Memorandum

Pfizer 2Q18 – Company collects ~$15 million from SGLT-2 Steglatro sales; Oral GLP-1 candidate completes second phase 1 study; No remarks from management on diabetes or NASH – July 31, 2018

Executive Highlights

  • Pfizer did not explicitly mention diabetes or SGLT-2 Steglatro during its 2Q18 update, but we estimate that the company collected ~$15 million in quarterly Steglatro sales, with ~$22 million going to partner Merck. From Merck’s 2Q18 financial materials, we estimated total franchise revenue of $37 million. Pfizer’s presentation called attention to EMA approval of Steglatro (ertugliflozin), Steglujan (ertugliflozin/sitagliptin), and Segluromet (ertugliflozin/metformin). We do hope that future earnings calls offer more in the way of details on Steglatro’s rollout. As a reminder, all three ertugliflozin products became available in the US in 1Q18.

  • In pipeline news, a phase 1 trial of oral GLP-1 agonist PF-06882961 recently wrapped up, and a new phase 1 trial was initiated for ACC inhibitor PF-05221304 in NASH. Pfizer also announced that type 1 diabetes candidate PF-06342674 (an IL-7 receptor precursor modulator) has been discontinued from phase 1.

Pfizer provided its 2Q18 financial update this morning in a call led by CEO Mr. Ian Read. Access the company’s slides, press release, and pipeline update. Once again, there was no mention of diabetes or NASH during prepared remarks or Q&A, despite the recent US launch of Merck-partnered SGLT-2 inhibitor Steglatro (ertugliflozin).

While Pfizer did not report any Steglatro sales, we estimated from Merck’s 2Q18 materials that total franchise revenue was ~$37 million in 2Q18 (reps have confirmed that Merck will continue to report total global sales moving forward). Per the original agreement between these partners, Pfizer will collect 40% of Steglatro franchise revenue, putting its 2Q18 share at $14.8 million, more than quadrupling sequentially from $3.2 million in 1Q18.

Notably, this product is extremely early in its launch cycle and 1Q18 revenue reflected only a partial quarter – standalone Steglatro, fixed-dose Steglujan (ertugliflozin/sitagliptin), and fixed-dose Segluromet (ertugliflozin/metformin) became available to US patients in late January/early February 2018.

Pfizer’s pipeline update (slide 4) highlighted EMA approval of Steglatro, Steglujan, and Segluromet; this decision came through in late March 2018. The partnership agreement stipulates that Merck will be in charge of all commercialization activities in Europe, though as we understand it, Pfizer will continue to collect 40% of global ertugliflozin sales.

We’re excited that patients now have four SGLT-2 inhibitors to choose from (Steglatro, Lilly/BI’s Jardiance, AZ’s Farxiga, and J&J’s Invokana), not to mention three fixed-dose SGLT-2/DPP-4 combinations (Steglujan, Lilly/BI’s Glyxambi, and AZ’s Qtern). In 2Q18, pooled class sales grew 21% YOY and 3% sequentially to just over $1 billion. Steglatro captured 4% of this market by value, compared to Jardiance’s 43%, Farxiga’s 33%, and Invokana’s 21%. We expect the ertugliflozin franchise to gain more commercial traction next year, in 2019, when reimbursement is much stronger. In the meantime, Merck/Pfizer have priced Steglatro at a significant discount to existing SGLT-2s ($8.94/day vs. $17/day) and have also made a copay card available to reduce out-of-pocket costs to $0 – we imagine both of these are attractive to patients/HCPs.

All this said, we’re perplexed by the relative silence from Pfizer (and Merck) on the launch of ertugliflozin products, and we hope it doesn’t indicate decreased confidence in the franchise. We can’t be sure what’s happening behind the scenes at Merck and Pfizer in terms of Steglatro rollout, but in general, we’d love to see both companies invest in SGLT-2 and in getting these therapies into more patient hands. It’s possible that the two companies are waiting until reimbursement is secured for a reasonable number of patients, which may not be until 2019.

Pfizer’s Diabetes Pipeline

  • We noticed on ClinicalTrials.gov that a second phase 1 study of oral GLP-1 agonist PF-06882961 was completed earlier this month. The study (n=12) was initiated in April 2018 and aimed to characterize the pharmacokinetics of the oral GLP-1 in various formulations (immediate release tablet, short and long controlled release tablets, and immediate release solution). This follows a previous phase 1 trial (completed in March 2018) that evaluated the safety/PK profile of a single ascending dose in healthy adults.

    • Oral administration could be the next major frontier for GLP-1 therapy. In our view, GLP-1s are the cream of the crop in terms of efficacious diabetes drugs on the market today; their benefits range from powerful A1c reduction to weight loss to anti-atherosclerotic effects to possible cardio/renal protection. We’ve heard from countless providers that adherence to GLP-1 agonists is challenging – in current forms, the medicine has to be injected twice-daily, once-daily, or once-weekly – so we’re confident that an oral version would be warmly received. Novo Nordisk leads this field with oral semaglutide in phase 3, but surely there’s demand for multiple oral GLP-1s. We’ll be eagerly following the development of PF-06882961, oral semaglutide, and other oral GLP-1 candidates including vTv’s phase 2 TTP273.

  • Pfizer announced (slide 13) that type 1 diabetes candidate PF-06342674 (an IL-7 receptor precursor modulator) has been discontinued from phase 1. The agent has been mired in phase 1 for years, showing no movement after a phase 1 trial in multiple sclerosis was terminated in 2015 due to a “corporate decision,” or after completion of another phase 1 trial in 2016 enrolling patients with type 1 diabetes.

Pfizer’s NASH Pipeline

  • A phase 2a trial of ketohexokinase inhibitor PF-06835919 for NASH wrapped up in April. This was safety and PK/PD study, enrolling 53 adults with NAFLD. Very notably, Pfizer’s Dr. Kendra Bence highlighted this candidate at the 2018 NASH Summit in Boston, explaining its unique mechanism of action. To our knowledge, PF-06835919 is the only ketohexokinase inhibitor in the NASH competitive landscape. NASH remains an area of incredibly high unmet need, with no FDA-approved treatments to-date; we’re pleased to note Pfizer’s continued commitment to NASH as a therapeutic area, though we would have loved more commentary from management to this end during today’s 2Q18 earnings call. Given the tremendous overlap between NASH and type 2 diabetes/obesity, we’re watching this field with an increasingly close eye.

  • We noticed that a new phase 1 trial for ACC inhibitor PF-05221304 is set to begin in late August. A phase 2 trial of the same candidate is ongoing, expected to complete in March 2019, and the new phase 1 investigation will assess the drug’s safety in 15 healthy Japanese adults (it’s expected to complete in November of this year). No updates were provided on the ongoing phase 2 trial (n=360). We note that PF-05221304 has a Fast Track designation from FDA, effective since January 2018.

  • No updates were given on phase 1 DGAT2 inhibitor PF-06865571, also being developed toward a NASH indication. A phase 1 trial enrolling patients with NAFLD and without drug-treated type 2 diabetes (n=45) began in June 2018 and is on track to complete in February 2019. We noted Pfizer’s aggressive approach with this candidate in 1Q18 – it’s unusual to see a primary endpoint of relative change from baseline in whole liver fat in a phase 1 study. All other DGAT2 inhibitors for NASH also remain in phase 1, as you’ll see on our competitive landscape page.

Pfizer’s Diabetes/NASH Pipeline Summary

The table below reflects the latest updates, as far as we’re aware, on Pfizer’s diabetes-related pipeline products. Items highlighted in yellow indicate notable changes to the pipeline in recent months.

Product

Product Details

Status/Indication

Timeline

PF-05221304

ACC inhibitor

Phase 2a/NASH

Phase 2 study expected to complete March 2019; Positive phase 1 data available according to 1Q17 update; New phase 1 trial in Japanese adults slated to start in August 2018; Holds Fast Track designation from FDA

PF-06835919

Ketohexokinase (KHK) inhibitor

Phase 2a/NASH

Phase 2 study completed April 2018; Phase 1 trial completed July 2017

PF-06865571

DGAT2 inhibitor

Phase 1/NASH

New phase 1 trial launched May 2018, expected to complete February 2019; Prior phase 1 trial completed July 2017; Other phase 1 studies completed and ongoing in subjects with and without NASH

PF-06882961

Oral GLP-1 agonist

Phase 1/Type 2 diabetes

Phase 1 study completed February 2018; Second phase 1 study completed in July 2018

PF-06342674

Interleukin 7 receptor (IL7R) precursor modulator

Discontinued/Type 1 diabetes

Discontinued in 2Q18; Phase 1 multiple ascending dose study completed September 2016

Questions and Answers

Q: Talk a little bit more about the president’s blueprint for reducing drug costs and potential changes to rebate structures. There was a lot of uncertainty about how this is going to play out. How likely do you think it is that we’re going to see changes to the current industry pricing structure? And how do you think about that and prepare for any changes from a Pfizer perspective?

A: On the present blueprint, we have submitted comments which I believe are public record. Pharma has submitted comments. Overall, we're very supportive of the blueprints. I think the president is trying to maintain a market-based system in the United States which is positive. Probably one of the largest changes, which I think would be overall positive for the industry, is the secretary's intention to remove the Safe Harbor for discounts so as to eliminate rebates. At the moment in time, about 40% of pharmaceutical prices are subsidies to the rest of the health care system. We realize some 58% of our list price. The rest goes to subsidize profitability of PBMs, insurance companies and frankly premiums for those that are healthy. This is not a sustainable position, and so removal of the rebates I believe will be very beneficial to patients and our industry, especially those companies who are launching new products over the next five years or so. With the removal of the rebates, we will remove the sort of what we call the rebate trap, whereby access is denied to innovative products because of a strong position of another product with its rebates. I think the president is focused on improving through trade agreement the free riding that occurs on American consumers and research. He wants to promote value-driven healthcare by linking payments to fulfillments. So overall, I suppose we will see more focus on net prices, rebates going away, and the blueprint being implemented, which is I believe is positive for patients and positive for innovative companies.

 

-- by Martin Kurian, Ann Carracher, Payal Marathe, and Kelly Close