AstraZeneca 1Q16 – Diabetes portfolio up 18% YOY to $578 million; Fairly positive performance but competitive pressure for Farxiga, Onglyza, and Bydureon – April 29, 2016

AstraZeneca (AZ) provided its 1Q16 update this morning in a call led by CEO Mr. Pascal Soriot. Below we include our top financial and pipeline highlights from the call, followed by Q&A.

Financial Highlights

1. AZ’s diabetes portfolio posted total sales of $578 million in 1Q16, up 18% year over year (YOY) as reported (23% in constant currencies) and down 1% sequentially.

2. SGLT-2 inhibitor Farxiga/Forxiga (dapagliflozin) sales more than doubled YOY and rose 9% sequentially to $165 million, with a slight majority of revenue ($94 million) coming from the US. The overall SGLT-2 inhibitor class grew 41% YOY to $528 million, with Farxiga/Forxiga holding 31% market share.

3. We were moved to see that DPP-4 inhibitor Onglyza (saxagliptin) grew 15% YOY as reported (20% in constant currencies) and 10% sequentially to $211 million in 1Q16. The overall DPP-4 inhibitor class grew 5% YOY to $2.1 billion, with Onglyza holding 10% market share.

4. GLP-1 agonist Bydureon (exenatide once weekly) grew 10% YOY as reported (11% in constant currencies) but fell 13% sequentially to $135 million. Byetta (exenatide twice daily) fell 31% YOY as reported (30% in constant currencies) and 14% sequentially to $62 million. The overall GLP-1 agonist class grew 26% YOY to $1.1 billion, with Bydureon holding 13% market share and Byetta holding 6%.

Pipeline Highlights

5. AZ shared that it plans to resubmit its saxagliptin/dapagliflozin (“saxa/dapa”) fixed-dose combination to the FDA in 2Q16

6. We were excited to learn that AZ has already advanced its PCSK9 inhibitor/GLP-1 agonist combination MEDI4166 to phase 2.

7. AZ has a number of ongoing life-cycle extension products for dapagliflozin and exenatide (e.g., dapagliflozin in type 1 diabetes, exenatide/dapagliflozin combination, Bydureon suspension formulation).

8. AZ’s phase 1 pipeline includes a GLP-1/glucagon dual agonist (MEDI0382) for diabetes/obesity and an anti-mRNA candidate (AZD4076) for NAFLD/NASH.

Financial Highlights

1. AZ’s diabetes portfolio posted total sales of $578 million in 1Q16, up 18% year over year (YOY) as reported (23% in constant currencies) and down 1% sequentially. Management highlighted the portfolio’s growth across all regions in a very competitive market and argued that AZ is well positioned going forward due to its broad portfolio. By product, SGLT-2 inhibitor Farxiga/Forxiga (dapagliflozin) accounted for 69% of overall growth for AstraZeneca’s diabetes portfolio, DPP-4 inhibitor Onglyza (saxagliptin) accounted for 22% after a surprisingly strong quarter, and GLP-1 agonist Bydureon (exenatide once weekly) accounted for 9%. By geography, growth for the portfolio was strongest in emerging markets at 65% YOY in constant currencies. Emerging markets growth was driven by the continued launch of Forxiga and strong uptake of Onglyza. Diabetes portfolio sales in Europe were up 18% YOY in constant currencies, driven by growth for Forxiga and Bydureon. US sales were up 14% in constant currencies, driven by increased focus and access for Farxiga.

Figure 1: Total Sales for AZ’s Diabetes Portfolio (3Q12-1Q16)

2. Farxiga/Forxiga (dapagliflozin) sales more than doubled YOY (up 117% as reported and 128% in constant currencies) and rose 9% sequentially to $165 million, with a slight majority of revenue coming from the US. US sales were up 154% YOY as reported and up 22% sequentially to $94 million. Ex-US sales were up 82% YOY as reported to $71 million. The split in ex-US sales was $41 million in Europe, $21 million in emerging markets, and $9 million in other regions.

Figure 2: Farxiga/Forxiga Sales (1Q13-1Q16)

• By volume, AZ shared that Forxiga continues to lead the SGLT-2 inhibitor class in ex-US markets and that Farxiga has gained share in the US. AZ attributed the US gains to the achievement of preferred status with a major health plan. This could refer to CVS Caremark’s formulary, which granted preferred status to Farxiga and Lilly/BI’s Jardiance (empagliflozin) over J&J’s Invokana (canagliflozin) for 2016. Management cautioned that competition in the US is expected to remain very intense, but so far AZ’s 4Q15 prediction that Farxiga’s fortunes would improve in 2016 appears to be correct.
• The overall SGLT-2 inhibitor class grew 41% YOY to $528 million in 1Q16, with Farxiga/Forxiga holding 31% market share by value. Much of this strong performance was likely due to the positive EMPA-REG OUTCOME results for Lilly/BI’s Jardiance (empagliflozin); Lilly management predicted in the company’s 1Q16 update that inclusion of the data on Jardiance’s label and updated treatment guidelines that reflect the results will promote even stronger class growth going forward.  By value, J&J’s Invokana (canagliflozin) continued to dominate the class with 62% market share in 1Q16, though it also had the most challenging quarter of the three SGLT-2 inhibitors with sequential declines in revenue and total prescription (TRx) share. Lilly’s portion of Jardiance revenue accounted for only 7% of the total market, but Lilly’s reported sales for Jardiance do not include BI’s portion of the revenue, so it is likely that Jardiance holds a larger portion of the market than the numbers suggest.

Figure 3: SGLT-2 Inhibitor Sales (1Q13-1Q16)

• Notably, during Q&A, management expressed optimism that the ongoing DECLARE CVOT will demonstrate a cardioprotective benefit with Farxiga. Management suggested that the prospect of a positive SGLT-2 inhibitor class effect on CV outcomes has raised medium- to long-term expectations for the class and stated that “hopefully we’ll have some positive news ourselves in the future on this.” The consensus in the field seems to be that a class effect is the most likely explanation for the positive EMPA-REG OUTCOME results given the minimal pharmacological and clinical differences between the marketed SGLT-2 inhibitors. Of course, subtle differences between molecules or different trial designs can easily lead to discrepant results, so we are withholding judgment for the moment. DECLARE is scheduled to complete in April 2019, by which time we will have seen CVOT results for Invokana as well (CANVAS and CANVAS-R are expected to complete in 2017). Of the three trials, DECLARE enrolled the largest population with the highest percentage of lower-risk participants, meaning its results should be the most generalizable to the broader type 2 diabetes population.

3. We were happily surprised to see that DPP-4 inhibitor Onglyza (saxagliptin) grew 15% YOY as reported (20% in constant currencies) and 10% sequentially to $211 million in 1Q16. This is the first quarter of positive YOY growth for the product since 3Q14. AZ’s supplementary materials attributed the positive growth to increased access and a higher net price in the US but acknowledged that the product had lost market share within the class. US sales rose 15% YOY (27% in constant currencies) and 27% sequentially to $124 million, while ex-US sales rose 2% YOY and fell 7% sequentially to $87 million.

Figure 4: Onglyza Franchise Sales (3Q12-1Q16)

• The overall DPP-4 inhibitor class grew 5% YOY to $2.1 billion in 1Q16, with Onglyza holding 10% market share by value. Sequentially, the class declined 3%. Merck’s Januvia (sitagliptin) remained the clear market leader with 66% market share within the class in 1Q16. Novartis’ Galvus (vildagliptin) held 13% market share, Takeda’s Nesina (alogliptin) and Lilly/BI’s Tradjenta (linagliptin) each held 4% (though as with Jardiance, Tradjenta’s share is likely higher because Lilly’s reported revenue represents only a portion of total sales), and Daiichi Sankyo/Mitsubishi Tanabe’s Tenelia (teneligliptin) held 2%. We expect the DPP-4 inhibitor class to continue to face challenges due to pricing pressure and greater competition from SGLT-2 inhibitors and GLP-1 agonists, but the class’ strong safety/tolerability profile and familiarity among PCPs should ensure that it remains a significant player for the foreseeable future, particularly for people with early-stage type 2 diabetes, where it seems to be especially effective.

Figure 5: DPP-4 Inhibitor Sales (3Q07-1Q16)

• The recent addition of a heart failure warning to Onglyza’s label (along with that of Takeda’s Nesina [alogliptin]) may present challenges for AZ going forward. During Q&A, management indicated that the company is “looking at data” to investigate potential links between DPP-4 inhibitors and heart failure but declined to comment further until that data is available. AZ also suggested that the label updates should be thought of as applying to the class as a whole rather than specific agents – we do not think most of the field will see it this way given the reassuring heart failure results for Januvia in TECOS. The label updates are fairly limited in scope, recommending that providers consider discontinuing Onglyza or Nesina in patients who develop heart failure and advising patients to contact their providers if they develop symptoms. We therefore expect that while the updates may provide a bit of a boost for Januvia at AZ’s Onglyza and Takeda’s Nesina’s expense, the overall impact should be fairly minimal.

4. GLP-1 agonist Bydureon (exenatide once weekly) grew 10% YOY as reported (11% in constant currencies) but fell 13% sequentially to $135 million. Management commented that strong ~25% class growth and the continued successful launch of the new pen drove the positive YOY growth but acknowledged that Bydureon faced competitive pressure in the US. US sales rose 2% YOY and fell 12% sequentially to $108 million, while ex-US sales rose 59% YOY and fell 18% sequentially to $27 million. Bydureon has generally performed well since the launch of the pen in 2014, but we expect that the strong uptake of Lilly’s patient-friendly Trulicity (dulaglutide), the positive CV outcomes results for Novo Nordisk’s market leader Victoza (liraglutide) will pose challenges for AZ in the coming quarters. Longer term, the introduction of Novo Nordisk’s semaglutide and Intarcia’s ITCA 650 (implantable exenatide mini-pump) should both expand the market and provide significantly greater competition for Bydureon and other existing products.

Figure 6: Bydureon Sales (3Q12-1Q16)

• Byetta (exenatide twice daily) sales fell 31% YOY as reported (30% in constant currencies) and 14% sequentially to $62 million in 1Q16. US sales fell 38% YOY and 2% sequentially to $42 million, while ex-US sales fell 9% YOY and 31% sequentially to $20 million. We expect the product to continue to be outpaced in this increasingly competitive class, though it posted stronger results in 2015 than we might have expected, likely due to favorable formulary positioning.

Figure 7: Byetta Sales (3Q12-1Q16)

• Notably, the overall GLP-1 agonist class grew 26% YOY to $1.1 billion in 1Q16, with Bydureon holding 13% market share by value and Byetta holding 6%. Sequentially, the class declined 3%. Victoza remained the clear market leader with 64% market share by value in 1Q16, but it has lost share to new entrants in recent quarters. Trulicity also held 13% market share within the class in 1Q16, GSK’s Tanzeum (albiglutide) held 3%, and Sanofi’s Lyxumia (lixisenatide), which is only available outside the US, held 1%. The breakdown one year ago was 71% market share for Victoza, 15% for Bydureon, 11% for Byetta, 2% for Trulicity, and 1% each for Tanzeum and Lyxumia. In terms of volume, IMS Health data included in Novo Nordisk’s 1Q16 update showed that US volume growth for the class reached 30% in March 2016, up from ~8% at the beginning of 2015. That data also showed that Bydureon and Byetta held a combined 21% TRx share, compared to 54% for Victoza, 16% for Trulicity, and 9% for Tanzeum.

Figure 8: GLP-1 Agonist Sales (1Q06-1Q16)

• During Q&A, AZ management framed the positive LEADER results for Victoza and the just-announced positive SUSTAIN 6 results for semaglutide as positive for the entire class. Management suggested that the positive CVOT results reinforced the perception of the GLP-1 agonist class as “a very attractive area to operate in” and reminded investors that the EXSCEL trial for Bydureon is ongoing (completion expected April 2018). We agree that the positive results will likely promote further expansion of the entire class but expect that there will be some disproportionate benefits for Victoza and other products with demonstrated CV benefit.
  
  • Differences in trial design will certainly add another layer of nuance to the interpretation of GLP-1 agonist CVOT results and we stress that in the absence of head to head results, it is really impossible to compare. So far, Victoza is the only GLP-1 agonist to demonstrate CV benefit in a trial that was powered to show superiority. Lyxumia and ITCA 650 have both demonstrated neutral effects on CV outcomes in relatively small, short trials. Semaglutide is the most ambiguous case, as SUSTAIN 6 demonstrated a statistically significant reduction in CV risk, but the trial was not powered to test for superiority, so the company will not be able to claim superiority on the product’s label based on these results alone. The impact on the market could be very different depending on whether patients, providers and payers (i) bucket GLP-1 agonists based only on the topline results (meaning Victoza and semaglutide are considered cardioprotective while Lyxumia and ITCA 650 are not); (ii) award cardioprotective status only to Victoza and any other agents that demonstrate superiority in a well-powered trial; or (iii) interpret the total body of evidence as suggesting a positive effect for the entire class.    

Pipeline Highlights

5. AZ shared that it plans to resubmit its saxagliptin/ dapagliflozin (“saxa/dapa”) fixed-dose combination to the FDA in 2Q16. The company received a Complete Response Letter for the product in October 2015 (a very surprising and disappointing decision) but has expressed strong confidence that the verdict will be positive this time around. An EU decision for saxa/dapa is still expected in 2H16. During Q&A, management did not offer specific forecasts on how the heart failure update to Onglyza’s label might affect saxa/dapa. The company did suggest that there is clearly a need for these combination products based on the performance of Lilly/BI’s Glyxambi (empagliflozin/linagliptin), which it estimated at $100 million in sales (we are not sure if this represents sales in 1Q16 or since the product’s launch). Lilly has provided very little information on Glyxambi’s performance since its launch in March 2015 – to boot, we do not have information from perhaps suggesting that the product is underperforming relative to its (very high) expectations. Lilly’s total reported revenue for the Jardiance franchise (including Jardiance, Glyxambi, and Synjardy) was only $38 million in 1Q16, though as mentioned above, this does not include additional revenue booked by BI. AZ also highlighted its Xigduo dapagliflozin/metformin combination as another “sizable part of the business” that could help compensate for any negative effects of the Onglyza label update on saxa/dapa.

6. We were excited to learn that AZ has already advanced its PCSK9 inhibitor/GLP-1 agonist combination MEDI4166 to phase 2. The ongoing two-part phase 1/2 trial (n=124 patients with type 2 diabetes) is expected to complete in November 2016. It is a randomized, double-blind, placebo-controlled trial investigating both single and multiple ascending doses of MEDI4166 administered subcutaneously. Part A is primarily intended to assess safety and tolerability over 43 days, with secondary endpoints including pharmacokinetics, change in glucose and LDL cholesterol, and immunogenicity. Part B has co-primary endpoints of change in postprandial glucose (glucose area under the curve up to 240 minutes after a mixed meal tolerance test) and change in LDL cholesterol from baseline after 36 days. Secondary endpoints include adverse events, pharmacokinetics, and immunogenicity. This combination could have enormous potential given how many patients with type 2 diabetes are at high risk for cardiovascular disease, particularly if the GLP-1 agonist and PCSK9 inhibitor classes are eventually both established as cardioprotective – we think there is a high likelihood of this.

7. AZ has a number of ongoing life-cycle extension projects for dapagliflozin and exenatide. The phase 3 DEPICT 1 and DEPICT 2 trials of dapagliflozin in type 1 diabetes are both still recruiting participants and are expected to complete in August 2017 and January 2018, respectively. A phase 3 study of dapagliflozin and exenatide in combination is ongoing with completion expected in December 2017 (primary completion in May 2016). We see this as another extremely promising combination that could potentially boast two components with demonstrated cardioprotective effects. The phase 2 EFFECTII study investigating the effects of dapagliflozin and omega-3 carboxylic acids on liver fat in patients with type 2 diabetes completed in December 2015. AZ still expects to submit a Bydureon suspension formulation to regulatory authorities in 2017 according to its pipeline. This product was originally expected to be submitted in 4Q15, but we learned from the supplementary materials in AZ’s 4Q15 update that the timeline had been delayed.  

8. AZ’s phase 1 pipeline includes a GLP-1/glucagon dual agonist (MEDI0382) for diabetes/obesity and an anti-microRNA candidate (AZD4076) for NAFLD/NASH. The first phase 1 trial of MEDI0382 in healthy volunteers completed in August 2015 and a multiple-ascending-dose study (n=75) in patients with type 2 diabetes and a BMI >27 kg/m² is currently recruiting participants and expected to complete in April 2017. The first phase 1 study of AZD4076 (partnered with Regulus Therapeutics) in 48 healthy males is currently recruiting participants and is expected to complete in February 2017. See our GLP-1/glucagon dual agonist and NAFLD/NASH competitive landscape pages for an overview of the many other candidates in development for these indications.

Questions and Answers

Q: Now that MEDI4166, the PCSK9/GLP-1 combination, has moved into phase 2, could you give us an update on your development plans for that molecule?

A: It moved into phase 2 in 1Q16. Our MedImmune group is moving that forward very quickly. You’ll have to wait a little bit more to get that information. We still have a GLP-1/glucagon combination in early development, by the way, which is also moving quite nicely. But we need more data before we can give you an update.

Q:  It seems that you only communicate on filings when they have been accepted. Could you confirm that you have not yet filed saxa/dapa in the US?

A: I can confirm that we confirm filings when they are accepted. And we haven’t mentioned it because the filing has not yet been accepted.

Q: You’ve had the update for the heart failure signal in the saxagliptin label, and I’m assuming you’re likely to have that also in the saxa/dapa label. I know that there was some exploration of the potential mechanism for that ongoing. Could you update us on that work and whether that label is likely to impact your expectations for the saxa/dapa product?

A: We are looking at data to try and investigate DPP-4 and heart failure. There’s not much I can communicate until we actually have the data and see what we find. We do think the label updates are class label updates, so not specific to particular agents in the class. I think Glyxambi sold around $100 million, so it’s not insignificant if there’s clearly need. If we look at the combination that we have with metformin, it’s a sizable part of the business. I think we also need to balance that with what you’ve commented on, which is the presence of Onglyza in the combination.

It’s hard to say at this point. We need to look at the ultimate label that we get. If we look at the portfolio level, I think the outcomes study for Forxiga – and hopefully we’ll have some positive news ourselves in the future on this – has raised expectations for the SGLT-2 class in the medium to long term. And clearly we’re a competitive participant there. And again, if I look at the overall diabetes portfolio, I’ve just reinforced that we’ve got more positive news with GLP-1s right now and we’re competitive in that segment. So it is like anything in R&D. We just need to see what label we get with saxa/dapa.

Q: Bydureon in the US is flattening. Could you update on any plans that might help to reinvigorate that. I know you’ve been working on some different pens and devices.

A: You’re right. It is very competitive. We’re holding share. We’ve got a very focused effort and it’s interesting. There is a pool of physicians who have a lot of confidence in Bydureon and are very favorable towards then pen, and you can see that in the numbers. It’s a very attractive area to operate in, and I think the recent outcomes studies just reinforce that. A couple of years ago, if you had to pick a class that would have a positive outcomes study, the GLP-1s were the one you would put at the top of the list. And we’ve now got two outcomes studies that are favorable for the class. We have ours ongoing. In terms of lifecycle, we have a number of things that we’re looking at that we’ll update you on in the future. If we look outside the US – and I think sometimes we forget that, particularly with the diabetes portfolio – we are really in good shape in Europe as well as emerging markets with Bydureon, Onglyza, and Forxiga.

-- by Emily Regier and Kelly Close