Memorandum

FDA approves Xeris’ GVOKE liquid glucagon injection for severe hypoglycemia rescue; prefilled syringe launch in October; auto-injector in 2020 – September 10, 2019

Executive Highlights

  • This morning, Xeris announced FDA approval of GVOKE, its liquid stable glucagon for severe hypoglycemia rescue. The glucagon will launch in two single-dose device formats: a prefilled syringe available in October (“in the next four to six weeks”) and the HypoPen auto-injector at some point in 2020 (once manufacturing ramps up). Interestingly, Xeris’ market research has indicated both form factors are desired, and it expects a fairly even split between the devices. GVOKE will launch in two doses – a 1 mg for adults and 0.5 mg for pediatrics (down to age two years).

  • We salute Xeris for the approval – patients have been waiting forever for alternatives to traditional glucagon and now it has two options! If education works, the market should expand dramatically.

  • GVOKE will be priced at parity to current glucagon injection kits and Lilly’s Baqsimi (~$280.80/dose), and a co-pay assistance program is expected to enable out-of-pocket costs ranging from roughly $0-$40. A 60-person sales force is coming on board now that the drug is approved. GVOKE will also be available in a two-dose pack.

  • Xeris has partnered with Amazon’s PillPack to enable home delivery of GVOKE. More details will be on the yet-to-launch website, www.gvokeglucagon.com.

  • GVOKE joins Lilly’s Baqsimi (approved in July, now launched in the US) as 2019’s second radically improved severe hypo rescue – what a year for glucagon! A big focus of today’s 24-minute Xeris investor call was how it will compete with Lilly’s larger resources and needle-free delivery, and CEO Paul Edick did a great job of emphasizing the runway in the market – ~660,000 glucagon prescriptions are filled for what he estimated as ~ six million US insulin users (his estimate used 100% of type 1 patients and 23% of people with type 2 diabetes). We imagine both products can be successful, given all the fear and hassle associated with the cumbersome reconstitution kits. That said, the pressure is definitely on Xeris to quickly build out a commercial organization, secure payer coverage, launch strong marketing, and compete with Lilly’s larger sales force.  

  • This has been a long time coming – our first Xeris coverage was in June 2012, when the company expected an NDA filing in late 2013; it actually went to FDA five years later in October 2018.

  • It is critical for patients to have great products to address severe hypoglycemia and the new products are a triumphant shift. That said, we do believe the need will go down over time as automated insulin delivery expands – notably, even for all on AID, it will be critical to own glucagon, even though the chances of using it will inevitably go down over time.

Earlier today, Xeris announced FDA approval of GVOKE (glucagon) injection, a ready-to-use, room temperature-stable, liquid glucagon for severe hypoglycemia rescue. GVOKE is approved for adults and children with diabetes (2+ years), and it will be available in two doses: 0.5 mg/0.1 mL (pediatrics) and 1 mg/o.2 mL (adults).

GVOKE will launch in two device form factors: a pre filled syringe (“GVOKE PFS”) coming to the US in the next 4-6 weeks (~mid-late October 2019) and an auto-injector (“GVOKE HypoPen”) launching at some point in 2020 (the manufacturing is more complicated and can only start to ramp now). Both device formats will be priced at parity to current glucagon kits and to Lilly’s just launched Baqsimi – ~$280.80/dose. We are working to better understand gross and net margins in the field; presumably, the cost of GVOKE will go down substantially over time as volume grows. We can’t wait to see when Novo Nordisk and Lilly will stop manufacturing traditional glucagon kits.

  • The 4Q19 launch is technically on time with expectations (3Q18, 4Q18, 1Q19, 2Q19), which included a three-month FDA delay in the PDUFA date from June to today. FDA requested a “fairly extensive bit of additional data” related to the chemistry, manufacturing, and control dossier – clearly Xeris got this into FDA quickly and it was satisfactory to support approval. We note that Xeris had long positioned the auto-injector (HypoPen) to launch in 4Q19; now it’s “2020.” The interim prefilled syringe is clunkier (right picture, above), but offers a quicker-to-market approach to compete with Lilly’s already-available, quite-sleek Baqsimi. According to the Xeris call today, some market research indicates a preference for the prefilled syringe – some users want to see that the dose goes in – and the company expects a 50/50 or 60/40 split of sales between the devices.

  • Designed to be easier for patients and caregivers, both forms of GVOKE will greatly reduce the steps to prepare and administer glucagon during severe hypoglycemia. Along with not requiring reconstitution or manual dosing, the HypoPen auto-injects and auto-retracts with a needle guard. This changes the landscape for injectable glucagon, as traditional glucagon kits are cumbersome, time-consuming, and highly error prone. Xeris’ usability studies have shown a 99% success rate in giving the full dose of glucagon in only two steps, compared to 6%-31% for traditional glucagon kits. This, combined with positive results from Xeris’ phase 3 data (ADA 2018) efficacy, safety, and utility studies, reaffirms GVOKE’s ability to lessen the stress of emergency diabetes management. The availability of an injectable glucagon also remedies any theoretical concerns on dosing or nasal/respiratory irritation for the nasal glucagon Baqsimi. We are elated to see two FDA approved glucagons for severe hypoglycemia rescue, as caregivers and emergency responders deserve radically simple-to-use, no-instruction-manual-needed treatments in emergency situations.

  • Xeris held a 24-minute conference call today (audio, slides), with eight minutes of prepared remarks and the Q&A listed below. A focus of Q&A was how GVOKE will compete with Lilly’s Baqsimi, which has about a one-quarter head start in the US following its approval in July and launch. Ultimately, we think uptake of both products will be strong in the very underpenetrated glucagon market, though there are some differences to note:

    • The device form factors are radically different – Baqsimi is needle-free and more compact (see below), while GVOKE has the more traditional needle injection and will first have the clunkier prefilled option (see above). We note that Baqsimi’s approval was first announced by FDA and then by Lilly, while today’s news was only announced by Xeris.

    • Xeris has an indication down to age two, while Baqsimi is approved for kids aged four and over years. Baqsimi only comes in one dose (3 mg), which could make it simpler for HCPs and for manufacturing; GVOKE comes in both pediatric and adult doses. In an emergency situation, we’re not sure this matter too much.

  • CEO Paul Edick emphasized that glucagon is highly underutilized - ~660,000 prescriptions for what he estimated as ~5.6 million insulin users in the US. The implication was every insulin user in the US should have a glucagon prescription, which is apparently recommended by ADA but seems unrealistically wide as a total addressable market. Those on basal insulin, for example, would do well to have one, but likely need one much less than those on mealtime insulin. That said, we know there are a lot of inadvertent dosing errors with all insulins – we’d love to see a breakdown of how they lead to severe hypoglycemia that is associated with emergency room visits and / or ambulances called – we’ve asked dQ&A for help on this. Nevertheless, no one would argue that the market is underpenetrated given the device options that have existed to date, which have been criticized for years. This gap also permeates into patient perceptions of rescue glucagon, with many patients thinking that glucagon is an appropriate tool only if unconscious or seizing (slide 11).

  • Xeris aims to targets 8,000 clinicians with is 60-person sales force, prioritizing 10-13 key states. Notably, 3,000 clinicians write ~50% of current glucagon prescriptions – a fairly narrow market and we’d love to see the endo/PCP/other split. Xeris hopes to mobilize advocacy groups to reach patients and caregivers along with direct-to-consumer advertising, press coverage, social media, digital presence, and traditional off-line channels – this will be a lot to tackle for a company new to a product launch, though Lilly’s promotion with Baqsimi will certainly drive awareness of the market, the dangers of severe hypoglycemia, and the value of ready-to-use glucagon. Xeris also hopes to bring GVOKE into other conditions associated with hypoglycemia – e.g., post-bariatric hypoglycemia and congenital hyperinsulinism. The company has been successful with some patient outreach.

  • As of last month, Xeris’ other glucagon programs remained in phase 2, including mini dose glucagon (e.g., exercise) and a pumpable glucagon for automated insulin delivery and other indications.

  • Xeris has boldly estimated US market potential for its GVOKE HypoPen at $2 billion annually based on current glucagon kit prices and a patient population of 3.5 million – that would entail reaching half of all US insulin users, which seems fairly unrealistic (even if it was the only product on the market). Zealand estimates a >$700 million market by 2025 for its HypoPal glucagon rescue pen (liquid stable dasiglucagon) with a targeted early 2020 NDA submission. Lilly’s glucagon grossed $150 million in 2018, but that is only a baseline that will increase once Baqsimi is accounted for (Sales were not broken out in Lilly 2Q19). 

Questions and Answers

Q: What do you think about the general launch of this product? Do you see patients switching very quickly or would this be a market where you need to create a lot of awareness that your product format is now available? On the overall size of the market, you talked about 660,000 prescriptions are being filled annually - how many of these are repeat prescriptions for individual patients?  

Mr. Paul Edick (CEO): We believe there is a great deal of anticipation in the market. Our market research suggested that there are patients who really do want better solutions and are not filling prescriptions because the kit that has been available is just too difficult or scary. We anticipate that there are people who will go to this relatively quickly. In terms of the 660,000 prescriptions that are filled annually, it’s hard to tell if those are repeat patients or not because to some degree, some of them might very well be people who have had prescriptions that were outdated but just refilled again. I don’t have that data at my fingertips, but we anticipate there will be conversion from the current kit, patients who have never had a kit that come into the market, and physicians who prescribe for a broader subset of the patient population given the easier nature that these devices do provide.

Q: What is the frequency of which patients may reserve the product based on the number of [severe] hypoglycemic events in a year?

Mr. Edick: On average, type 1 patients have one to two events per year. 20% of Type 2 patients might have one to two events per year. It’s kind of like an EpiPen. You don’t have a severe allergic reaction that often, but you carry an EpiPen just in case.

Q: At peak years, what would you expect with regards to the two presentations: the prefilled syringe and auto-injectors? Are they an even split, or do you think there will be more auto-injectors?

Mr. Edick: Actually, when we first started this process a few years ago, we thought it was all about the auto-injector. Our market research over the last year-and-a-half led us to believe there is almost an equal audience that liked the idea of a pre-filled syringe. The patient population is used to giving themselves injections. Parents of children or adolescents with diabetes like the certainty that the injection took place. I think we’re going to see a 50-50 or 60-40 split.

Q: Just to confirm on the pricing side, there is no difference between the pre-filled syringe presentation vs. the auto-injector presentation?

Mr. Edick: No, they all are going to be about the same price. With Lilly’s recent introduction and Baqsimi’s pricing at about the same price of the current glucagon kit, we’re going to be right at that price more or less.

Q: With regard to the supply chain for the auto-injector, will the launch be early 2020, or are you able to narrow down the guidance on the timeframe?

Mr. Edick: I can’t narrow it a great deal right now. With the approval, we have a final sign-off with the FDA on what our specifications are for manufacturing. That scale-up process is starting now. It needs to be validated, and then we need to manufacture to commercial scale. We’re going to do it as carefully and painstakingly as we need to, and we’ll introduce the auto-injector as soon as it’s available. In the meantime, patients have a dramatically improved form in the pre-filled syringe. We think it’s going to be widely accepted, and at some point in 2020, we’ll have two options for patients. Even if you include the nasal glucagon from Lilly, we’ll have a few options that will make life a lot better for the diabetes community.

Q: My final question is on the competitor’s product. Even though it’s been in the market for just one month, do you have any thoughts on the launch dynamics?

Mr. Edick: We anticipated that Lily was a little ahead of us, and then with Lily getting delayed, we thought it was behind us. We then got delayed, and Lilly was ahead of us. We always thought being second to some degree would be advantageous because we would see what Lilly would do, and most of what Lilly has done is what we thought it would do. Lilly priced right where we thought it would and approached access and reimbursement the way we thought it would. Its actions in the marketplace are pretty much what we have anticipated. That gives us great confidence that we are going to be very competitive.

Q: If you think about growing actual prescriptions in patient use and awareness, what’s the strategy? Is there a DTC rollout? What are you thinking about how quickly that can happen? Additionally, with respect to Lilly, do you think about that as a first-mover advantage for Lily or a bigger voice in the marketplace that you can have? In general, how are you thinking about Lilly and possibly a third competitor coming in?

Mr. Edick: A third competitor is a year-and-a-half away, so I think the market is going to shape up in whatever way it’s going to shape up over the next few years. A third competitor will be in a place to take share from us or Lilly. Over the course of the next eighteen months to two years, Lilly is an important voice in the marketplace. Lilly for the first time is marketing a glucagon product. For the first time in my memory, it’s talking to the endocrinology and diabetes communities about the fact that they honestly should have glucagon handy. This is an important message, and as a company, it will send that message. It’s going to be talking about the fact that there are new options available and that the current kit does not really meet patients’ needs. Those are all the right messages in the marketplace, and those are all the right messages we believe should be in the marketplace. That is going to help to bring people back into the market and get them to fill prescriptions with these new devices. I think to your first question, there are going to be people who are now motivated to have something that otherwise wouldn’t have been.

Our approach will be very patient-centric. We are going to have a DTC campaign which will be very active on social media. We’ve been out talking to and listening to the community on how we should communicate with it. We will be very active once the pre-filled syringe is in distribution centers, warehouses, and pharmacies. We will be executing those campaigns, so call us around November. 

Q: The investors are looking for the launch and ramp here in 2020. How are you thinking about current cash position vs. burn as you ramp up fully commercially?

Mr. Edick: I think we’re in a pretty good shape from a cash position. We raise money when the opportunity presents itself. Our ramp commercially is sort of set by some degree by doing a little bit less in Phase III clinical trials. The work we’ve got going in clinical is Phase I and Phase II as opposed to Phase III work. I think the burn is going to increase somewhat, but I don’t think dramatically.

Q: Are you still on track for an EU filing? We’ve talked about that being a potential source of non-dilutive capital. Is that still from a partner perspective an opportunity?

Mr. Edick: The simple answer is yes. We continue to see partners in Europe. We’re still on track by the end of the year. I just learned this morning we now have a scheduled date for a pre-filing call with the EMA. We also have a couple of the other potential glucagon uses that we’ll have data for later this year. That’s all on track, and we are looking for partners for our glucagon products in Europe. Keep in mind that one of the things we’ve said publicly over time is we anticipate that our pricing strategy OUS would be aligned with US pricing. That presents a higher hurdle for any potential partner because people are used to taking products from the US and pricing them for a fraction of the US price around the world. That’s not an approachable give-and-take, and we’re also not seeking an approach where we’re seeking reimbursement immediately in a lot of countries. We’d probably seek to sell to the cash market and the self-pay market and then seek reimbursement once securing a foothold in sales. That presents a more difficult situation for the traditional partnerships we’ve historically seen in our industry.

Q: Would you be able to provide details about your co-pay program, or is it too early to ask about that? Additionally, in the past, you’ve talked about the potential for an individual patient to keep a couple of pens at the office or home. Would the co-pay program or reimbursement allow for a couple of pens to be refilled by the same patient?

Mr. Edick: Keep in mind that we will be selling both a one-pack and a two-pack. The co-pay program would allow for two-pack. In certain situations, patients might pay as little as $0 out-of-pocket and maybe upwards as much as $30 or $40. We will aggressively drive down the co-pay situation for different patient populations. We will have a program in place for people who don’t have insurance or don’t have any personal means that they are able to apply for assistance. We want to make it as easy, simple, and inexpensive as possible for patients to get access to our products.

 

 

--by Ursula Biba, Ani Gururaj, Adam Brown, and Kelly Close