Memorandum

GSK 2Q14 – Tanzeum launching in US this week at a lower price than existing options in class – July 23, 2014

Executive Highlights

  • The once weekly GLP-1 agonist Tanzeum (albiglutide) is being launched this week in the US; GSK is pursuing an aggressive pricing strategy relative to existing GLP-1 agonists that the company says (unsurprisingly) received substantial interest from payers.
  • Phase 3 data on Tanzeum presented at ADA suggests perhaps less weight loss and also fewer GI tolerability issues than other GLP-1 agonists.

Earlier today, GSK CEO Mr. Andrew Witty led the company’s 2Q14 financial update. Below, we list the top five highlights from the call.

1. GSK is launching its once weekly GLP-1 agonist albiglutide (US brand name: Tanzeum) in the US this week – it was approved in the US in mid-April. No updates were provided on a launch timeline for Europe, where albiglutide will carry the brand name Eperzan.

2. Very notably, we learned during Q&A that GSK is pursuing an aggressive pricing strategy for Tanzeum relative to already-marketed weekly, daily, and twice-daily GLP-1 agonists. Management suggested that the decision was in response to the increased pricing pressure for diabetes drugs in the US, and mentioned that the company has received substantial interest from payers for albiglutide.

3. We saw phase 3 data from the Harmony trial program presented at this past ADA (see our coverage here) suggesting minimal weight effects for albiglutide, and perhaps also fewer GI tolerability issues.

4. The FDA announced in May that it was removing many elements of the REMS program for Avandia (rosiglitazone). We believe the implications for CVOT trials will be under greater scrutiny going forward – this could have enormous significance for the diabetes field and it is too closer to call at this point what is most likely to happen.

5. GSK is one of the supporters of the first call for proposals for type 1 diabetes research projects as part of the European IMI2 program.

Top Five Highlights

1. GSK announced that it is launching its once-weekly GLP-1 agonist Tanzeum (albiglutide) in the US this week. This launch follows the product’s approval by the FDA in mid-April. Management did not provide an update on the launch timeline in Europe, where the product was approved in late April. In Europe, albiglutide is to be marketed under the brand name Eperzan.

  • Tanzeum/Eperzan is the second once weekly GLP-1 agonist to reach the US and European market, following AZ’s Bydureon (exenatide once weekly). The patient experience and design of the delivery device will likely be important determinants of success within the group of once-weekly GLP-1 agonists, which might soon include a new entry, Lilly’s dulaglutide (submitted to the FDA last November and currently under review in the US and EU). Tanzeum and Bydureon both require reconstitution, but both are now available as dual-chambered pens that encapsulate the entire reconstitution and injection processes within one device (although the reconstitution process takes upwards of 15 minutes for both) – read our report on the Bydureon dual-chambered pen and our coverage of the ADA 2014 Exhibit Hall, where we got to see the Tanzeum pen firsthand. Lilly’s dulaglutide, in contrast, is formulated as a ready-to-use suspension and will be marketed (if approved) in a unique auto-injector device that hides the needle from patients’ view – a usability study of this single-use pen was presented at ADA. As we understand it from patients who have used it, Lilly’s pen is very easy, which could presumably be a major advantage for them.

2. Very notably, we learned during Q&A that GSK is pursuing what sounds like a fairly aggressive pricing strategy for Tanzeum in the US. Third-party sources have suggested that the wholesaler acquisition cost for Tanzeum is ~10% lower than that of Victoza 1.2 mg (the lower dose, although one that many patients take) and up to 65% less than that of Victoza 1.8 mg; although GSK has not provided specific pricing comparisons to other agents, it has shared that the wholesaler acquisition cost (WAC) is $326 for a 28-day supply (see below). As a rationale for the pricing decision, management noted the increased price pressure on diabetes pharmacotherapies in the past six to nine months – we imagine that the move to single-source formularies and in particular Express Scripts’ 2014 formulary substitutions for rapid-acting insulin and GLP-1 agonists (see item #5/6 of our September 2013 letter) were part of what was being cited. Management noted that the company has already had a “tremendous” response and level of interest from payers, and that the company is interested to see how the strategy “shakes things up.” Apart from being a bold marketing strategy in terms of winning over an increasingly stingy field of payers, presumably the pricing decision could serve to expand access to the GLP-1 class for patients – though that is still quite expensive for those without insurance.

  • We learned later from the company that the wholesalers acquisition cost (WAC) for Tanzeum in the US is currently set at $326 for four pens, a 28-day supply for approximately ~$4,250/year ($11.40 per day). It is important to note that WAC is the price that wholesalers (not pharmacies or patients) pay, and that it does not reflect any discounts or reimbursements. It is hard to speculate what the final cost to consumers will be, given that markups will push the price upwards while discounts and rebates offered by GSK would pull in the other direction. The Express Scripts 2013 Drug Trend Report published earlier this year suggested that Tanzeum was expected to cost ~$2,000 per year.
  • There are a number of factors that influence the potential impacts of GSK’s pricing decision. For one, albiglutide’s clinical characteristics appear to be slightly different than those of Novo Nordisk’s Victoza (liraglutide) and AZ’s Bydureon (exenatide). Albiglutide barely failed to achieve non-inferiority against Victoza in the Harmony 7 trial, and data suggests that its weight effects are on the more modest side (see below). Additionally, albiglutide might soon be joined by Lilly’s dulaglutide in the field of once-weekly GLP-1 agonist candidates – comments from Lilly that it sees dulaglutide as a way of growing the GLP-1 agonist class suggest that a discount vs. Victoza is not out of the question, although dulaglutide has the advantage of having achieved statistical non-inferiority vs. Victoza in the AWARD-6 trial.

3. At ADA in June, we got a look at some new long-term data from the three-year phase 3 Harmony 3 study. Out to three years, albiglutide maintained statistically greater reductions in A1c (-0.68%) than sitagliptin (-0.27%) or glimepiride (-0.41%) in an intent-to-treat analysis. At year two (the primary endpoint), albiglutide demonstrated a -0.91% placebo-adjusted reduction in A1c, compared with -0.56% with sitagliptin and -0.64% with glimepiride (baseline A1c = 8.1%). Notably, albiglutide did not provide better weight loss than placebo or sitagliptin in the long term, but was also associated with a relatively low rate of GI side effects compared to other GLP-1 agonists. This profile, in our view, differentiates albiglutide as perhaps a slightly milder agent that might be appropriate for patients that are particularly sensitive to GI tolerability issues or that have less of a need for weight loss. We could see HCPs being more eager to use a drug that will prompt fewer GI-related patient complaints.  

4. As a reminder, earlier this year, the FDA approved a label change for the ex-blockbuster Avandia (rosiglitazone) removing many elements of its REMS program – read our report. While it was positive to receive a final decision on the extended Avandia saga, we do not anticipate that the decision will lead to a major revival of the franchise as the damage has been done. The drug is, of course, also already generic. We do think that this will add fuel to the fire, related to the extensive, very complex CVOT guidelines that came out of the Avandia saga c. 2008.  

5. We learned earlier this month that GSK will be part of the call for proposals on type 1 diabetes that is kicking off the European Innovative Medicines Initiative 2 (IMI2). The type 1 diabetes project, which will focus on characterizing the phenotype and heterogeneity of type 1 diabetes in the at-risk and new onset setting and developing biomarkers for optimizing the design of type 1 diabetes clinical trials, has a total (financial and in-kind) budget of €35.2 million ($47.8 million). 

Questions and Answers

Q: On your GLP-1 agonist albiglutide, at least on a list price basis, you appear to be entering the market at a big price discount, which is something you generally don’t see drug companies do with new drug launches. Any comments behind your decision would be appreciated.      

A: In diabetes, you’ve seen a significant amount of price pressure in the last six to nine months. Frankly, the pricing strategy for Tanzeum is exactly resident with what is going on in the US marketplace. We’ve had a tremendous response and level of interest from payers, which is not surprising for something that is so much more value-based than they’ve seen. It will be interesting to see how that shakes things up. It is not sensible for us to sit on the calls and say that there is price competition and not think about using price as part of our own competitive strategy, and that is exactly what we’re doing.

-- by Manu Venkat and Kelly Close