Memorandum

BMS 2Q13 – Forxiga resubmitted to the FDA; Bydureon up 10% sequentially in US; worldwide Onglyza sales up 40% year-on-year – August 19, 2013

Executive Highlights

  • BMS/AZ announced the resubmission of their candidate SGLT-2 inhibitor Forxiga (dapagliflozin) to the FDA – the PDUFA date is set for January 14, 2014.
  • Worldwide 2Q13 Onglyza franchise sales grew 40% year-on-year to $240 million, stabilizing after the dip in growth seen in 1Q13.
  • US Bydureon (exenatide once-weekly) sales grew 10% sequentially to $57 million. Worldwide Bydureon sales reached $66 million in the first quarter BMS/AZ had full international rights.

BMS reported 2Q13 financial results on July 25 in a call led by CEO Lamberto Andreotti. In 2Q13, worldwide Onglyza franchise sales grew 40% year-on-year (YOY) to $240 million, representing a much more positive result relative to the dip in growth seen in 1Q13, when the franchise experienced its lowest ever YOY growth of 25%, partially due to loss of coverage through Caremark at the end of 2012. During Q&A, management commented on the German IQWiG’s assessment of Onglyza and Komboglyze, finding “no additional benefit” for either drug. Management noted that the G-BA (the highest decision making body for health insurance funds in Germany) reversed the ruling for Komboglyze, and it is too soon to tell what the effects on Onglyza reimbursement might be in Germany. Management confirmed that the results of SAVOR-TIMI, Onglyza's CVOT, will be presented on September 2 at the European Society of Cardiology Congress in Amsterdam –Takeda’s EXAMINE will also be presented September 2.

Worldwide Bydureon sales totaled $66 million in 2Q13, the first quarter that BMS had complete control of OUS exenatide sales (Lilly finished transferring international exenatide rights to BMS on April 1, 2013). Compared to 1Q13, BMS' US Bydureon sales grew 10% to $57 million - the first real growth in Bydureon performance that we've seen since BMS/AZ acquired Amylin in August 2012. Notably, management reaffirmed that it expects, in conjunction with AZ, to increase resources behind Bydureon while marketing Byetta in conjunction with long-acting insulin. Worldwide 2Q13 Byetta sales totaled $104 million, with $74 million in US sales representing a 12% sequential decline.

The big diabetes news of the day was BMS/AZ's announcement of the resubmission of Forxiga (dapagliflozin) to the US FDA. The new PDUFA date is set for January 14, 2014, and BMS management is preparing for a likely advisory committee meeting. In 2Q13, international Forxiga sales totaled $5 million, up from $3 million in 1Q13. The SGLT-2 market in the US seems poised for success, as J&J reported in its 2Q13 financial update that Invokana had overtaken all major US DPP-4 inhibitors in new-to-brand prescription (NBRx) share. We continue to be curious, moving forward, how companies will differentiate the various SGLT-2 inhibitors since three candidates (Invokana, Forxiga, and Lilly's empagliflozin) have the potential to reach both the US and European markets as early as 1Q14. We see a number of areas for potential differentiation amongst SGLT-2 inhibitors, including patient and prescriber "hassle factor," use in the renal impairment population, selectivity for SGLT-2 over SGLT-2, and indications beyond type 2 diabetes as potential areas of differentiation - see page 6 of our J&J 2Q13 report at http://close.cx/JJ2Q13 for much more detail. Finally, management remarked upon the FDA’s granting priority review to metreleptin for lipodystrophy in June. In July, the Agency requested three additional months to complete its review of the data, setting the PDFUA date at February 27, 2014.

FINANCIAL UPDATES – OVERALL DIABETESCARE
  • BMS’ total diabetes revenue reached $415 million in 2Q13, a 21% sequential increase from 1Q13. Management stated twice during the call that BMS and AZ plan to increase commercial investment behind their diabetes portfolio in the second half of 2013 given the increasingly competitive nature of the diabetes market.

FINANCIAL UPDATES – ONGLYZA FRANCHISE

  • Worldwide Onglyza (saxagliptin) franchise sales grew 40% year-on-year (YOY) to$240 million, with $167 million coming from Onglyza (up 36% YOY), and $73 million from Kombiglyze (up 56% YOY). This was a challenging comparison against 54% growth in 2Q12 (given the franchise’s previous growth history of >100% growth throughout 2010 and 2011) and represents stabilization from 1Q13 when the Onglyza franchise experienced its lowest worldwide growth to date (25%). Management noted that the 40% growth included the positive effects of a$26 million returns reserve reversal. The relatively poor performance of Onglyza in early 2013 has been attributed to the loss Caremark formulary status in late 2012. Management remarked that it believed it was seeing a stabilization of total prescription (TRx) share for Onglyza, noting that 2Q13 TRx share grew “slightly” excluding the Caremark loss. Sequentially, the Onglyza franchise grew 19% worldwide, with the US and International markets contributing fairly equally to growth.

Table 1: BMS Onglyza franchise revenue by product and region.

 

2Q13 Sales (Millions of Dollars)

Reported Growth from 2Q12 / 1Q13

Onglyza Franchise Worldwide

$240

40%/19%

US

$167

36%/19%

International

$73

49%/18%

Onglyza Worldwide

$180

32%/23%

US

$115

31%/24%

International

$65

35%/23%

Kombiglyze Worldwide

$60

67%/7%

US

$52

49%/11%

International*

$8

700%#/-11%

*The difference between worldwide and US Kombiglyze sales implies that BMS recognized revenue from international markets, though BMS has not provided details on these OUS sales. #Kombiglyze’s first quarter of international sales was 1Q12.

  • The German Institute for Quality and Efficiency in Health Care (IQWiG) has decided that both Onglyza and Komboglyze (Kombiglyze’s trade name in Europe) provide “no additional benefit” over existing therapy. However, management noted during Q&A that the G-BA overturned this ruling on Komboglyze, saying that it did provide additional benefit– this was fairly notable since we believe most patients will ultimately be taking fixed dose combinations. For background, IQWiG provides recommendations to the G-BA (The Federal Joint Committee – the highest decision making body for health insurance funds in Germany). The G-BA then ultimately decides on what a drug’s added medical value is and how it should bereimbursed. When asked during Q&A, management commented that it is too early to discuss potential outcomes.
  • Merck’s Janumet (sitagliptin/metformin fixed-dose combination) received hints of a positive ruling from IQWiG. The IQWiG ruled that Janumet has “hints of a minor added benefit” compared to sulfonylureas (SFUs), if the goal is to lower blood glucose levels to near- normal levels. In the past, the G-BA has ruled that BI/Lilly’s Tradjenta has “no additional benefit,” causing its price to be non-negotiable. Thus, Tradjenta would likely have been priced similar to that of SFUs, and BI/Lilly decided to not launch the drug in Germany. IQWiG found that Novartis’s Galvus also has “no additional benefit.” If G-BA confirms these findings, Galvus’ reimbursement will also become non-negotiable. Merck expects the G-BA to make a decision on Januvia’s added medical value (and thereby reimbursement) in 4Q13. BMS/AZ did not provide an expected timeline for the G-BA’s evaluation of the Onglyza franchise. These decisions are incredibly important given their influence on reimbursement throughout the EU and eventually beyond.
  • Management confirmed that the full results of Onglyza’s cardiovascular outcomes trial (CVOT), SAVOR-TIMI, will be presented orally at the European Society of Cardiology. The conference will be held in Amsterdam, and the results will be presented on September 2, 2013 during a late-breaking “Hot Line” session. BMS/AZ released topline results at the end of June, revealing that the trial met its primary safety endpoint of CV non-inferiority compared to placebo, and did not meet the primary efficacy objective of CV superiority, for a composite endpoint of cardiovascular death, non-fatal myocardial infarction or non-fatal ischemic stroke. SAVOR- TIMI will be the first CVOT for a type 2 diabetes drug to report full results post-implementation of the FDA’s 2008 CV guidance. Close Concerns will be at ESC to bring readers a detailed report on the results. Results of Takeda’s EXAMINE CVOT for the DPP-4 inhibitor Nesina (alogliptin) will be presented at the same session. Completion of the next CVOTs will not occur until 2014 – the trials with expected 2014 completion dates are Sanofi’s ELIXA for Lyxumia, Bayer’s ACE for Acarbose, and Merck’s TECOS for Januvia.

FINANCIAL UPDATES – EXENATIDE FRANCHISE

  • In the US, Bydureon revenue increased 10% sequentially to $57 million, and Byetta revenue decreased 12% sequentially to $74 million. This is the first real rise in Bydureon performance that we have seen since BMS/AZ acquired Amylin in August 2012. With management’s commitment to dedicating more resources to Bydureon in 2H13, we are optimistic that its performance will continue to improve though access pressures are making DPP-4 inhibitor class growth much more challenging than even a couple of years ago. This, coupled with increased competition from the SGLT class, will create pressure for the class, though it has benefited enormously from its status as the easiest to take and easiest to prescribe medicine for patients with type 2 diabetes, and that is a perch we don’t believe will be challenged anytime soon (although it may well be that SGLT inhibitors turn out to also be very highly regarded on both fronts – just perhaps not quite as well as the DPP-4 inhibitor class). Notably, management commented during Q&A that both commercial and Medicare access has been steadily improving since launch. As in the past, management remarked that it would market Byetta as an add-on to basal insulin.

Table 2: BMS exenatide franchise sales in the US by product.

 

2Q13 Sales (Millions of Dollars)

Sequential Growth from 1Q13

Byetta (US)

$74

-12%

Bydureon (US)

$57

10%

  • In 2Q13 BMS/AZ’s worldwide Bydureon sales totaled $66 million, and worldwide Byetta sales totaled $104 million. Worldwide Bydureon and Byetta revenue recorded by BMS/AZ increased sequentially to 27% and 22%, respectively. However, comparisons to BMS/AZ’s previous quarters are not particularly meaningful given that 2Q13 was the first quarter that BMS/AZ held full international rights to the exenatide franchise (as a reminder, Lilly finished the transfer of international exenatide rights to BMS/AZ on April 1, 2013). For reference, Bydureon and Byetta’s worldwide performance in 1Q13 (consisting of US revenue reported by BMS/AZ and combined international revenue reported by BMS/AZ and Lilly) was ~$66 million for Bydureon and ~$129 million for Byetta.1 For additional reference, 2Q12 worldwide sales of Bydureon and of Byetta totaled $35 million and $156 million, respectively, when Amylin held US rights and Lilly held international rights. We did not feel it was appropriate to make worldwide sequential or YOY comparisons given the multiple changes in commercialization rights over the past year.
  • Internationally, BMS/AZ’s $9 million and $30 million of international Bydureon and Byetta sales in 2Q13, respectively, is lower than the total 1Q13 combined BMS/AZ and Lilly international sales of about $14 million and $45 million, respectively.2 The lag in BMS/AZ’s performance is likely due to the time needed to ramp up sales forces where Lilly had previously marketed exenatide products. In 2Q12, when Lilly held full international exenatide rights, it reported $7 million and $41 million in sales of Bydureon and Byetta, respectively.

Table 3: Worldwide exenatide franchise sales by product and region.

 

2Q13 Sales (Millions of Dollars)*

1Q13 Sales (Millions of Dollars)*

2Q12 Sales (Millions of Dollars)*

Byetta

$104

$130

$156

US

$74

$85

$115

International

$30

$~45

$41

Bydureon

$66

$66

$35

US

$57

$52

$28

International

$9

$~14

$7

*In 2Q13, BMS/AZ held full US and international rights to the exenatide franchise. In 1Q13, BMS/AZ reported full US sales, while BMS/AZ and Lilly both reported international sales. Lilly 1Q13 Byetta/Bydureon sales are estimated from total international exenatide franchise revenue of $57.6 million (see footnote 1). In 2Q12, Amylin reported all US exenatide sales, and Lilly reported all

  • According to Novo Nordisk’s 2Q13 financial update on August 8, 2013, the GLP-1 agonist market continues to be dominated by Novo Nordisk’s Victoza (liraglutide). Victoza holds 68% of the GLP-1 market by value according to January 2013 IMS Moving Annual Total data, with the exenatide franchise making up the rest. The GLP-1 agonist field will become increasingly crowded in the coming years – Sanofi has already launched its once-daily short- acting GLP-1 agonist, Lyxumia (lixisenatide), in Germany and the UK. In Germany, where it has had a full commercial launch, Lyxumia had captured 10% of the GLP-1 weekly market by volume mid-July 2013. Other GLP-1 agonists in late-stage development include GSK’s once-weekly Eperzan (albiglutide; submitted in the EU in March 2013 and in the US January 2013); Lilly’s once-weekly dulaglutide (expected 2013 submission); and Novo Nordisk’s once-weekly semaglutide (phase 3); Intarcia’s once- or twice-yearly exenatide osmotic minipump (phase 3); and PhaseBio’s Glymera (phase 2b).
  • Similarly to 1Q13, BMS/AZ did not report sales of Symlin (pramlintide), which it gained through its acquisition of Amylin.

FINANCIAL UPDATES – FORXIGA

  • International sales of BMS/AZ’s SGLT-2 inhibitor Forxiga (dapagliflozin) totaled $5 million in 2Q13, up from $3 million in 1Q13 (its first full quarter on the market). As a reminder, Forxiga was the first SGLT-2 inhibitor to the worldwide market and launched mid- December 2012 in Europe. As of BMS’ 1Q13 financial update, it was available in the UK, Germany, and Denmark. With the strident austerity measures currently in place in the EU, we would not necessarily expect to see the strongest demand for Forxiga there. An EU decision on J&J’s SGLT- 2 inhibitor Invokana is expected in 3Q13 (Invokana launched in the US in late March 2013). Lilly/BI also submitted their SGLT-2 inhibitor empagliflozin to the US and EU in March 2013, making a March 2014 decision possible in both regions.
  • The big news on the call was that BMS/AZ had just re-submitted Forxiga to the US FDA. The new PDUFA date is set for January 14, 2014, and BMS management is preparing for a likely advisory committee meeting. During Q&A, management noted that the new submission package includes new CV data and data on blood pressure and glycemic control. The FDA’s Endocrinologic and Metabolic Drug Advisory Committee (EMDAC) website does not yet have a date listed for the advisory committee meeting for Forxiga. The SGLT-2 market in the US seems poised for success, as J&J reported in its 2Q13 financial update that Invokana had overtaken all major US DPP-4 inhibitors in new-to-brand prescription (NBRx) share.
  • We see a number of areas for potential differentiation amongst the SGLT-2 inhibitors, including 1) patient and prescriber “hassle” factor; 2) potency; 3) selectivity for SGLT-2 over SGLT-1, and 4) indications beyond type 2 diabetes. For an in-depth discussion on these factors, please see our page 6 of our J&J 2Q13 report at http://www.closeconcerns.com/knowledgebase/r/164d9ab5 (the discussion focuses on Invokana, Forxiga, and Lilly’s empagliflozin). Other SGLT-2 inhibitors in development include Astellas/Kotobuki's ipragliflozin (submitted in Japan), Taisho's luseogliflozin (submitted in Japan), Pfizer/Merck's ertugliflozin (phase 3 expected in 2H13), Theracos' EGT0001442 (phase 2), Lexicon's SGLT-1/SGLT-2 dual inhibitor LX4211 (a type 1 indication will potentially be pursued before type 2; phase 2 complete), and Novartis' SGLT-1/SGLT-2 dual inhibitor LIK066 (phase 2).
  • We are especially excited about the potential for SGLT-2 inhibitors to be used in patients with type 1 diabetes – a poster at ADA 2013 (Poster 70-LB) presented findings for a phase 2a pilot study of dapagliflozin in this population. Treatment resulted in a reduction in total daily insulin requirement (-19% on the 5 mg and -16% on the 10 mg doses) while also producing a trend toward reduced glucose levels and reduced glycemic variability (both measured by CGM). For details on this study, please see page 10 of our ADA 2013 SGLT-2 inhibitors report at http://www.closeconcerns.com/knowledgebase/r/0a7c84d4.

PIPELINE UPDATES

  • BMS management did not provide an update on Bydureon line-extensions during the call. As a reminder, Bydureon currently requires reconstitution prior to injection. BMS/AZ have a dual-chambered pen in development that would automate the reconstitution process. In addition, they have once-weekly and once-monthly exenatide suspension formulations in development that do not need reconstitution. In the past, management has guided for regulatory submission of the Bydureon dual-chambered pen in 3Q13 and a launch in early 2014 (suggesting a shortened review cycle). The once-weekly exenatide suspension formulation was advanced to phase 3 in 4Q12 (two active trials are listed on ClinicalTrials.gov – one comparing the suspension to Byetta and the other to sitagliptin; Identifiers: NCT01652716 and NCT01652729, respectively). Management has refrained from discussing the once-monthly suspension formulation since its 4Q12 financial update when it stated that it remains “interested” in the product but is “still working on the technical aspect of it.”
    • On the long-acting exenatide front, Intarcia Therapeutics recently began phase 3 trials for an implantable osmotic minipump that delivers a steady stream of stabilized exenatide for up to one year. Intarcia hopes to achieve a 1.8% A1c reduction in phase 3, which is greater than has been seen with any other GLP-1 agonist. In phase 2 studies, ITCA-650 provided superior A1c reduction, similar weight loss, and less nausea at 12 weeks compared to the equivalent dose of Byetta. For details, please see page 12 of our EASD 2012 Incretins Report at http://www.closeconcerns.com/knowledgebase/r/8b6a6d88.
  • Management remarked that the FDA granted priority review for metreleptin, a leptin analog under investigation for the rare disorder lipodystrophy. In July, the FDA notified BMS/AZ that it would require a three-month extension to complete its review of the data, setting the PDUFA date at February 27, 2014.
  • BMS’ online pipeline shows no changes in status of the rest of its pipeline since the company’s 1Q13 financial update. As of February 15, 2013, BMS’ online pipeline includes a PEG-FGF21, an 11-beta-HSD inhibitor, a GPR119 agonist, and a GPR40 agonist in “exploratory development” (post discovery through phase 2) for metabolic applications. BMS also has a PCSK9 Adnectin in exploratory development for a “cardiovascular” indication. Please see page 7 of our BMS 1Q13 report at http://www.closeconcerns.com/knowledgebase/r/c413d599 for more details on this candidate.

 

Questions and Answers:

Q: If you could comment on the forthcoming ruling from IQWiG [Institute for Quality and Efficiency in Healthcare] in relation to the AMNOG and Onglyza/Kombiglyze – what are your expectations there with regard to pricing for both these agents?

A: Just to remind everybody what the process in Germany is now; we have a process known as AMNOG, which is a three-step process. You first have IQWiG, who comes up with a ruling. This ruling is not binding; it is advice to the G-BA. Then the G-BA comes up with a ruling, and then you start your negotiations with the BfArM. So, it’s a lengthy process going over a period of time, which usually lasts about a year. So at this stage, we were the first company going through an assessment for a DPP-4. Komboglyze has completed both the assessment through IQWiG and also now the assessment with G-BA. So those two first steps have been completed for Komboglyze. And actually there was a difference in the ruling between the IQWiG and the G-BA. While IQWiG found no additional benefit, the G-BA confirmed that there was additional benefit. So now we will answer in the negotiations for Onglyza and Kombiglyze, and we cannot comment further on this part. So we are now expecting to see the G-BA ruling, and then we will go into the BfArM negotiations. So it would be premature now to discuss what pricing will come out of that. What we know, however, is that there is a chance to be able to argue the benefit of those assets and the importance of those DPP-4 in the treatment of diabetes with very good efficacy and safety. So, this is happening and we are looking forward to continuing the discussion with the G-BA and the BfArM.

Q: First off on dapagliflozin, can you talk a little bit about the reason for an Advisory Committee meeting? Specifically, you mentioned that that was likely going to be discussed. And can you give us a little bit of flavor on what has been changed or improved meaningfully with the new filing versus some of the questions that have been raised by FDA historically?

A: The dapagliflozin data we are submitting significantly enhances the information we provide in our first submission, and in addition answers all of the questions raised by the FDA as part of their Complete Response Letter. Part of the reason for the Ad Comm is that at the original Ad Comm, as you recall, there was a vote not to approve this drug. So, the FDA felt it was important to come back and for us to present our broader portfolio of information now for the Advisory Committee to opine. As part of that resubmission, let’s just say we will have a couple of studies on CV risk, which are now two years in. Those are in patients with a history of CV disease who are diabetic and two new studies that weren’t in the original dossier, specifically studying blood pressure and glycemic control in diabetic patients. As you heard earlier, we now have a PDUFA date of early January. We’re preparing for the Advisory Committee with the hope of getting approval by then.

Q: Can you update us on reimbursement, the payer issue, and pricing? What’s happening? Are you on formularies? Is that the issue, or is it a marketing issue?

A: The comment made before was specifically related to coverage with Caremark. We lost coverage at the end of last year, and that had a meaningful impact on our Onglyza sales coming into this year. We’ve seen that impact primarily in 1Q and at the beginning of 2Q. We believe that impact has now stabilized. Beyond that plan, we continue to have good access with Onglyza and Kombiglyze across the majority of the market. And with exenatide, our preferred access in both commercial and Medicare for Bydureon has actually been improving following the launch and steadily improving this year as well. So, although diabetes clearly, from a pricing and rebates perspective, is an increasingly competitive area, overall the access to our portfolio is quite good. The Caremark issue was a very significant issue. It was one issue that impacted us in 2013 for Onglyza.

Q: May we assume that if there were any pancreatic findings in SAVOR that we would have been told that already?

A: I’m not going to comment any more about SAVOR results. But, of course, as you know, they will be presented on Labor Day at the ESC [European Society of Cardiology]. I think many of us were very encouraged by the recent meeting at the NIH [National Institutes of Health], where for two days this item was discussed. And I think many people came to the same conclusion we had, that there really wasn’t any indication that either GLP-1 based therapy or increases were associated with the risk of pancreatic cancer.

Q: On DPP-4 inhibitors, just more broadly, category growth has slowed a bit here. What’s your expectation going forward? Is that something that you think is a new norm? Can we reaccelerate growth in the category? I’m just interested in any comments you might have on the broader category.

A: A lot of the acceleration we saw last year for DPP-4s in the US was really related to the very rapid erosion of the TZDs. The slowdown this year has really been related primarily to that process ending. So, we continue to see opportunity for growth of DPP-4s. But clearly, the very accelerated growth of last year was linked to a number of factors, including the erosion of TZDs.

Q: I believe you’ve made reference to increasing resources around the entire diabetes franchise with AstraZeneca, and I wanted to understand that a little more fully. Is AstraZeneca fully engaged with the amount of resources that the joint venture wishes to spend in that category? And importantly, had they already been engaged with Bydureon, because I think your comment was towards Bydureon specifically?

A: In fact, AstraZeneca has been very engaged, and we have discussions with AstraZeneca at all levels, including discussions between Pascal Soriot and myself about how to improve our presence in diabetes. It is not necessary to do this – we’ve only invested or decided to invest more behind Bydureon. In the US, we are adding an additional sales force that is most focused on Onglyza. So it’s that entire portfolio that we are supporting. And again, AstraZeneca is engaged and we are engaged equally, and we continue to work together to optimize the individual assets in the entire portfolio.

-- by Jessica Dong, Ewuradjoa Gadzanku, and Kelly Close


1Both BMS/AZ and Lilly recorded separate international exenatide revenue in 1Q13. Our calculation of international sales is based on a sum of BMS/AZ’s reported sales and an estimation of Lilly’s sales. Lilly disclosed that its total international sales of Byetta and Bydureon totaled $57.6 million in 1Q13, but declined to provide a breakdown between Byetta and Bydureon. Applying the 4Q12 split of ~23.5% Lilly’s exenatide revenue coming from Bydureon and the rest from Byetta, we estimate that Lilly’s 1Q13 Bydureon sales totaled ~$13.5 million and Byetta ~$44.1 million. BMS/AZ reported $0 of international Bydureon revenue and $1 million of Byetta revenue in 1Q13. Thus, our estimates are that total international Bydureon revenue reached $13.5 million and total international Byetta revenue reached $45.1 million in 1Q13

2 See footnote 1.international exenatide sales. Amylin transferred full US rights to the exenatide franchise to BMS/AZ on August 8, 2012. Lilly finalized the transfer of international rights to BMS /AZ on April 1, 2013.