog) and recombinant human insulin (Insugen).
• We were heartened to hear positive sentiments about diabetes funding in India. As we understand it, to date, patients and their families have been wholly responsible for funding 100% of their diabetes care expenses, which often represents ~20-30% of a family’s income. Ms. Mazumdar-Shaw said, however, that she believes the government will soon begin to cover some expenses for patients; given the size of the population, this could make growth meaningfully higher in India. 
• For more information, please see our Biocon F2Q13 report athttps://closeconcerns.box.com/s/nb2s1ops7zspcwapx27u

Questions and Answers

Q: On biosimilars, there has been talk of a potentially higher regulatory bar for chronic drugs. Can you talk about that?

A: I think FDA has to get more comfortable with product quality. Every time you meet with them you get unique signals. But I think they are getting more consistent with the European regulators. The same thing happened with small molecule generics about 25 years ago.

It’s hard to second guess at this stage. We have to go with what is out there. Everyone is trying to meet the biosimilar guidances from the US and EU. I think the EU is farther down the line – the US is very cautious right now. It is going to be about ascertaining the comfort level with safety and efficacy. We will start introducing products in emerging markets. For biosimilars, emerging markets are more receptive. We will also have strong post-marketing surveillance and gather strong pharmacovigilance data. That will beef up a lot of that data that the regulators are looking for.

Q: What is the path forward for recombinant human insulin?

A: We have two programs that we are actively pursuing. For recombinant human insulin, the phase 3 study is completed in Europe. For the second program – biosimilar glargine – we’re entering into a global phase 3 trial shortly. We just completed the phase 1 PK/PD study.

Q: You were guiding for biosimilars to be a $200 million business by 2018. It looks like these could be approved in the 2016 timeframe…

A: Emerging markets have a huge market potential – there is large demand for insulin and insulin analogs. These are places where we are registered and can market. When we enter into in Europe and the US, there will be modest entry-point sales. We expect sales will pick up thereafter.

Q: For the IN-105 oral insulin program, what are the key milestones?

A: We mentioned that surprising placebo response, and that information was very closely looked at by BMS. They are helping us with the phase 2 trial design. We will be designing two or three studies to answer those questions. Then, they have the option to license the compound. If you think about it, IN-105 is a particular game changer if it works. But there will also be significant clinical trial costs if it works.

Q: What is the progress on re-partnering the insulin portfolio post-Pfizer?

A: I cannot give any more information. We will hopefully share that information shortly.

Q: How do you perceive the need for more people taking insulin globally? In emerging markets, the diagnosis rates are so low, and the percentage taking insulin is so low.

A: When you look at what’s happening in emerging markets, governments are spending in key disease areas. In India alone, they have tripled investments in healthcare, and diabetes is a big area of focus. Governments are looking at the distribution of essential drugs, especially making lifesaving drugs like insulin free. They will cover a larger number of patients that are right now not being covered. At a government level, the tender markets for insulin are just exploding. We’re seeing a lot of huge surges.

In developed markets, many of the innovator companies, are moving away from recombinant human insulin into analogs. We still believe this is going to be an important space.

Q: How large was the phase 3 trial for recombinant human insulin?

A: It was about 250 patients, and it has been registered on the European clinical trial website. Regarding glargine, we are discussing with regulators in both the US and Europe. Now that the US guidelines are much clearer, we want to decide how to do a comprehensive global program.

Q: The European guidelines for insulins have just been redone and published. They are notably silent on whether or not you are supposed to submit 12 months of immunogenicity data pre- or post-submission. From the timelines you presented this morning, it seems like you interpreted it as 12 months pre-submission data?

A: Yes.

 

Bristol-Myers Squibb

Lamberto Andreotti (CEO, Bristol-Myers Squibb, New York, NY)

Mr. Lamberto Andreotti branded 2012 as the “year of transition,” highlighting several milestones for BMS including the EU approval of BMS/AZ’s Forxiga (dapagliflozin), as well as their purchase of Amylin (which “took our diabetes franchise to the next level”). When reviewing BMS’ diabetes portfolio, he noted that BMS and AZ are the only Pharma companies with approved diabetes products across three novel drug classes. As a reminder, BMS/AZ market the Onglyza franchise, as well as Byetta and Bydureon (gained from the Amylin acquisition), and will soon introduce Forxiga to the global market. We think this will be especially important some years out when unique novel compounds have been approved and when the market is competing for patient “share of mind” and trying to develop easy-to- prescribe and easy-to-take fixed dose combinations. Mr. Andreotti remarked that the Amylin integration “is going very well” and reiterated that the BMS/AZ/Amylin sales force has already begun promoting the combined portfolio in the US. He estimated that the transition of international Bydureon and Byetta rights from Lilly to BMS/AZ would occur in mid-2013 – this represents a slight delay from Lilly’s expectation of a 1Q13 transition completion, which was announced during Lilly’s recent 2013 financial guidance. During that meeting, Lilly noted that an estimated $490 million in deferred income remains outstanding.

Questions and Answers

Q: Can you comment how the Amylin acquisition is proceeding?

A: It’s an interesting acquisition because we bought some established elements and some not-so- established elements. We were not going after major synergies. We were active on a lot of G&A structures (general and administration), but our major focus was to use the BMS/AZ organization combined with the Amylin organization to give much stronger support to the combined portfolio. We have trained the Amylin sales force on our products, and at the same time we have trained the AZ and BMS reps on Byetta and Bydureon. It is still too early to say whether this approach has been successful or not. We have some initial, tiny indicators. Miracles do not happen in any industry, but nothing changes in a matter of days. We’re a couple of months now in the market. Outside of the US, we are in the hands of Eli Lilly. We’ve had good interactions with them. We are taking Byetta and Bydureon back from them. The situation there is a bit more complicated because in certain countries, Bydureon has not been launched yet. In others, it was half-launched. So it’ll take a bit more time to talk about the results outside of the US.

 

Eli Lilly

John Lechleiter, PhD (CEO, Eli Lilly, Indianapolis, IN)

Eli Lilly CEO John Lechleiter characterized Lilly’s four phase 3 diabetes compounds (dulaglutide, empagliflozin, and its two basal insulin candidates) as potentially major contributors to the company’s future. We did not learn any new details on why BI returned rights to the novel basal insulin analog LY2605541 to Lilly, as was announced yesterday, but it seems clear that BI has dropped the program and we would not be surprised if Lilly ultimately did not pursue it (although Lilly did not discuss this possibility). We see the potential problems on the safety front – potential association with liver enzymes, which had been raised at ADA – as an area of uncertainty, which may be related to more limited public commentary on this drug. The fact that BI remains at work on the other basal insulin with Lilly demonstrates, from our view, the company’s strong interest in the area. We assume, for now, that Lilly and BI have different risk profiles as far is this sub-segment goes. Dr. Lechleiter did highlight the positive topline phase 3 results for empagliflozin, which Lilly also announced at JP Morgan (see below for highlights). During Q&A, management stated that empagliflozin could be submitted for regulatory approval as early as the first half of 2013. No other new updates were provided since Lilly’s 2013 Financial Guidance recent update (see our report at https://closeconcerns.box.com/s/n202e6t20zx3oyyyxqob). Notably, as in many recent investor presentations, Dr. Lechleiter continued to emphasize Lilly’s emphasis on emerging markets and its diabetes business. Dr. Lechleiter is obviously a very revered leader at Lilly as well as throughout industry and it was our pleasure to listen to him. We think he can impact the diabetes and obesity fields even more and hope to see his leadership become even broader and more entrenched.

• Dr. Lechleiter did not provide new details on why BI decided to terminate its partnership with Lilly on the novel basal insulin analog LY2605541 (PEGylated lispro), as Lilly announced at JPM. During Q&A however, management did note that topline phase 3 data might be publicly released for PEGylated lispro, pending internal review of initial phase 3 data in 3Q-4Q13. As previously stated, Lilly expects internal read-outs of phase 3 data for its novel insulin glargine formulation in 2013, which remains a part of the Lilly/BI alliance. Additionally, Dr. Lechleiter reaffirmed that submission of Lilly’s novel insulin glargine formulation could also occur this year. Lilly had previously said that it would not share results publicly for the PEGylated lispro.
• During his presentation, Dr. Lechleiter highlighted that yesterday Lilly also announced positive topline results from four completed phase 3 trials of its SGLT-2 inhibitor, empagliflozin. In all four studies, empagliflozin met its primary efficacy endpoint of greater A1c change from baseline compared to placebo – very unfortunately from our view, no actual results were given, though the fact that phase 3 results were announced at JP Morgan reinforces the growing importance (from a high base) of this meeting. Doses of 10 and 25 mg were tested, and safety information was consistent with findings reported from phase 2 results. Consistent with other SGLT-2 inhibitors, genital infections were more common in patients treated with empagliflozin compared to placebo. For more details, please see our report at http://www.closeconcerns.com/knowledgebase/r/e4f7114e. Dr. Lechleiter reiterated that full data would be released through scientific meetings and publications in 2013 and 2014. We are very eager to better understand patient and HCP views on these infections – is it a hassle or a major concern? What is the lifetime risk for a person taking this class of drug, of these side effects? These are questions that will help us come to better estimates about the commercial potential for this market. 
• During Q&A, management indicated that empagliflozin could be submitted to regulatory authorities as early as the first half of 2013 (Lilly’s 2013 Financial Guidance call held on January 4 had only specified that it could be submitted sometime in 2013; see our report at http://www.closeconcerns.com/knowledgebase/r/8bc6759f). Obviously the J&J panel meeting on canagliflozin should have a major impact on how the chances for the class are perceived. [Editors note: since the writing of this piece, the advisory committee on canagliflozin has occurred. See our coverage at: https://closeconcerns.box.com/s/efga4as47nd9jtgj1ej2.]
• Additionally, during Q&A, management stated that they believe the company’s novel insulin glargine product could be competitive in emerging markets where biosimilar versions of Lantus already exist. Furthermore, management believes that niches exist in the basal insulin market to allow Lilly to successfully commercialize both a novel insulin glargine and PEGylated lispro at the same time.
• Dr. Lechleiter reaffirmed that in 2013 for dulaglutide, Lilly expects to disclose phase 3 data and expects a potential regulatory submission. Dr. Lechleiter expressed continued enthusiasm for dulaglutide, referring to the October release of positive topline data from three completed phase 3 studies in dulaglutide’s AWARD clinical trial program demonstrating A1c superiority compared to Byetta at 26 weeks, metformin at 26 weeks, and sitagliptin at 52 weeks (for more details, please see our report at http://www.closeconcerns.com/knowledgebase/r/bd49e680).

Questions and Answers

Q: Can you offer some context around how the relationship with BI is changing and why BI returned rights to the novel basal insulin candidate [LY2605541]?

A: We continue to be very excited about the alliance with BI. We began the alliance with four assets – two orals coming from BI [Tradjenta and empagliflozin] and the two basal insulins from Lilly. BI also has the option for a fifth asset, a TGF-beta antibody. That decision will take place at a later stage. BI has decided to terminate the relationship as to the basal insulin analog based on strategic portfolio considerations. The alliance continues to be strong. We like the two orals. We are commercializing Tradjenta today. We expect to file empagliflozin and insulin glargine this year. We continue to remain excited to develop the novel basal insulin analog as a Lilly stand-alone.

Q: How might the efficacy of your SGLT-2 inhibitor, empagliflozin, compare to J&J’s canagliflozin and BMS/AZ’s Forxiga (dapagliflozin)?

A: We have reported that we have positive data from four phase 3 trials for empagliflozin. This data is positive enough to allow potential submission in the first half of 2013. At this point we won’t comment on relative efficacy – we will disclose this data at ADA.

Q: If the profile for your novel basal insulin candidate holds up, it would be pretty compelling. Should we interpret BI’s decision to back out as a negative for the asset?

A: We shouldn’t read it as a negative for the asset. We will have internal readouts from the first phase 3 trials later this year in Q3 and Q4. There’s a potential for topline release once we get results from those trials.

Q: If you end up with both the novel glargine product partnered with BI and a novel basal analog as a Lilly stand-alone product, how would you manage that relationship with one partnered basal and one wholly owned?

A: Even today we have our insulins that are not part of the alliance, as well as dulaglutide, which we are developing as a Lilly standalone, so we see the alliance as giving us a larger commercial footprint and having the ability to maximize all of these products. We’ve always talked about the unique opportunity we see with our novel insulin glargine as well as the unique opportunity we see with the novel basal analog. We see different segments of the basal market. Glargine will compete within the space with other different glargine products. The innovative basal analog for us is a new paradigm. If this product is successful, some benefits would be very significant. It could really deliver in a big way for people with diabetes and for our company.

Q: Can you provide a launch date for the novel insulin glargine?

A: We won’t disclose a launch date for glargine. What we are sharing right now is the 2013 filing date in the US and Europe. As we look at the patents and exclusivity period that Sanofi has, we may go through early 2015, which will be the first opportunity for anyone to enter the market.

Q: Let’s say the novel insulin glargine is approved in 2015 – what happens to the emerging markets? Can you go in and compete against the two non-Lantus insulin glargines that are already there?

A: Absolutely. This will be an important product for emerging markets. Our plans are to file this product on a worldwide basis. Clearly we expect that different jurisdictions will have different patents and exclusivity periods for the innovative product.

Q: Will we see data from your studies prior to the approval?

A: We are not planning at this stage to disclose data. It is a possibility, but we believe we have significant know-how on how we are developing our own insulin glargine product. This is a regulatory pathway that is, at best, ambiguous. We may disclose data at some point in time.

Q: You already said you would not discuss comparative efficacy of empagliflozin with other SGLT-2 inhibitors, but how else might empagliflozin be differentiated from dapagliflozin and canagliflozin?

A: We will have to wait for the data. Some data was released for canagliflozin today for the FDA Advisory Committee meeting that I have not yet had a chance to look closely at. Each of the products will have a full range of strengths and weaknesses. Based on what we’ve seen for empagliflozin today, we believe we have a strong package that we’re preparing for submission.

 

Forest Laboratories

David Solomon (SVP Corporate Development and Strategic Planning, Forest Laboratories, New York, NY)

After reviewing Forest’s “next nine” products (seven on the market and two under regulatory review), Mr. David Solomon remarked that the glucokinase activator GK1-399 (formerly TTP399) is currently in phase 2. As a reminder, GK1-399 is the lead candidate from Forest’s GKA program, which it licensed from TransTech Pharma in June 2010. It appears to have recently been advanced to phase 2, as a phase 1/2 trial comparing three doses of GK1-399 to placebo completed in September. As a liver-selective glucokinase activator, GK1-399 aims to increase hepatic glucokinase activation (to stimulate hepatic glucose uptake) while avoiding pancreatic glucokinase activation (which stimulates insulin secretion), thereby minimizing the risk of hypoglycemia. Forest is responsible for all development and commercialization costs and will receive global rights to the drug in markets excluding the Middle Eastand North America. For further details on GK1-399, please see our Forest F2Q13 report at https://closeconcerns.box.com/s/ayqdkkps9iv4pca7dwhu.

Questions and Answers

Q: You spent a lot of money on the TransTech acquisition to acquire glucokinase activators for type 2 diabetes. Do you have any plans to enter the type 1 diabetes space?

Dr. Francis Perier, Jr. (CFO and SVP of Finance, Forest Laboratories): Type 2 is great because we’ve figured out managed care, there is an unmet need there, and the population of type 2 diabetics is growing. We don’t currently have anything planned for type 1. If the right opportunity presents itself though, we’d be interested.

 

Gilead Sciences

John Martin, PhD (Chairman and CEO, Gilead Sciences, Foster City, CA)

The Gilead Sciences presentation included overviews of Gilead’s HIV/AIDS, Hepatitis C, and Oncology products and candidates; diabetes was not mentioned. As a reminder, Gilead has a late sodium current inhibitor (ranolazine) in phase 3 development for type 2 diabetes and is currently conducting three phase 3 trials evaluating ranolazine as an add-on to metformin (ClinicalTrial.gov Identifier: NCT01555164), as a monotherapy (Identifier: NCT01472185), and as an add-on to the sulfonylurea glimepiride (Identifier: NCT01494987). As background, ranolazine is already marketed as Ranexa for the treatment of chronic angina (chest pain/pressure resulting from a lack of blood and oxygen supply).

 

GSK

Patrick Vallance, MD, PhD (President, Pharmaceutical R&D, GSK, London)

The data package for regulatory filing of GSK’s once-weekly GLP-1 agonist albiglutide is “about to be submitted,” said Dr. Patrick Vallance, President of GSK’s Pharmaceutical R&D. While a slight delay from the timeline put forth during the company’s 3Q12 financial update (when management expected to file with global regulatory agencies “around the end of the year”), regulatory submission in 1Q13 would be in line with previous guidance from the company. Dr. Vallance highlighted GSK’s robust clinical evaluation of the candidate, which included eight pivotal HARMONY phase 3 studies in roughly 6,500 patients total. He noted that since albiglutide is based on the human GLP-1 protein (Byetta and Bydureon are based on the exendin-4 protein, which has a ~53% homology to the native peptide), it has a lower risk of auto-antibody reactions, something we hadn’t heard before; we’re interested for greater explanation on this front, as we assume rigorous auto-antibody testing would be required in any clinical program. To our knowledge, albiglutide consists of two copies of the human GLP-1 peptide fused to albumin and is thus much larger than other GLP-1 agonists, giving it different properties. Additionally, he remarked that albiglutide would be delivered through a “very simple pen device.” We’ll be interested to see how patients receive this device and how it compares to Bydureon’s, as Dr. Vallance views the reconstitution/administration device as a potential differentiator (see Q&A).

• If approved, albiglutide would likely be the second once-weekly GLP-1 therapy to market; however, it may be closely followed by dulaglutide, which Lilly expects to submit to regulatory authorities in 2013. Other companies looking to enter the once-weekly class include Novo Nordisk (semaglutide; phase 3 to begin in 1H13) and PhaseBio (Glymera; phase 2). For additional background on the GLP-1 class and greater characterization of albiglutide, please seeour GSK 3Q12 report at: http://www.closeconcerns.com/knowledgebase/r/55cc6b2b. For a full discussion of albiglutide’s phase 3 Harmony program, please see our July 11, 2012 Closer Look at http://www.closeconcerns.com/knowledgebase/r/a6be6e0a.

Questions and Answers

Q: What characteristic do you think will differentiate competitors within the growing once- weekly GLP-1 class? And what do you view as the biggest plus with albiglutide?

A: There aren’t many one-weekly GLP-1s out there yet. I think the difference between albiglutide and Bydureon will be the device: the simplicity of use, the needle size, and indeed the data package going along with it. As for others coming down the line, I can’t comment. The biggest factor right now is that albiglutide is a tolerated, easy-to-use once-weekly drug versus a daily drug.

 

Halozyme Therapeutics

Gregory Frost, PhD (President and CEO, Halozyme Therapeutics, San Diego, CA)

Halozyme CEO Dr. Gregory Frost believes that the commercialization of Hylenex for preadministration in people using insulin pumps will make a “significant contribution to revenue growth by the end of 2014” – this was exciting to hear, and could represent the nearest term ultra-rapid-acting insulin delivery technology to hit the market. One important update on the program was that one of the company’s phase 4 studies testing Hylenex in insulin pumpers would be coming up on ClinicalTrials.gov “soon.” Additionally, Halozyme will be testing the device that it will be using for preadministration of PH20 – as of the last update, these were infusion sets being developed in collaboration with Unomedical. There was much more discussion on Hylenex, though it was largely a review of the company’s November 3Q12 financial results call. There were no updates on the PH20-insulin coformulation program – Halozyme has a phase 3 formulation ready, but the company doesn’t have any plans to conduct clinical studies in the next two quarters. Said Dr. Frost, “We are really focused on pumps.” News also emerged on the financial side: Halozyme believes it can be cash flow positive as early as 2014. Dr. Frost remarked that the company entered 2013 with $100 million in cash and guided for a $45-$50 million cash burn through the year.

• Dr. Frost reviewed the necessary steps Halozyme would need to take to make Hylenex “commercial ready” for preadministration in people using insulin pumps: 1) scale up manufacturing capacity; 2) secure delivery device approvals (as we understand it from previous presentations, the Unomedical infusion sets will work with any insulin analog and any non-patch pump, though the company is looking to offer functionality to OmniPod users); and 3) conduct additional studies in in relevant sub-populations (the company’s phase 4 program that is slated to begin this year). Dr. Frost’s update suggested one of these insulin pump studies will be coming up on ClinicalTrials.gov soon.
• While details of the phase 4 program were not elaborated on during the day’s presentation, to our knowledge, the program will serve to: 1) confirm that the administration solution is safe and effective; 2) confirm that the directions for use are clear; 3) validate the benefits of Hylenex preadministration for insulin pumpers; and 4) generate additional data that can be used to promote Hylenex. We note that the FDA did not request the phase 4 studies.

• As a reminder, preadministration indication for Hylenex use in insulin pumps is technically on label today. It falls under the broad indication of “an adjuvant to increase the dispersion and absorption of other injected drugs.”
• No new updates were given on the company’s plans to advance its coformulation program for PH2o with insulin analogs (Halozyme’s second ultra-rapid-acting insulin program). While the company has a “phase 3 formulation” it does not intend to begin clinical evaluations in the next two quarters; rather, the company will remain focused on Hylenex for preadministration in insulin pumpers.
• As a reminder, Hylenex is the company’s FDA-approved formulation of the enzyme recombinant human hyaluronidase (PH20), which increases the dispersion and absorption of subcutaneously injected fluids and drugs. Halozyme is pursuing two programs in the diabetes arena: a proprietary preadministration program (an injection of Hylenex is administered prior to inserting an infusion set) and a coformulation program (mixing rapid-acting insulin analogs and PH20) that it plans to partner.
• For a more in depth discussion of the company’s ultra-rapid-acting insulin programs and detail on other market players with late-stage products, please see our Halozyme 3Q12 report at: http://www.closeconcerns.com/knowledgebase/r/228750e5.

Questions and Answers

Q: Can you give any greater specificity on when are you looking to launch PH20 for the insulin pump indication and whether this would occur before or after completing the phase 4 program?

A: The phase 4 program is continually evolving. You should start looking at this being important for our revenue at the end of 2014. There are elements of getting the fill lines up. We have the device that we’re going to be submitting files on. You’ll see a phase 4 coming up on ClinicalTrials.gov soon. All of those things are going to come together to make this program meaningful towards the end of 2014.

Q: Any updates on the coformulation program for PH20 with insulin analogs?

A: We have a phase 3 formulation but we don’t have any plans in the next two quarters on doing any clinical studies there. We are really focused on pumps.

 

Isis Pharmaceuticals

Stanley Crooke, MD, PhD (CEO, Isis Pharmaceuticals, Carlsbad, CA)

In highlighting several of Isis’ later-stage drug candidates, Dr. Stanley Crooke briefly noted the company’s phase 2 apoC-III inhibitor. As a reminder, the company is pursuing a staged development plan for ISIS-APOCIII and is initially planning to develop the drug to treat patients with severely elevated triglyceride levels (>1,000 mg/dl), who are at high risk of CV disease and pancreatitis, followed by other indications in cardiovascular disease and the metabolic syndrome (such as type 2 diabetes). He revealed that two phase 2 studies are slated to complete in 2013 and that a phase 3 study in patients with severe hypertriglyceridemia is expected to being in late 2013 or early 2013, placing a potential regulatory filing within the next five years. The presentation slides indicate that Isis is looking for partnership opportunities for the candidate. Dr. Crooke also noted that three of Isis’ phase 1, type 2 diabetes candidates could advance into phase 2 in 2013 or early 2014: a glucagon receptor antagonist, a glucocorticoid receptor inhibitor, and a PTP-1B inhibitor. No mention was made of Isis’ remaining diabetes candidate, an FGFR4 antagonist (phase 1).

• Two ongoing phase 2 studies for Isis’ ApoC-III inhibitor (ISIS-APOCIII) are scheduled to complete in 2013. The first evaluates ISIS-APOCIII 100 mg, 200mg, and 300 mg once weekly in roughly 100 patients with severely elevated triglyceride levels (440-2,000 mg/dl), with data expected in mid-2013. The second study is assessing ISIS-APOCIII 300 mg once weekly in roughly 25 type 2 diabetes patients with moderately elevated triglyceride levels (200-500 mg/dl), with data expected in late 2013. During Q&A, Dr. Crooke noted that Isis hopes to observe an increase in insulin sensitivity in the diabetes trial – this would be quite a boon for patients, as current insulin sensitizers (TZDs) are associated with several side effects. The presentation slides reviewed phase 1 data for ISIS-APOCIII in healthy volunteers, which showed that ISIS-APOCIII led to no severe adverse events, clinically significant increases in liver enzymes, or flu-like symptoms, and only a very low incidence of mild injection site reactions.
• During Q&A, Dr. Crooke noted that Isis’ PTP-1B inhibitor exhibits several improvements over a previous iteration (which was developed until phase 2), including a greater increase in insulin sensitivity, a more robust lowering of LDL levels, and weight loss (which could make it a potential weight loss drug).

Questions and Answers

Q: The European Medicine’s Agency Committee for Medicinal Products for Human Use issued a negative review of Kynamro [ISIS/Genzyme’s cholesterol-lowering drug]; do you believe Kynamro is going to get approved in the US?

A: Yes. I am confident because the labeling is nearly final and the REMS is final; basically everything is done. If people would watch the FDA rather than the panel, they would understand that the FDA is positively exposed to Kynamro. We ran into a strange situation in Europe, but the questions were easily resolved, and we are confident that Kynamro will be approved in Europe as well.

The label is going to go well, and Genzyme’s focus is exactly right. Once the drug gets in hands of lipidologists, it will go to patients. The drug will outperform expectations.

Q: Where does your level of confidence come from?

A: It comes from watching the office. The analysts are not aware of the relationship between Genzyme and the Agency. Watching Genzyme and the Agency, I am confident Kynamro will be approved.

Q: How big of an advantage is having Genzyme market the drug for Isis and what are Genzyme’s plans for marketing the drug?

A: Genzyme marketing group is led by Paula Soteropoulos. She is phenomenal and her group is great. We think they are really capable. The focus is exactly right: get the patients diagnosed and get them to the lipidologist where they will be prescribed Kynamro. Genzyme has a long history of marketing good therapies to patient and physician populations like this. I have no idea how great Aegerion will do, but we are confident that Genzyme will do well.

Sanofi is assisting by calling on a large range of physicians to introduce Kynamro and Genzyme can access broader Sanofi resources.

Q: Why will drug-drug interactions not be a problem for Kynamro? Especially since your patient population, patients with cardiovascular problems, are likely to be using other therapies.

A: Kynamro is subcutaneously injected and metabolized entirely differently than other drugs. It has no effect on cytochrome P450 in the liver. Additionally, we have seen that it has no pharmacokinetic or pharmacodynamic interaction with classic cardiovascular therapies, such as warfarin.

Q: Can you update us with the three type 2 diabetes therapies you have in your pipeline. During the presentation you said that they will be going into phase 2 trials in 2013/2014; can you give us a more specific timeline?

A: We had a PTP-1B inhibitor in phase 2 some years ago, and had encouraging data. However, we needed a better drug and found a better PTP-1B inhibitor. The new PTP-1B inhibitor has improvements in insulin sensitivity, lower LDL. A good safe insulin sensitizer is really needed. Our PTP-1B lowers LDL, and we’ve seen that lowers weight as well and may be a potential for an obesity drug. Currently, it is in phase 2 study and there is a metformin add on study; these trials are just getting underway.

The glucagon receptor antagonist (ISIS-GCGR) violates our basic principle of using small molecule therapies. However, we are pursuing its development because our drug does unique things. The drug produced significant increases in GLP-1 without any LDL problems. Phase 2 studies are just beginning for this as well.

The glucocorticoid receptor inhibitor (ISIS-GCCR) takes advantage of antisense technology, and it does not cross the blood brain barrier. It does not involve the HPA axis, and there is no increase in blood pressure, aldosterone, or ACTH. It has the potential to be an anti-obesity drug and we are seeing a rapid potential for Cushing’s disease. This therapy will not start phase 2 trials until the middle of the 2013.

Overall, these therapies will be great licensing opportunities for us in 2014.

Q: What clinical disclosures can we look at for ISIS-APOCIII?

A: We are very positive about the severely elevated triglyceride study for ISIS-APOCIII and will reveal the results in the second half of 2013.

 

Lexicon Pharmaceuticals

Brian Zambrowicz, PhD (CSO, Lexicon, The Woodlands, TX)

Lexicon Chief Scientific Officer Dr. Brian Zambrowicz gave a compelling talk describing how Lexicon’s SGLT-1/SGLT-2 dual inhibitor could be differentiated from selective SGLT-2 inhibitors. After reviewing the phase 2b data, which Lexicon recently presented at AHA 2012 and discussed during the company’s 3Q12 financial update, Dr. Zambrowicz stated that LX4211 could be differentiated from selective SGLT-2 inhibitors on the basis of efficacy, safety/tolerability, the potential to benefit patients with renal impairment, and potential synergies with DPP-4 inhibitors. On the topic of safety, Dr. Zambrowicz emphasized many times, especially during the Q&A session, that LX4211 has a relatively clean safety profile due to its lower rates of urinary glucose excretion compared to selective SGLT-2 inhibitors. The contribution of SGLT-1 inhibition allows LX4211 to achieve robust glucose lowering and weight loss effects with less urinary glucose excretion. During an illuminating Q&A session, Dr. Zambrowicz stated that while canagliflozin exhibits greater efficacy than dapagliflozin because of its increased urinary glucose excretion, it comes at the price of increased infection and severe adverse events – he suggested that the FDA’s potential cardiovascular concerns with canagliflozin could be related to the high level of urinary glucose excretion. Lexicon now expects a phase 3 initiation for LX4211 around mid-2013, along with results from the ongoing study in patients with renal impairment in mid-2013. Study sites for a study in type 1 diabetes are currently in preparation for the trial.

• Dr. Zambrowicz estimated that phase 3 trials for Lexicon’s SGLT-1/SGLT-2 dual inhibitor LX4211 would initiate around mid-2013 with an illustration in his slides suggesting that trial initiation could occur mid-year through Q3. This represents a slight delay from the company’s 1H13 estimate provided during its 3Q12 financial update. As previously stated, Lexicon is looking to establish a partnership prior to initiating phase 3 trials for LX4211. Management declined to provide specific details about partnership efforts other than saying they were progressing well. If we were to speculate wildly, based solely on product portfolios and pipelines, Merck seems like a sensible option for partnership. Lexicon has spoken before about the promise for combining LX4211 with a DPP-4 inhibitor due to the synergistic elevation of GLP- 1 produced by this combination (details below). Merck is the only company marketing a DPP-4 inhibitor (Januvia) in the US that does not also have an SGLT-2 inhibitor in its pipeline. During a breakout session on Day #1 of JPM, Merck management also alluded to investigating new Januvia combinations that would preserve its safety and tolerability profile (for details see page 11 of our JPM Day #1 report at http://www.closeconcerns.com/knowledgebase/r/5402e69e).
• Dr. Zambrowicz reviewed key phase 2b data that were released as topline results in June and in full at AHA 2012 in November. He reiterated that at 12 weeks, LX4211 400 mg once daily provided a 0.95% (0.86% placebo-adjusted) A1c reduction, reiterating that this “compares very favorably” with 12-week data for other oral anti-diabetic agents. He also reviewed the weight-loss (2.5 kg [5.5 lbs], or 2.0 kg [4.4 lbs] placebo-adjusted) and systolic blood pressure benefits (~6 mm Hg over placebo) seen with LX4211 400 mg. Additionally, he highlighted that rates of genital infection were low compared to selective SGLT-2 inhibitors (5.1% at the 400 mg dose), and no signal for urinary tract infections or GI adverse events emerged. For our full commentary on these data please see our Lexicon 3Q12 report at http://www.closeconcerns.com/knowledgebase/r/b4b339b8 and page 2 of our AHA Day #4 report at http://www.closeconcerns.com/knowledgebase/r/23644a79.
• In what Dr. Zambrowicz characterized as the “crowded” SGLT-2 inhibitor arena, Lexicon believes LX4211 has many substantial opportunities for differentiation. Dr. Zambrowicz stated that LX4211 could be differentiated on the grounds of efficacy, safety/tolerability, potential for benefit in patients with renal impairment, and potential synergies with DPP-4 inhibitors.
  • Efficacy: Lexicon has previously stressed that LX4211 achieved favorable A1c lowering effects when compared to selective SGLT-2 inhibitors in 12-week phase 2b trials. During Q&A, Dr. Zambrowicz stated that weight loss achieved on LX4211 is comparable to canagliflozin and better than dapagliflozin, with a better safety profile than both.
  • Safety: Lexicon attributes LX4211’s low rates of genital infection compared to selective SGLT-2 inhibitors to LX4211’s relatively low level of urinary glucose excretion (~40 g/g glucose/creatinine ratio and ~55 g glucose/24 hours on the 400 mg dose). In the past, management has stated that this is roughly half of what is seen with selective SGLT-2 inhibitors. Because LX4211 acts both through SGLT-1 and SGLT-2 inhibition to decrease blood glucose, less urinary glucose must be excreted to achieve the glucose lowering effects of selective SGLT-2 inhibitors. In a detailed Q&A session, Dr. Zambrowicz noted that he was not necessarily surprised at the FDA’s cardiovascular concerns for canagliflozin (which will be discussed at tomorrow’s Advisory Committee meeting – see our preview at https://closeconcerns.box.com/s/d8p0t04w6q0l1irutf9v) because of severe adverse events related to volume depletion and dehydration that could be attributed to the very high levels of urinary glucose excretion associated with the drug. [Editors note: since the writing of this piece, the advisory committee on canagliflozin has occurred. See our coverage at: https://closeconcerns.box.com/s/efga4as47nd9jtgj1ej2.]
  • Patients with renal impairment: Dr. Zambrowicz stated that selective SGLT-2 inhibitors may have limited benefit when kidney function is compromised (this has been observed with canagliflozin), but since LX4211 also acts through the SGLT-1 mechanism in the GI tract, patients with renal impairment will not lose the SGLT-1 benefit.
  • Synergies in GLP-1 elevation with DPP-4 inhibitors: LX4211 triggers the release of GLP-1 and PYY through SGLT-1 inhibition. Thus, when combined with a DPP-4 inhibitor, which prolongs endogenous GLP-1 half-life by inhibiting the DPP-4 enzyme that degrades GLP-1, Lexicon proposes to see a synergistic effect on GLP-1 elevation. Dr. Zambrowicz stated that Lexicon is pursuing the possibility of combination with a DPP-4 inhibitor. This will undoubtedly play into considerations for the partner it chooses prior to initiating phase 3 trials for LX4211. Generally, we’re becoming more and more keen on potential for fixed dose combinations – the devil will be in the details, no doubt, but we suspect it won’t stop at dual combinations, but triple combos and more.
• Lexicon expects results from its ongoing study of LX4211 in patients with renal impairment in mid-2013 (ClinicalTrials.gov Identifier: NCT0155008; primary completion date March 2013). Dr. Zambrowicz commented that the study is enrolling well. The study aims to enroll 20 patients with type 2 diabetes and moderate renal impairment. It will compare 400 mg LX4211 vs. placebo over seven days.
• Dr. Zambrowicz stated that sites for the study in patients with type 1 diabetes were just now “getting up and running” (ClinicalTrials.gov Identifier: NCT01742208; primary completion date March 2013). This study is expected to enroll 30 patients with type 1 diabetes and will compare an unspecified dose of LX4211 to placebo over 28 days. In type 1 diabetes, Lexicon hopes that LX4211 could reduce patients’ insulin requirements, thus potentially reducing hypoglycemia and weight gain.

Questions and Answers

Q: Could you give us insight into how partnering talks are going, how many interested parties there are?

Jeffery Wade, JD (CFO, Lexicon): We won’t comment too much here. The goal is to get a partner in place before beginning phase 3 trials. We’re pleased with how it’s going, and we’re making good progress toward our agenda.

Q: Are there any safety signals potential partners have focused on?

A: I don’t think there’s much pushback with the safety. People are particularly intrigued for the opportunity for differentiation in safety, particularly with infections. If you go back and look at phase 3 data for canagliflozin and dapagliflozin, canagliflozin has tremendous urinary glucose excretion and also the highest rate of infections. Canagliflozin had a 17% rate compared to a 9% rate in dapagliflozin. LX4211 has the least amount of glucose excretion, and I think that may contribute to our lower risk of infection. I don’t think the SGLT-1 mechanism has added any safety signal we can see. There are no red flags.

Q: Can you comment on the population that experiences infections?

A: It’s females, mostly yeast infections, just like in canagliflozin and dapagliflozin. They’re not severe and don’t cause people to quit the study. They’re infections that patients are used to treating themselves.

Q: How does weight loss on LX4211 compare to competitors?

A: Of all selective SGLT-2 inhibitors that have gone through phase 2b, clearly the best of those at week 12 is canagliflozin, and that’s because they have the most urine glucose excretion. We’re right there with them as far as weight loss. And we’re doing that with way less urine glucose excretion. We’re not doing it because we’re spilling all that glucose out. The SGLT-1 mechanism is playing a role here. In addition to blocking glucose uptake, the peptide release of GLP-1 and PYY suppress appetite. We did get a satiety signal in our phase 2b study.

Q: What do you think we’ll learn from the FDA [Advisory Committee meeting] tomorrow [on canagliflozin]? What do you think we’ll learn about how the FDA is thinking about the SGLT-2 class? Is there anything you’re specifically looking out for?

A: There’s nothing I’m specifically looking out for. I haven’t had a lot of time to read in as much detail as I’d like from all the briefing documents, but I think the most interesting thing that has popped out looking very different from dapagliflozin was the potential increase in cardiovascular events in the first 30 days of treatment. But I don’t think that surprises me. Again this goes back to the urine glucose excretion. Canagliflozin has better efficacy than dapagliflozin, but I believe they’re paying a heavy price for that. I think you see that in the infection rate and also in severe adverse events related to volume depletion and dehydration. The question is, do you really want to take an elderly patient, maybe with some mild renal impairment and with a history of cardiovascular events, and cause volume depletion? It’s no coincidence, I think, that it’s happening in the first 30 days, because the effect in increased urine volume is transient. LX4211 has much less urine glucose excretion. It’ll be very interesting to see what the panel thinks and how they proceed in their discussions.

Q: Regarding the type 1 diabetes study, could you outline specifically what you’re looking for?

A: It’s 20-30 patients, not very long – seven days [Editor’s note: Dr. Zambrowicz’s slides and the trial’s ClinicalTrials.gov listing state that the trial will last 28 days]. But the reason for the trial is that we want to figure out how we’ll use LX4211 with insulin. Obviously these patients are either on a pump with insulin or are on basal insulin with mealtime injections. We believe the likelihood for needing to adjust insulin will most likely be prandial because of the profound effect of SGLT-1 inhibition on blood glucose levels after a meal. Really it’s a study that will give us a better feel for how to use LX4211 with insulin and design future studies. We’re primarily looking at modifications in insulin levels and the effects on postprandial glucose during the study.

 

MannKind

Alfred Mann (CEO, MannKind, Valencia, CA)

MannKind CEO Alfred Mann showed great continued confidence in his company’s inhaled ultra-rapid- acting insulin candidate, Afrezza. “If I didn’t think this was a great product, I wouldn’t have put $930 million into it myself.” During his prepared remarks, Mr. Mann reviewed the potential market, Afrezza’s efficacy and safety profile, and ongoing clinical trials for US regulatory approval. The company’s two phase 3 trials of Afrezza are still expected to read out in August 2013, which would enable FDA filing in late September/early October. Mr. Mann anticipates that a March/April 2014 PDUFA date would follow. As of JPM, 68% of patients in the type 1 trial have completed the study and 52% of patients in the type 2 trial have completed the study (ClinicalTrials.gov Identifiers: NCT01445951 and NCT01451398, respectively). Mr. Mann believes that the FDA “can’t be very concerned about safety issues with Afrezza,” given that the Agency requested that MannKind expand its age inclusion criteria for a post- approval phase 4 trial in pediatrics to four to 18 years of age (versus the 12-19 years of age that the company had proposed). Turning to the international market, once the company “recover[s]” from filing in the US (we assume Mr. Mann was referring to the high cost resulting from the US regulatory delay), MannKind intends to submit Afrezza for approval in the EU. He also added color during the breakout session to ongoing partnership discussions for the commercialization of Afrezza. Mr. Mann remarked that MannKind’s interest in pursuing a partnership with an insulin company is low, with Sanofi being a notable exception. Further, before finalizing any regional partnerships (MannKind has nine potential regional partners), MannKind wants to finish arrangements with a global partner. As we’ve come to expect, he concluded his presentation by reiterating the “blockbuster potential” of Afrezza certainly, there is significant need to get easier-to-use insulin to the market, and we’ll be curious to seehow patients perceive the benefits of this alternative to traditional insulin therapy.

• “The FDA is not concerned, we’re not concerned,” said Mr. Mann when discussing the small reduction in pulmonary function observed with Afrezza. He elaborated that the reduction is comparable to what one would see over the course of four months of life. Besides a mild, transitory cough with Afrezza inhalation, he remarked, there are “no safety signals, no cancer signal, no cardiovascular signal, no nothing.” Of course, the only predictable outcome in the last few years (especially for MannKind) has been an unpredictable regulatory environment, so it will be interesting to see what happens with Afrezza. We assume Afrezza would have an advisory committee – as a reminder, MannKind expects a six-month Agency review.
• Mr. Mann believes that compared to traditional insulin therapy, Afrezza leads to less weight gain and less risk of hypoglycemia. He explained that Afrezza lowers prandial highs without exhibiting the late hyperinsulinemia that can lead to hypoglycemia. “The one area where we have not shown superiority is A1c,” which Mr. Mann attributed to the improved hypoglycemia risk profile. For greater detail on Afrezza’s potential benefit profile, please see our MannKind 3Q12 report at: http://www.closeconcerns.com/knowledgebase/r/4e736bb5.

Questions and Answers

Q: What is the timing of the phase 3 read out?

A: Late August. We want to read out both studies together if we can. The final visit after the four-week washout of the type 1 trial won’t happen until late May and the type 2 trial is a few weeks later in June. We’re saying August, but it’s probably going to be late August.

Q: What are the baseline A1c levels for the study? I understand you were looking for above 7.5%?

A: The FDA wants this to be a big success. They wanted us to show large drops in A1c, so they said to get a baseline as close to 8.5% as you can. The type 1 trial had 8.3%, and of course to do that you need a lot of patients with an A1c of 10% and above. Some were as high as 11%. If these patients don’t have hypoglycemia from glargine, and if you get their fasting levels down to 120 mg/dl or less, these people are going to get good control. Although, even with the monitor some people are not going to be compliant. You’re going to see huge benefits in A1c here.

Q: Is the device adapted to deliver other drugs?

A: We have a lot of things we can deliver with this. But given the cost of the delay of approval, we can’t do many of these on our own so we are doing most of these with partners. We also have improvements to what we’re doing today, but I guess I can’t talk about those. But it is going to be better.

Q: What is the biggest risk to the phase 3 studies?

A: Well nothing is zero, but I can’t imagine any risk at this point. We know this drug. We’ve seen no safety risk. I would think that since we’ve already treated so much of the population that even though we are blinded, I can’t imagine that if there was a huge problem, we wouldn’t know about it by now.

Q: Can you give us some insight into how partnership discussions are going? Are you still prioritizing a worldwide partnership?

A: We have nine potential regional partnerships, but we can’t deal with those at this point. We don’t dare do the big ones unless we have made arrangements with what we call a global partner. Certainly, we want a major partner to cover the developed world.

Q: Would you be looking for a partner with a diabetes or primary care sales force?

A: If they have a presence in metabolic disease areas, certainly we know they have reach in that market segment, but that’s not an absolute requirement.

We’re not really excited about partnering with insulin companies although maybe Sanofi. But Novo Nordisk or Lilly… at Novo Nordisk, insulin is 40% of their product, so why would they want to give attention to our product? But for Sanofi, Apidra hasn’t been successful and degludec is coming and it’s better than Lantus, though still hardly adequate, so I would expect Lantus to be under a lot of pressure.

Q: What are your plans for filing in Europe?

A: We have been in discussions. Our intention is to file almost immediately after we file in the US. Once these trials are done and we recover from the filing in the US, we will file in Europe. Look, if I didn’t think this was a great product, I wouldn’t have put $930 million into it myself.

 

Merck

Ken Frazier (CEO and President, Merck, Whitehouse Station, NJ)

Merck’s (voluntarily) abbreviated ~15 minute presentation and ~45 minute question-and-answer period continued to demonstrate and reinforce the company’s dedication to and strong interest in diabetes. Merck CEO and President, Mr. Kenneth Frazier characterized Januvia and Janumet as “exemplary” of the company’s primary care business and noted that the franchise is helping to negate some of the headwinds the company has been facing (e.g., several large brands going off patent). During Q&A, he expressed confidence that the Januvia franchise will continue to grow, highlighting the opportunity to gain market share from generic sulfonylureas, which currently have ~35% of patient days of therapy – we see Merck’s focus on this opportunity as very positive for patients. Additionally, he emphasized that the franchise still has room to grow in emerging markets. For example, Januvia is currently not reimbursed in China; we can imagine that when it is, the franchise will grow still stronger. In addition to Merck’s current portfolio, diabetes drugs appear to have a very strong presence in the company’s R&D pipeline. Notably, Mr. Frazier highlighted Merck’s phase 3 once-weekly DPP-4 inhibitor, MK-3102, both as an important opportunity to expand the DPP-4 inhibitor franchise and as one of the more important candidates in Merck’s mid-stage pipeline. Finally, when asked what classes might work well in combination with Januvia, Merck’s management noted that they are looking for a candidate that has a good tolerability (and safety) profile to complement Januvia’s. Classes they highlighted included the GPR40 mechanism, which they have in-licensed, and glucose responsive insulin, which they stated would be a “real breakthrough in the whole diabetes field” if successfully developed. Management also remarked that Merck has earlier undisclosed programs in the field. We note that the focus on diabetes today was in line with the spirit of Mr. Frazier’s comments during Goldman Sachs CEOs Unscripted, encouraging us about the company’s future in the field (for more details on Mr. Frazier’s discussion at Goldman Sachs please see our January 3, 2013 Closer Look at https://closeconcerns.box.com/s/bd0a5tlwn6xkyuu18xob).

• Merck initiated phase 3 trials of its once-weekly DPP-4 inhibitor MK-3102 in the fall of 2012. As a reminder, MK-3102’s once-weekly dosing is made possible because it is not metabolized, so it is long-lived in the blood stream (for more information on MK-3102 please see our report from Merck’s November 2011 R&D day at http://www.closeconcerns.com/knowledgebase/r/4d18c66c). Currently, there are six phase 3 trials studying MK-3102 listed on ClinicalTrials.gov with the earliest estimated completion date being December 2013 and the latest being April 2015. For details on these trials please see our Merck 3Q12 report at http://www.closeconcerns.com/knowledgebase/r/4a9d4587.
• Notably, Mr. Frazier stated that though it is important for DPP-4 inhibitors to not be associated with cardiovascular risk, he does not think they need to cause cardiovascular benefit. Merck’s cardiovascular outcome study for sitagliptin (TECOS) is anon-inferiority trial and has a primary completion date of December 2014 (ClinicalTrials.gov Identifier: NCT00790205).
• As a reminder, Merck acquired Beverly, MA-based SmartCells (and SmartInsulin, the company’s glucose-responsive insulin) in December 2010. During Merck’s November 2011 R&D Day, management mentioned that Merck is merging its SmartInsulin efforts with its GlycoFi capabilities (which give it the ability to incorporate glycosylation changes into a protein during expression in yeast rather than through later chemical modification).
• GPR40 is an orphan G-protein-coupled receptor (GPCR) expressed in pancreatic islets. Its agonists stimulate insulin secretion in a glucose-dependent manner. It is our understanding that Takeda is the main company currently developing a GPR40 agonist for type 2 diabetes. Its compound, TAK-875, is in phase 3 testing.

Questions and Answers

Q: Getting outcomes data in something like cardiovascular disease is a lot more time consuming and expensive than in specialty areas. Do you think Merck has the right balance at this point in its primary care, so that there are not too many large outcomes studies?

A: […] We believe that we have the right focus. We have a focus on primary care and areas like diabetes, which is a strong growing area. We see DPP-4 inhibition as a growing category within diabetes. […] We are actually striving for balance. I know some companies have made the decision strategically that they want to play in for example specialty only. We think the key to success going forward is two fold. One, focus on where the scientific opportunity is irrespective of if it is primary care or specialty. And two is to see where patient demand is going to be. That leads us into different things like diabetes and cardiovascular disease.

Q: Januvia has been an impressive story. Should we expect growth to slow going forward or are there still a lot of opportunities ahead?

A: I firmly believe that there is a lot of growth ahead of us. We know that there are projections that the class will grow to a very substantial number. We still have a huge amount of opportunity versus generic sulfonylureas, which are about 35% of patient days of therapy. In addition we have markets where we have not fully launched the drug. For example, China is second only to India, in terms of the number of diabetics a country has. While Januvia is available on the private-pay market, we have not gotten reimbursement for the drug in China. So that is a great geographic opportunity, in addition to what I think is the greatest opportunity with sulfonylureas. I would also point out that in our pipeline we have our once-weekly DPP-4 inhibitor, which is going into phase 3 and that we think will provide greater opportunity for our franchises.

Q: How important is CV outcome data to DPP-4 category?

A: We have a cardiovascular outcomes study underway called TECOS that is designed to show non- inferiority. I think that is important for us to show that it is useful in diabetes and certainly causes no harm in terms of cardiovascular outcomes. I do not know that you have to have a big winner, in the sense that you need to show concrete positive outcomes or benefit from the drug. We continue to be committed to that and we think that it is a great drug. It has very positive efficacy associated with it and very nice tolerability.

Q: Could you comment on what excites you in your mid-stage pipeline?

A: A couple of projects are very important to us and are exciting […] MK-3102, our once-weekly DPP-4 inhibitor is an important opportunity for us.

Q: Do you have any thoughts on what would be a good diabetes class to use in combination with a DPP-4 inhibitor like Januvia other than metformin?

A: That is a good question. We are definitely working on that in earlier programs of the pipeline. Januvia happens to be a very clean drug in terms of having minimal side effects and nice efficacy. I think that one is looking to pair a molecule like Januvia with something that has a good safety profile. That is of course something that is difficult to do and we are continuing to work on that. We have announced earlier on that we have done a licensing deal with a GPR40 mechanism, so that is a mechanism that we are pursuing. We have also announced a much earlier but very exciting program in terms of having glucose responsive insulin. If we could come up with an insulin, which would actually respond to glucose to prevent hypoglycemia, that would be a real breakthrough in the whole diabetes field. And we have other undisclosed programs, which are earlier on. It is a difficult thing to do, but it is something that we are very committed to try to do.

 

Merck KGaA

Matthias Zachert (CFO, Merck KGaA, Darmstadt, Germany) and Stefan Oschmann, PhD (CEO, Merck Serono, Darmstadt, Germany)

In opening the session, Mr. Zachert gave a high-level description of the Merck Group’s business strategy and restructuring efforts. Dr. Oschmann then followed with an update on Merck Serono (the largest of the four Merck Group divisions), mentioning Glucophage (metformin) only in passing when noting the components of Merck Serono’s General Medicine division, which has experienced flat growth in the first nine months of 2012. He remarked that General Medicine sales experienced strong growth in emerging markets offset by a decline in European markets, though there was “some remaining business primarily in the southern European markets.”

 

Novartis

Joseph Jimenez (CEO, Novartis, Basel, Switzerland)

Mr. Joseph Jimenez touched briefly on Novartis’ diabetes-related businesses, mentioning Galvus and Lucentis as two of six products that will drive growth in 2013. Mr. Jimenez’s slides indicated that Novartis expects a pivotal study read-out for its phase 3 DGAT1 inhibitor, LCQ908, within the next 12 months (an update since the company reported 3Q12 financial results), with filing expected in the US and Europe in 2014 (consistent with previous estimates). His slides also indicated that approval for a pathological myopia indication for Lucentis is expected within the next 12 months, representing a delay from previous estimates that this approval would occur by the end of 2012. When asked about competition for Lucentis, during the breakout session, management characterized Bayer/Regeneron’s Eylea (aflibercept, another anti-VEGF agent) as less of a threat to Lucentis in Europe than it has posed in the US (see bullet for details). As a reminder, Novartis holds rights to Lucentis ex-US, and Roche/Genentech within the US. Eylea has been eroding Lucentis’ US market share since its FDA approval for wet AMD in late 2011; Eylea received a European approval for the same indication on November 27, 2012. Bayer/Regeneron submitted Eylea for a diabetic macular edema (DME) indication in Europe on December 6, 2012, putting a likely European approval for DME in late 2013. Please see our Novartis 3Q12 report at https://closeconcerns.box.com/s/o5572d4yi3gdw6esvbdv for details on the competitive landscape for Lucentis and for Galvus’ recent performance. Novartis will report 4Q12 and 2012 full-year financial results on January 23, 2013.

• Bayer/Regeneron’s Eylea (aflibercept) received a European approval for wet age- related macular degeneration (wAMD) on November 27, 2012. Eylea’s principal benefit over Lucentis is the less-frequent intraocular injection schedule required by its label. Lucentis’ label calls for once-monthly intraocular injections, whereas Eylea’s label allows for injections every two months after the first three months of monthly injections. As stated during Q&A, Novartis believes that this is what has given Eylea an advantage in the US since sales representatives may not promote off-label use of Lucentis on an as-needed basis. In contrast, Novartis believes that European ophthalmologists have been trained to individualize treatment such that they are already prescribing Lucentis on an as-needed basis rather than strictly once- monthly, so Eylea’s label for every-other month administration may not represent a significant benefit. Mr. Jimenez also noted that Eylea’s structure is more similar to that of Avastin and that 20% of the drug escapes the eye into systemic circulation, implying that Eylea may be less safe than Lucentis (we thought this was framed a bit strongly given that no data directly comparing the two exist).

Questions and Answers

Q: Can you characterize your prioritization of primary care in developed markets?

A: We have a history of a very strong primary care business […]. Our business focus is shifting more towards specialty. Before we had been 60:40 primary care to specialty. That ratio will flip, but we will still have an important primary care business.

Q: So you are shifting your focus to specialty products, which are more expensive, in the face of US and European markets’ increasing concern about the price of products. How will you pave the path during development to get recognition on the part of payors, whether they be governmental or private?

A: We’re working toward identifying groups of patients that are most likely to respond to treatments and develop health economic data showing huge benefits. Instead of 30% to 40% response rates, we’re looking for 50% to 60% to 80% response rates, so all of a sudden the health economic benefit becomes very clear. The level of unmet medical need will drive whether you get reimbursement. So, incrementally better medicines at a high price will not be a path for the future, but if you can develop treatments for a very special population with a significant medical benefit, I think it’ll continue to be reimbursed.

Q: What are you doing in the face of competition for Lucentis?

A: I showed this morning how Lucentis today is a $1.8 billion drug and growing at 24% a year. Part of that is geographic expansion as we expand into Asian markets, so it’s not just coming out of the US. There are very key differences with Lucentis outside the US compared with Lucentis inside the US. I think what’s most misunderstood is the potential for the anti-VEGF category to grow. We’re seeing new indications like DME [diabetic macular edema], RVO [retinal vein occlusion], pathological myopia and some other small indications. The VEGF category will become quite large. Lucentis’ main competitor will be Bayer/Regeneron’s Eylea. Regeneron did rather well in the US, but you have to remember that in the US market, the Lucentis label has been constraining in that it requires monthly injections. A doctor can still prescribe it at a lower frequency, but the promotion of Lucentis is limited to once-monthly injection. In most countries ex-US, particularly in Europe, ophthalmologists are trained to individualize therapy. Some patients need Lucentis every month, but some only need it every two or even every six months. So in Europe, the big claim that Eylea is every other month will largely fall on deaf years. Eylea is still a good drug, but we believe we have a good business. There are also differences between the molecules. Lucentis is an antibody fragment, whereas Eylea is closer to Avastin. I think the European assessment said that about 20% of the drug is systemic. So it may have some of the same issues of Avastin from an adverse event standpoint. So it remains to be seen what Eylea’s safety profile will be long term. Lucentis has been on the market for many years.

Q: Do you think it will be possible to get a $300-500 million drug in China in the next decade?

A: If you look at what a drug like Lucentis has done, you could argue that would be possible. Diabetes will be a very big category.

Q: What does the reimbursement picture look like in China?

A: It is very variable based on the kind of product. If you take a product like Galvus, this is a product that tends to be priced in a range that most emerging markets can afford. For example, in India Galvus is now number one in the DPP-4 category. In India alone, it could be a $100-million-plus product. Higher priced products like Lucentis get more challenging. In various emerging markets, it varies a lot but we have typically worked with governments or third parties to work out deals that allow the product to get to patients. This may mean free goods, discounts, or rebates to make it possible.

Q: Given the size of those markets and the prevalence of the diseases, it seems like you’d have to give a large number of free goods for any health-economic impact.

A: The size of those markets is so huge, so the demand of units is so large you can potentially make a very good business. Additionally, the cost of goods sold is quite a small number. So it doesn’t take much to be able to get to profitability.

 

Orexigen

Michael Narachi (President and CEO, Orexigen, La Jolla, CA)

During his presentation, Orexigen President and CEO Michael Narachi reviewed the company’s progress with the Light Study, Contrave’s path to resubmission, and the commercial landscape for obesity pharmacotherapies. Consistent with earlier timelines, Orexigen expects to finish randomizing ~9,000 patients in the Light Study by next week; although Mr. Narachi commented that it is too early to predict when the 87th MACE event required for interim analysis will occur, Orexigen stated that it expects to be able to conduct the interim analysis and resubmit the Contrave NDA in 2H13 if the event rate comes in close to the targeted 1.5% in a company press release. Encouragingly, the FDA’s Center for Drug Evaluation Research (CDER) proposed an expedited resubmission process for Orexigen’s Contrave, which if implemented would allow the company to use the summary report (as opposed to the complete clinical study report) of the interim results as the basis of resubmission, moving up potential approval by as much as two months. Mr. Narachi expressed confidence in Contrave’s commercial prospects, highlighting the drug’s favorable profile (he reviewed market research presented at the company’s Analyst Day in December 2012), Takeda’s resourcing and experience in primary care (and its contractual agreement to heavily promote Contrave in its first few years on the market), the large obesity market, and limited competition. He commented that the whole ball game today is about market growth, since only a small proportion of eligible individuals are currently using obesity medications; Orexigen expects the market could grow threefold to fourfold in the coming years. In addition, Orexigen will soon be initiating the Ignite Study, a method-of-use trial aiming to evaluate the real-world efficacy of Contrave. The study will randomize ~200 participants to Contrave with a telephone based lifestyle modification program versus usual care; Orexigen expects subjects in the Contrave arm will easily achieve an average weight loss of 10-15%. The first patient visit is expected to occur in February and endpoint data is to be available by the end of 2013. No new updates were provided on Empatic or the European regulatory process; for information on these and detailed coverage of Orexigen’s market research, please see our Orexigen Analyst Day report at: https://closeconcerns.box.com/s/w21rlvbk4etvscv9vt2g.

Questions and Answers

Q: As you look at the other two companies preparing for, or in a new launch, is there anything you can use to optimize your own launch?

A: You’ve heard this mantra from us before – this is not a share fight in an existing market. It’s a new market. All three drugs have different mechanisms and will naturally appeal to different segments of the market. With two other new entrants launching, a lot of positive things will happen. They’ll help grow the market and promote education. Both are taking creative, responsible, medical approaches to launch. We’re also going to see specific things that did or didn’t work so well that we may be able to leverage. The launches will be quite different. The drug profiles are quite different. The first two are scheduled, and Contrave won’t be scheduled. That changes the sampling dynamics at launch. The resources of the partnerships are different too. So you’ll see a different launch. The positive is that I’d be telling you a similar story if we launched first and others were following. Would I prefer to be first? Perhaps. But is it bad to be coming to market about a year-and-a-half later? I don’t think it’ll materially change except for loss of time.

Q: Have you started thinking about surprising issues like co-pays already?

A: I don’t think there are any surprises on the reimbursement front. Meridia and Xenical had about 45% coverage. I think the new drugs will get up there. I think we are swimming downhill. The key will be to continue to build coverage. Our launch is going to be fundamentally different than the first two launches. We are going out big right from the get go. You have one shot at a launch. You want to get your sales slope to be as steep as possible in the first couple years, after that it is hard to change it much.

Q: In terms of access or reimbursement, are you or Takeda doing anything to set the stage for Contrave in reference to what Vivus, Arena, and Eisai are doing to strengthen access?

A: Reimbursement doesn’t happen by accident. The biggest thing that drives reimbursement is demand. A lot of managed care organizations won’t review you until you have been on the market for six months because they want to see if demand is there. They’ll find a way to give customers what they want. Driving demand is key part of driving reimbursement. There’s a skill set and infrastructure involved. Large pharma companies have large management teams of one hundred people or more. Takeda has that and more. When I was at Takeda, we drove great coverage and reimbursement for Actos. That’s the kind of strategies and tactics that Takeda is going to use for Contrave.

Q: Does Qsymia being on ESI’s formulary make a difference? Does that help you?

A: Yes, every victory helps. There are a lot of groups working together to increase awareness for obesity in general. There is a lot of alignment amongst a great number of players – not just the three we have been describing today – who are working to get related policies passed, to get the Medicare restriction removed. We are working with a lot of these players too, co-founding projects and so on.

Q: Did you enroll more women and minorities than you expected?

A: We were shooting for about 50/50 split or close to that for gender. In most obesity clinical trials, 75- 80% of the participants are female. So we actually had a larger proportion of males. We needed that because males generally have a higher CV rate. So we’re in the ballpark of where we wanted to be.

Q: Can you speak to the background MACE rate in those two demographics and how that ultimately compares to the overall event rate you expect in women and minorities?

A: It is too early to gauge where we are for the actual event rate. What we’re looking at with our modeling is that when you plug in characteristics of people enrolled today, we’re in ballpark of that 1.5% annual MACE rate we are targeting. It’s about as sophisticated of a model as you can get, but it is still simply a model.

Q: Do you intend to publicly update the event rate?

A: No, we wont be talking about the specific event rates. That would not be appropriate for a trial like this. You have heard the criticism of cardiovascular outcomes studies, particularly from Dr. Nissen, around such information being disclosed and biasing the later results. This is an FDA issue, beyond Orexigen, the FDA is trying to decide how much information from an interim analysis should go on the package insert.

The Data Monitoring Committee will guide us on timing. Whether we publicize the rate will also depend on how different it is from the guidance we have already given. If it is quite different from what we have told you, then an update is more important than if it is similar to what we have said.

Q: Whether the MACE rate comes out 0.8% or 1.5% or 1.99%, we shouldn’t expect to get that number because it might cause bias?

A: One reason academics don’t want to give such early numbers is because people will often misinterpret them. Say the true rate is 1% and you have a 50% of being above or below the true rate. People will interpret 0.8% as protective and 1.2% as a signal but they’re not significantly different. What I’d expect today is that we’ll be within the boundaries and we’ll resubmit.

Q: Do you think this interim data is something you can use with payors to move the dial?

A: We are going to be very careful about disclosing anything that is not absolutely necessary because of the potential for criticism of biasing the final results.

Q: Going forward as other drugs become available, do you have any plans for switch out studies with people who are non-responders on either Belviq or Qsymia onto Contrave?

A: No. There are 98 million patients untreated today, we will focus on those first.

Q: How much do you think an approval of alogliptin would help Contrave, in terms of Takeda’s sales infrastructure in this field?

A: I think we’re in a no lose decision either way. There are a lot of synergies for promoting a diabetes drug and an obesity drug. We know alogliptin and Contrave will reside in the same marketing unit, which is great because it means they will not compete for resources. It is very synergistic to talk about diabetes and obesity. You can imagine that you are holding a medical education event; at one event you can talk about two products, and you’ll get a tailwind from that. If for some reason, however, alogliptin does not get approval, then I think Takeda has even more priority to make Contrave a success because they’ll have lost the opportunity for another product. Overall, I’d like to see it approved, and I think there are good synergies. And I think it’s a good reason why we’ll dominate the obese diabetic patient. Takeda has a great relationship across the board with doctors and associations, that’s how Actos became such a successful drug.

Q: Looking to the future, do you think we’re entering a new paradigm where obesity medications will all have stopping rules?

A: The two most recently approved drugs have that label, which is what we proposed in our advisory committee in 2010. It was already somewhat in the sibutramine label. It’s an endpoint that a patient or physician can easily measure; you don’t need a lab, so I think it makes sense.

Commercially I view it as a continuing rule. It’ll motivate a patient that if they haven’t lost X weight by X time that they will not be able to continue the drug. So I see it as a real motivator. Part of the problem with past launches has been unrealistic expectations for timing on response. I think other things will align to it - payors may align to it – I think everyone will say lets give it a therapeutic trial as per the label, and thatwill motivate success.

Q: Intuitively you’d think payors would love stopping rules?

A: Why pay for drug that doesn’t work, right? Medco put in place more than a dozen genetic screens to find out if you are eligible for therapy. This is even easier.

Q: Can you broadly describe the interest level that is out there for Empatic?

A: Earlier there was skepticism around Empatic because it has an anti-convulsant. With the approval of Qsymia (which also has an anti-convulsant component) interest increased. However, with the disapproval in Europe, interest waned a little again. We will not fund a large phase 3 trial for Empatic independently. People do ask about it, but it is too early to say if that will be a partnered product or not.

Q: Will you be using WeightMate for the Ignite Study?

A: No, it will be a tele-health program. WeightMate is online.

Q: Will these different forums help you decide which way to go for Contrave in the end?

A: Using a pill and a program in a difficult area that requires change in behavior like weight loss is the way to go. Philosophically, if Contrave is introduced along with a program or programs that would be great. Takeda is driver of that decision in North America. Teams are working on how to do that. It makes sense for diabetes drugs as well. But it is a strategic choice of which way you want to go – do you want to have premium programs or off the shelf programs. But what we have done so far is a phase 3 with a human intensive program. The Light Study used Internet based counseling. For this study we haven’t announced the collaborator product but it’s a different program. This demonstrates that there’s different ways to go and that when you add Contrave to these programs you get more success.

 

Sanofi

Elias Zerhouni, MD (President of Global R&D, Sanofi, Paris, France)

After describing Sanofi’s recent initiatives to strengthen R&D, Dr. Elias Zerhouni gave an overview of upcoming regulatory milestones and noted that Sanofi has submitted the once-daily GLP-1 agonist Lyxumia (lixisenatide) to the FDA, in line with its previous guidance for a December 2012 filing. Sanofi expects both an FDA decision on the file acceptance and a final EU decision on the drug’s approval in 1Q13 (as a reminder, Lyxumia received an positive opinion from the EMA’s CHMP in November 2012). Discussing each therapeutic area, Dr. Zerhouni turned first to diabetes and confirmed that Sanofi hopes to market Lyxumia as a complement to Lantus. Moving to insulin, he noted that the new U300 glargine formulation is currently being investigated in six phase 3 studies, two of which are expected to produce topline results in 2Q13. Dr. Zerhouni highlighted Sanofi’s efforts to improve its insulin delivery in emerging markets, citing specifically the reusable AllStar pen that was recently launched in India.

• During his diabetes overview, Dr. Zerhouni underscored Lyxumia’s pronounced effect on postprandial glucose and confirmed that a “key thing” for Sanofi will be to combine Lyxumia with Lantus as a strategy to promote the drug’s uptake. He stated that Sanofi’s next step is to develop a Lyxumia/Lantus combination but did not explicitly mention the lixi/Lantus fix-flex device that is slated to begin phase 3 in mid-2013. Sanofi’s pipeline also indicates that it is evaluating a premixed Lyxumia/Lantus combination in phase 1, though we had previously heard that it has been advanced to phase 2.
• Sanofi continues to develop the new U300 glargine formulation through the phase 3 EDITION program, with six ongoing trials in type 1 and type 2 diabetes. Notably, topline results from two trials are expected in 2Q13: EDITION I and EDITION II both recruited high-dose type 2 insulin users and compare the new glargine formulation to Lantus when used with mealtime insulin or with oral antidiabetic medications, respectively. The phase 3 program also includes EDITION III (comparison with Lantus in insulin-naïve type 2 patients) and EDITION IV (comparison with Lantus in type 1 patients), as well as two recently initiated studies in Japan (JPI and JPII).
• Dr. Zerhouni highlighted Sanofi’s efforts to improve its insulin delivery in emerging markets, citing specifically India’s reusable AllStar pen that is cheaper than the Lantus pen. During Q&A, he noted that in price-sensitive geographies such as emerging markets, Sanofi is working to gain new patients with human insulin and by providing a fixed-cost “diabetes box” that contains several diabetes products (e.g., insulin, strips for the meter, blood pressure medications). Historically, Sanofi has not invested in human insulin in developed markets and we look forward to seeing if they change their plans on this front.
• During Q&A, Dr. Zerhouni expressed confidence in continued Lantus penetration despite the launch of Tresiba (Novo Nordisk’s insulin degludec) and the potential introduction of biosimilar glargine. Speaking to biosimilars, he reasoned that given Sanofi, Novo Nordisk, and Lilly’s strength in the insulin market, it will be difficult for a biosimilar manufacturer to produce the quantity of insulin to gain significant market traction. When asked about future competition from degludec, he underscored Lantus’ established safety profile and the fact that physicians and patients are unlikely to switch insulins if the patient already experiences control with his or her current medication. Dr. Zerhouni reiterated that it will be a competition for new patients and that degludec, “without any distinct advantages,” does not share Lantus’ safety profile and does not have as many clinical and epidemiological studies supporting its safety.

• Dr. Zerhouni labeled Sanofi’s PCSK9 monoclonal antibody SAR236553 the “new pillar for the cardiometabolic franchise,” pointing to the 21 million patients globally that are currently not at goal despite current therapies. Sanofi recently initiated the phase 3 ODYSSEY program, which will enroll roughly 22,000 participants and evaluate SAR236553 75 mg and 150 mg given as a single injection every two weeks.

Questions and Answers

Q: Can you just talk about the insulin market and any pricing pressure you’re seeing?

A: If you look at the insulin market, there is a huge market in emerging markets. One of things we’re doing is asking, ‘What is the right price-volume tradeoff?’ It’s not the case that you can reduce the price and get a higher volume. We do this in a couple ways. In price-sensitive markets, we believe we can gain new patients with human insulin. Sanofi was the first one to start producing human insulin. We have been steadily growing Insuman. We also developed the All Star pen, which is a lower cost pen for Lantus.

There are some interesting pricing models. In Brazil, it’s the case that reducing price wasn’t going to increase uptake. In emerging markets, there is no healthcare insurance. People are faced with managing household monthly budgets. So what we’ve been doing is providing a diabetes box – so in addition to insulin, we provide strips for the meter, we provide hypertension and cholesterol medication, and we put all that in the box as well. We provide that at a fixed cost for patient.

If you stick with your European or American roots, it’s a much more consumer retail approach. In Europe, there is no price movement. All growth has been volume growth. In the US, there has been some price increases as well as volume growth. We see the healthcare market increasingly interested (from the payer side) in reimbursing for outcomes, not just components of healthcare. This is integrated care, beyond-the- pill strategies. That’s why we got into iBGStar. When we start focusing on outcomes, we need some mechanism to track patient progress. Patients today only have episodic contact today with a physician. Then, they go away for three or six months and then you have no idea how they’re doing. The iBGStar is not just another blood glucose meter. It can offer tailored patient education, track the progression of disease, and help a patient get onto the right dose of Lantus. Where we are, with the range of products from GLP-1, to human insulins, to devices, we’re able to produce diabetes solutions. That’s a different way to discuss price with payers around the world.

Q: How do you perceive the threat of biosimilar insulin?

A: One of things that makes insulin different is the quantity that has to be produced. If you look at where the worldwide capacity is, 90% of it is with Sanofi, Novo, and Lilly. These are also oligopolistic markets. In other markets like flu vaccines, you’ve got multiple suppliers and some products are more differentiated – people do find the right point. I don’t think biosimilar insulin is really going to be that disruptive to marketplace. Lilly’s bread and butter business is outside the analog space. Degludec is a late entry into the market, should it get approved. Biosimilar insulin will not be the same as generic medications – we don’t believe that it is substitutable.

Q: How do you see the resilience of Lantus with Tresiba coming?

A: I’ve been launching products for 25 years in this industry. One of biggest things is inertia. Physicians are primarily concerned about patient safety. And they know the safety of Lantus. If a patient is doing well, you won’t have much luck in getting that physician to switch – that’s especially the case if there is some level of explanation required. It’s a battle for new patients. In the US, we have over 80% market share with Lantus. What’s most interesting with Lantus is that there are three major epidemiological studies. And then we have ORIGIN, the most significant outcomes in diabetes since UKPDS. In addition to that, we have millions of patient data points. We have an ironclad profile on safety. When I look at

degludec, they don’t enjoy that same profile. The FDA documents provide us with some opportunities. People have maximum confidence in the safety of our product, and then you have someone coming along without any distinct advantages. As someone with 25 years of sales and marketing experience, I can sell against that.

From a scientific standpoint, we always have the notion to find an alternative to the best molecule. We tried to find a better Lantus. Every time we failed. The issue of cancer was resolved. Due to the evolution driven by research, we may have reached a natural sweet spot from a scientific standpoint.

Q: What will be your M&A strategy in 2013?

A: We generate a lot of cash flow. We spent 20 billion acquiring Genzyme. But we believe it’s good to have a leveraged balance sheet. We don’t want to see net debt drop below 10 billion euros over time. On M&A, we will do what we did before Genzyme – one billion to two billion euros per year in bolt-on acquisitions.

In emerging markets, we are a leader. Two thirds of our emerging market sales are in non-BRIC countries. Everybody is in India and China. There is heavy competition there. However, in Vietnam or Colombia or Nigeria, there is not the same level of competition. Not everybody is there yet. Colombia is probably the most exciting country economically besides Brazil. A number of satellite countries are starting to benefit from the growth of the BRICs. We want to get in these countries like Vietnam and grow our businesses.

Q: Are rapid-acting insulin and basal insulin manufacturing similar? Is it easy to convert from one to another?

A: No. It really requires some know-how. Rapid-acting insulin is a very close copy of normal insulin. It’s fundamentally protein technologies. It’s not easy to convert.

 

Takeda

Yasuchika Hasegawa (President and CEO, Takeda, Osaka, Japan)

As announced in mid-November, the PDUFA date for Takeda’s DPP-4 inhibitor alogliptin (marketed as Nesina in Japan) is set for January 25, 2013 (Editor’s note – Nesina got approved by the FDA on February 25.). CEO Yasuchika Hasegawa noted that Nesina currently occupies the number two spot in Japan’s DPP-4 inhibitor market, and the company’s goal is to re-capture the number one spot (we think this is held by Merck’s Januvia but we aren’t sure - we believe Novartis’ Galvus is also very strong in Japan as may be BMS/AZ’s Onglyza). Mr. Hasegawa also stated that Takeda had entered a supply agreement with US dialysis heavy-hitters Fresenius and US Renal for Omontys, Takeda’s once-monthly erythropoietin stimulating agent (ESA) for anemia in patients on dialysis. Takeda remains in negotiations with other dialysis organizations for Omontys agreements. The company’s GPR40 agonist TAK-875 remains in phase 3, with a potential FY2015-16 approval in the US and Europe. Japanese approval for the company’s once weekly DPP-4 inhibitor SYR-472 is still expected in FY2014. For more details, please see our Takeda F2Q12 report at https://closeconcerns.box.com/s/xnnh91xa8cyuaesjhs1f. Mr. Hasegawa did not present on Takeda’s partnership with Orexigen for Contrave, but during Q&A management commented on the reimbursement landscape for obesity drugs. While they noted that, for the purposes of financial planning, it would be safest to assume that most payment will come out of patients’ pockets, they believed that it would be “very hard to keep [obesity drugs] off of [insurance companies’] formularies on the basis of them being cosmetic,” which may signify that Takeda thinks the public is becoming more accepting of obesity as a medical condition. For context, Orexigen management previously stated that reimbursement for obesity medications is not as bad as many make it out to be – from 2009-2010, 35-45% of covered lives in the US had coverage (mainly tier 3) for obesity medications, according to a survey of 15 pharmacy directors (Managed Care, November 2010).

Questions and Answers

Q: Can you both prepare for an alogliptin launch in the next year in the US as well as increase operating margin?

A: To be very precise, the PDUFA date is January 25, but we do not expect to launch until late in the year. There will be no fixed costs since we are using our primary care sales force. One of the best ways to dilute costs is to increase sales. So hopefully the ability to launch two products in one year is the best way to use our cost base. In the best-case scenario, we may have to prepare for a third launch in the US with Contrave.

Q: Are you willing to consider rare and orphan diseases?

A: Our approach to R&D is different from some pharma companies. Some companies establish disease areas of focus and then pursue those diseases. We will get into rare diseases, but it would be based on the science and properties of molecules. If the best application of our molecules is a rare disease, then we will pursue that. We pick areas depending on the science of the molecule, not depending on the disease.

Q: What do you think the total market opportunity with Contrave is?

A: I think it’s big. [Pause and laughter.] It’s well known that Orexigen has an outcomes study running and that they’re in negotiations with the FDA. Once we have the outcomes study and we have the final labeling, we’ll know that better. There is, of course, a best-case scenario from which you can extrapolate. There’s also the question of timing and competition. I’m positive that – assuming that a couple of decisions or results go our way – that it’s big. I think Contrave is positioned very well in terms of its efficacy and its safety profile. It has no teratogenic effects. I anticipate this will be a very competitive product in terms of its medical and scientific qualities.

Q: What do you think the copay would be for most patients? How many patients will actually get insurance?

A: For this point in time, to be on the safe side, you have to assume payment will be mostly out of pocket. Even then, in my opinion, it would be still be a considerable market. Payors are having to revisit the obesity market. It might have been considered a frivolous market in the past, a cosmetic issue, but now I think everybody recognizes obesity as a substantive health issue that causes an enormous amount of downstream expenses in healthcare. From the standpoint of government and managed care payors, I think there will be rethinking of that whole environment. My guess is it will be very hard to keep these products off of the formularies on the basis of them being cosmetic.

 

Vivus

Leland Wilson (CEO, Vivus, Mountain View, CA)

Vivus CEO Leland Wilson discussed newly released prescription data for Qsymia, the recent addition of Qsymia to Express Script’s national preferred formulary, and the upcoming FDA decision on the REMS modification proposal that would allow Qsymia to be distributed from retail pharmacies. Qsymia scripts show pretty solid growth during the first three months post-launch, with 44% growth in scripts written in the four weeks ending November 23 compared to the previous four weeks and 68% growth in the four weeks ending December 21 compared to the four weeks ending November 23 (see table below). Mr. Wilson noted that this growth took place during a traditionally slow prescribing period (the holidays), suggesting that even better growth take place in the coming months, since February through May are historically months associated with high script rates. Mr. Wilson also provided additional color on Express Scripts’ decision to add Qsymia to its national preferred formulary, remarking that this milestone was nearly as significant as the Qsymia NDA approval. Additionally, Mr. Wilson seems confident that the FDA will approve Vivus’ REMS modification that would allow Qsymia to be distributed at retail pharmacies. We share Mr. Wilson’s optimism for the REMS modification, since the FDA requested Vivus submit it. We view these developments as strong steps in the right direction and believe that Qsymia might be gaining momentum.

• This morning Vivus released new Qsymia script data (see table below) showing encouraging growth. A cumulative total of 26,700 scripts had been written for Qsymia to date as of December 21, 2012 and a cumulative total of 14,500 unique patients had been prescribed Qsymia. Number of scripts written grew 44% from the four weeks ending November 23, 2012 compared to the four weeks ending October 26, 2012, and scripts grew 68% in the four weeks ended December 21, 2012 compared to the previous four week period. Impressively, Mr. Wilson noted that the holidays usually represent the lowest prescribing period, so the fact that Vivus has seen robust growth for Qsymia prescriptions portends even better growth in the coming months. Qsymia’s prescriber base has increased linearly since its launch in September, totaling 7,652 unique prescribers as of December 21, 2012.

Four weeks ending –	Qsymia Rx’s written	Rx growth from previous four-week period
October 26, 2012	5,400	---
November 23, 2012	7,700	44%
December 21, 2012	13,000	68%

 

• Mr. Wilson remarked that Qsymia’s addition to the Express Scripts (ESI) national preferred formulary was nearly as significant as the Qsymia NDA approval. He stressed multiple times that this was a “very, very big deal” since so many lives (26.3 million) are covered under ESI. Mr. Wilson also believes that ESI’s decision to cover obesity medications demonstrates that it sees the cost benefit of treating obesity as a chronic medical condition and, specifically, the cost benefit of treating obesity with Qsymia.
  • Mr. Wilson highlighted the reasons for why he believes ESI decided to reimburse Qsymia, specifying that the high patient response rate was a major factor in ESI’s decision to reimburse the drug. In addition to the robust ~10-15% weight loss patients achieved and sustained for 56 weeks on the mid- and high doses of Qsymia, 83.5% of patients achieved ≥3% weight loss after 12 weeks, and 89.7% of patients achieved ≥5% weight loss after 28 weeks (the weight loss cut-offs for Qsymia’s stopping rules). Mr. Wilson noted that this means payors waste minimal money on a therapy that is ineffective for individual patients.
  • As a reminder, Express Scripts lists Qsymia as a tier 3 “non-preferred” brand name drug needing prior authorization, with a copay of $50-$60. Physicians will have to attest that the patient has previously failed to lose weight after counseling on diet and exercise and trying a prescription of phentermine at some point in their history. Mr. Wilson remarked that this is a very low hurdle to overcome since most patients seriously interested in medical weight loss would qualify under these criteria. For our initial coverage of ESI adding Qsymia to its national formulary, please see our December 21, 2012 Closer Look at https://closeconcerns.box.com/s/a7lynmgrudkyzq9d7d3v.
• In both his presentation and during Q&A, Mr. Wilson expressed high confidence  that the FDA will approve the REMS modification, allowing Qsymia to be distributed at retail pharmacies. As a reminder, Vivus submitted the REMS modification request in October. The FDA has six months to review the request so its decision should be announced by April.
• Mr. Wilson also reminded the audience that Vivus has added Walmart to the list of mail-order pharmacies that carry Qsymia, stating that its position as an aggressive price- leader (it has the lowest published price for Qsymia currently) and recognition with patients might help increase patient access to the drug while the company awaits an FDA decision.
• Mr. Wilson implied that the pieces are falling into place to turn Qsymia into a blockbuster drug. He named reimbursement and a paradigm of obesity medications being used chronically (rather than the previous paradigm of ~45 day short-term use) as the two essential factors for a billion dollar market and highlighted that Qsymia is now covered under a large pharmacy benefit manager (ESI). Additionally he remarked that Qsymia is the only long- term weight management drug available. See page 3 of our September 18, 2012 Closer Look for our analysis of what it might take for Qsymia to gain blockbuster status: https://closeconcerns.box.com/s/pcyojlrbots95cuq0l83. We will have to await Vivus’ 4Q12 financial update to better judge how likely this could be. Certainly, ESI’s coverage under its national formulary should help with out-of-pocket costs in the future. Our report on Vivus’ 3Q12 financial results can be found at https://closeconcerns.box.com/s/rgzmcqvdm409qfo3ae1s.

Questions and Answers

Leland Wilson (CEO, Vivus, Mountain View, CA), Mike Miller (CMO, Vivus, Mountain View, CA); Timothy Morris (CFO, Vivus, Mountain View, CA)

Q: With the scripts data you released this morning, what percent of those are due to the Get Started!  Program?

A: I want to make this clear since there has been some confusion this morning. The Get Started! Program has little effect on creating physician demand for writing the scripts. What it does do is help patients that are price sensitive to fill that script. So demand is created totally separate from this program. That’s not a reason for why there has been an increase in scripts. As we’ve said in the past, we have a walkaway rate of about 30%, which is not terrible. We don’t currently have new data to say that two weeks free has reduced the walkaway rate, but I think it’s probably good in helping patients to pay for the product. The other big consideration is that 90% of scripts written come as a package – two weeks of the titration dose and 30- days of the main dose. So patients are paying in the neighborhood of $230 for those two scripts, which is a little high. So the Get Started! Program has helped them significantly fill their scripts.

Q: In the past, commentary sounded a little discouraging about the 30% walkaway rate. Now you’re feeling that that’s not so disappointing?

A: My history in the marketplace is that a 30% walkaway is not unusual. It’s not good but it’s not unusual. Certainly the two-week program will help.

Q: What will change in June or July when you modify the REMS?

A: We have God’s work that we have to do before we can make any of that happen. We have to make sure that thought leaders are on our side. We have to have substantial reimbursement – ESI is first of big ones we hope to bring on board. We have to get the REMs modification approved. When that happens we’ll  work with a larger pharma company that has excess capacity. People warn us that this strategy has proven not to be very successful, but there’s ways to structure these arrangements so you can get their full interest and it is all about money. If reps get bonuses for selling your drug they are going to do a bang up job with it. It does not work if your product is a me too. I can tell you without question that we have had a  wonderful reception by doctors. This is a new therapy and this is a new market. We think there are companies in the cardiometabolic area that have excess capacity with interest in this, and we’ve had discussions with them. We don’t have anything on horizon at this point. We are working in that area now.

A: We’re in discussion with a number of clinics, but we have not made a final decision yet. But since the first cohort will be just three patients, it would be safe to say that it would be held in one location.

• For background, Dr. Gozani presented compelling data from a survey of diabetes patients showing that painful DPN (which about 25% of people with diabetes have) reduced quality of life more than dialysis, stroke, or heart disease. Many of these people unfortunately do not respond to or do not tolerate drugs and need an alternative like the Sensus.
• NeuroMetrix is currently conducting a full launch of the Sensus. During the company's 3Q12 financial update, management had announced the intention to first conduct a controlled launch the in 50-100 by the end of 2012 with a full launch in 1Q13. However, when we spoke to management, they stated that their confidence in the product led them to go straight into a full launch.
• For background, the Sensus is designed to provide a 60-minute treatment to the patient. People often feel their pain subside after within 15 minutes of beginning the session and the effects can last for an hour after the session finishes. Additionally, people can use the Sensus as often as they need. The Sensus also sounds convenient in that a single charge can sustain the device for 2-4 weeks. The device is made to be worn discreetly on the calf underneath clothing, which suggests that it would more or less have to be continuously turned on to provide  continuous pain management.
• Management highlighted the efficiency of NeuroMetrix’s focus on payors/providers handling capitated Medicare Advantage patients for the DPNCheck. These HCPs receive a fixed fee-per-member from Medicare regardless of services rendered and can increase their reimbursement by detecting DPN in patients. According to NeuroMetrix, there are about 13 million lives covered by Medicare Advantage; insurance companies offering such a plan include Aetna, Humana, UnitedHealth, and Kaiser.
• In a conversation we had with management they identified Japan as one of the most important ex-US countries for brand expansion. NeuroMetrix reminded us that the key is for a country to both have a large diabetic population and decent purchasing power. Other countries they highlighted included Germany, China and India (large diabetic populations but not strong purchasing power), and Australia (strong purchasing power but a relatively small diabetic population).
• A survey of managed care patients found that diabetic neuropathy (DPN), which ~50% of people with diabetes have, is the leading cause of reduction in quality of life among the surveyed patients. DPN comprised three of the top ten greatest reducers of   quality of life related to diabetes, and amputation and painful neuropathy were described as the two most severe reducers of quality of life related to diabetes.

 

 

-- by Adam Brown, Hannah Deming, Jessica Dong, Kira Maker, Nina Ran, Vincent Wu, Amro El-Adle, Margaret Nguyen, and Kelly Close