Memorandum

Takeda 1Q17 – Nesina revenue up 6% YOY to $99 million; Sales fall steeply in Japan; DPP-4 inhibitor class declines 3% YOY to $2.2 billion – May 30, 2017

Executive Highlights

  • In a tough quarter for Takeda’s leading diabetes product, DPP-4 inhibitor Nesina (alogliptin), revenue from the drug rose 6% YOY but fell 14% sequentially to $99 million, from a base of $93 million in 1Q16 and $119 million in 4Q16. Performance was particularly sluggish in Japan, where Nesina sales declined 14% YOY and 28% sequentially to $58 million.
  • Pooled sales from all major commercially-available DPP-4 inhibitors fell 3% YOY and 8% sequentially to $2.2 billion in 1Q17. Merck’s Januvia (sitagliptin) remains the clear frontrunner, holding 61% of the market by value. Lilly/BI’s Tradjenta (linagliptin) held 14% of total sales in 1Q17, while Novartis’ Galvus (vildagliptin) held 13%, AZ’s Onglyza (saxagliptin) held 7%, and Takeda’s Nesina held 5%.

Takeda provided its 1Q17 (F4Q16) update in a recent call led by CEO Mr. Christophe Weber (view the financial data book here). Sales of DPP-4 inhibitor Nesina (alogliptin) grew 6% YOY as reported (5% in constant currencies) but fell 14% sequentially to 11.2 billion JPY ($99 million). This was from a base of $93 million in 1Q16 and $119 million in 4Q16. Growth in 1Q17 was driven by ex-Japan markets: Revenue was up 50% YOY operationally in the US to 1.4 billion JPY ($12 million), up 62% YOY in Europe/Canada to 1.7 billion JPY ($15 million), and up 52% YOY in emerging markets to 1.5 billion JPY ($13 million). A sharp decline in Japan offset these impressive increases – sales dropped 14% YOY as reported and operationally and also fell 28% sequentially to 6.6 billion JPY ($58 million). DPP-4 inhibitors are the most often prescribed therapies for type 2 diabetes in Japan, and so fluctuating sales in that market for the alogliptin franchise are somewhat concerning. Nesina revenue fell 8% YOY as reported in Japan in 1Q16 before rising 11% YOY in 2Q16; sales then declined 3% YOY in 3Q16 but grew 2% YOY in 4Q16. We suspect that combination products are gaining favor among patients/providers over standalone DPP-4 inhibitors. Takeda markets an alogliptin/metformin fixed-dose combination (branded in Japan as Kazano) as well as a combo with TZD pioglitazone (branded in Japan as Oseni). That said, Daiichi Sankyo and Mitsubishi Pharma have plans to bring an SGLT-2 inhibitor/DPP-4 inhibitor fixed-dose combination (canagliflozin/teneligliptin) to market in Japan by 2018, and we imagine the superior A1c-lowering efficacy of this particular combination of agents on top of a weight loss benefit and possible CV benefit will be another headwind for Takeda’s Nesina business. Nesina accounts for a relatively small portion of overall DPP-4 inhibitor sales, and captured only 5% of the total market by value in 1Q17 – see below for our detailed pooled analysis. Lastly, Takeda ceased breaking out sales for TZD Actos (pioglitazone) in 2Q16, which likely reflects waning prescriptions. We’ve heard some positive commentary from thought leaders on the role pioglitazone could play in diabetes care (many cite efficacy at low doses, and the IRIS trial showed a CV benefit to low-dose pioglitazone), but on the flip side, the FDA recently decided to strengthen the bladder cancer warning on all pioglitazone labels. Even if pioglitazone prescriptions do swing back, we expect most of these will be written for generic versions of the agent rather than for Actos.

Figure 1: Nesina Sales (4Q10-1Q17)

  • On a pooled basis, worldwide sales of all major DPP-4 inhibitor products fell 3% YOY to $2.2 billion (from a high base of $2.3 billion in 1Q16). Sequentially, pooled revenue dropped 8% from a base of $2.4 billion in 4Q16. This financial performance isn’t particularly surprising, as DPP-4 inhibitor sales have been fluctuating for a couple years now. The class experienced modest 4% YOY growth for the full year 2016 (up to $9.7 billion from $9.3 billion in 2015). Competition from newer therapy classes like GLP-1 agonists and SGLT-2 inhibitors is certainly an obstacle for DPP-4 agents, though we see a distinct opportunity with the advent of SGLT-2/DPP-4 combos – this includes AZ’s Qtern (dapagliflozin/saxagliptin) and Lilly/BI’s Glyxambi (empagliflozin/linagliptin), while Merck/Pfizer have filed fixed-dose ertugliflozin/sitagliptin with the FDA and EMA as well (decision expected by January 2018). Intense pricing pressure surrounding diabetes drugs in the US has also been cited as a challenge for DPP-4 inhibitors. As an example, Merck’s Januvia (sitagliptin) franchise fell 6% YOY to $1.3 billion in 1Q17, while US revenue was down 9% YOY to $702 million despite a small 3% uptick in US prescription volume – the company must be realizing a lower net price per prescription in the US due to rebates, discount programs, segment mix, etc., which could very well explain the revenue decline. Nesina showed double-digit YOY growth in US revenue in 1Q17 (50%), but from a much smaller base, so we doubt this implies that pricing pressures have eased up at all. All this said, we continue to see an important role for DPP-4 agents in diabetes care moving forward due to their long history of safety and tolerability. Patients and providers are much more familiar with products in this class vs. SGLT-2 inhibitors and GLP-1 agonists, especially in a primary care setting. Diabetes thought leaders including Dr. Robert Ratner have defended DPP-4 inhibitors for use in the elderly and in patients with renal impairment. Despite fluctuating revenue, we expect this class to be a mainstay in type 2 diabetes management into the foreseeable future.
  • Merck’s Januvia continues to lead the DPP-4 inhibitor class by value, capturing 61% of sales in 1Q17. As depicted on the graph below, Januvia – as the clear frontrunner and market leader – is the primary driver of overall class trends. Januvia’s 6% YOY drop in 1Q17 parallels the 3% YOY decline in whole class revenue. By our calculations, Lilly/BI’s Tradjenta (linagliptin) captured 14% of total sales in 1Q17, while Novartis’ Galvus (vildagliptin) captured 13%, AZ’s Onglyza (saxagliptin) captured 7%, and Takeda’s Nesina captured 5%. As a note, these value share estimates are based on our calculations for total Tradjenta revenue, since only Lilly’s portion (and not BI’s) is reported publically. The Tradjenta franchise was the only DPP-4 inhibitor business with meaningful growth in 1Q17 – global sales were up 20% YOY to $113 million. Onglyza sales fell a disappointing 27% YOY to $154 million, though AZ management has established pretty firmly that standalone Onglyza will be de-prioritized in favor of the company’s SGLT-2 inhibitor business (Farxiga) and Qtern. Galvus sales were essentially flat (growing a slight 1% YOY) at $286 million in 1Q17.

Figure 2: Pooled DPP-4 Inhibitor Sales (1Q07-1Q17)

-- by Payal Marathe, Helen Gao, and Kelly Close