AZ 2Q17 – Diabetes business down 7% YOY to $600M; Farxiga up 19% to all-time-high $250M + DECLARE CVOT to report early, now 2H18; SGLT-2 pooled sales up 20% to $857M; Bydureon falls 6% to $146M following no CV benefit in EXSCEL topline – July 28, 2017

AstraZeneca provided its 2Q17 update in a recent call led by CEO Mr. Pascal Soriot. It was a “softer quarter” (management’s words) for the diabetes business, following a “subdued” 1Q17, but it seems that the foremost reason for this financial performance might be the complex pricing system and very high rebates going toward Medicare/Medicaid in the US, leading to lower realized sales by the company. This full report elaborates on our First Look, with much more detail on the company’s diabetes products and pipeline, plus illustrative graphs. You can access the presentation slides accompanying this 2Q17 update, as well as a clinical trial appendix. The press release can be found here.

We begin this report with a look at pooled SGLT-2 inhibitor sales in 2Q17, now that J&J, Lilly, and AZ have all shared their financials on Invokana (canagliflozin), Jardiance (empagliflozin), and Farxiga (dapagliflozin), respectively. See our SGLT-2 whole class analyses from 1Q17 and 2016 for a refresher.

Read on for this and other itemized highlights (11 in total) covering AZ’s major diabetes products and notable pipeline developments.

Table 1: 2Q17 Financial Results for AZ’s Major Diabetes Products

Pooled Market Highlights

1. The SGLT-2 inhibitor market grew 20% YOY, reaching $857 million in 2Q17 (from a base of $715 million in 2Q16). Sequential growth for the class was also 20%, although this occurred against an easy comparison of 15% sequential decline in 1Q17. For the first time in 2Q17, sales of Lilly/BI’s Jardiance (empagliflozin) surpassed sales of J&J’s Invokana (canagliflozin), which had previously been the market leader by value since 2014 launch. By our calculations, Jardiance captured 36% of the market by value in 2Q17, Invokana captured 34%, and AZ’s Farxiga (dapagliflozin) captured 29%. Notably, this analysis uses our estimate of total Jardiance franchise sales since only Lilly’s portion is reported publically. (In a full-year 2015 diabetes update, BI listed global net sales for the franchise at €165 million, or ~$183 million, while Lilly collected $60 million in revenue from Jardiance in 2015, putting Lilly’s share at ~33%.) While a 20% YOY rise for the entire class is markedly lower than growth in the 40%-50% range observed throughout much of 2016, and while we expected higher growth margins in the wake of EMPA-REG OUTCOME and the new CV indication for Jardiance, we note that Invokana revenue was the limiting factor driving down growth in 2Q17. Jardiance revenue more than doubled YOY to $312 million and revenue from AZ’s Farxiga (dapagliflozin) also rose 19% YOY to $250 million, whereas in contrast, Invokana revenue fell 23% YOY to $295 million. AZ management mentioned on today’s call that US Farxiga sales actually declined 4% YOY in 2Q17 due to intense pricing pressure and a greater proportion of prescriptions going to patients on Medicaid – J&J management cited these same reasons for sluggish Invokana performance, showing that SGLT-2 inhibitors are not immune to the pricing debate surrounding diabetes (and other) prescription drugs in the US. We’d love to learn total prescription volume for all three SGLT-2 inhibitors in the US, as this would shed light on patient access to these advanced therapies distinct from recorded revenue. We can’t imagine that CANVAS data is already having a meaningful impact on overall volume and sales for the class (J&J’s CVOT found a significant 14% risk reduction for CV events, on par with EMPA-REG OUTCOME, but also found a nearly 2x risk of lower limb amputations with canagliflozin vs. placebo), but we recognize that the FDA’s decision to add a boxed warning for amputations on all Invokana franchise medicines could draw more attention to safety concerns surrounding SGLT-2 inhibitors. In fact, the EMA has recommended strengthened warnings for amputations on all SGLT-2 product labels, and while we’re not yet sure how this risk compares for Jardiance vs. Invokana vs. Farxiga, this reinforces the need for more standardization in how CVOTs are conducted. Amputations were collected prospectively in CANVAS, but retrospectively in EMPA-REG OUTCOME. Moreover, as Manchester’s Dr. Andrew Boulton very notably pointed out, amputations are a “soft endpoint,” meaning patients/providers can subjectively decide whether or not to amputate, and we should view safety data from both CANVAS and EMPA-REG OUTCOME (and DECLARE, for that matter), through this lens. There are many moving variables to CVOT trial design, including patient perspectives, and we call attention to this as a precaution for comparing CANVAS and EMPA-REG OUTCOME, at least until subsequent analyses further elucidate the amputation signal… on our part, we certainly have more questions than answers right now.

Financial Highlights

2. AZ’s diabetes portfolio fell 7% YOY to $600 million in 2Q17, what management described as a “softer quarter” for the diabetes business. This financial performance was driven by US sales of the company’s major diabetes products, which were down 9% YOY due to “intense pricing pressure” and “competition for market share.” SGLT-2 inhibitor Farxiga (which posted the highest sales of all AZ diabetes products) accounted for 42% of total diabetes revenue, but even that drug experienced 4% YOY decline on the US market (US sales of $110 million vs. $115 million in 2Q16). We recently learned that rebates to Medicaid and Medicare are even higher than we expected, and this is one likely factor contributing to AZ’s lower realized sales in 2Q17. Notably, this comes on the heels of what management called a “subdued” 1Q17 for AZ Diabetes, when overall revenue fell 1% YOY. Diabetes sales were up 5% sequentially in 2Q17, but against an easy comparison of 4% sequential decline in 1Q17. We noticed that the company once again broke out Symlin (pramlintide) sales in 2Q17 – $11 million, flat YOY – after not reporting this revenue for the past several quarters, most likely because this amylin analog for type 1 diabetes has never quite taken off commercially.

3. Revenue from the SGLT-2 inhibitor Farxiga franchise totaled $250 million, which represents 19% YOY growth as reported (20% in constant currencies) from a base of $211 million in 2Q16. US sales fell 4% YOY to $110 million, which management attributed to pricing pressure and segment mix (a greater proportion of prescriptions going to patients on Medicaid). This echoes commentary from J&J management to explain Invokana’s 26% YOY decline on the US market in 2Q17 (down to $256 million from $348 million in 2Q16). Presumably, this means more US patients in-need are accessing this advanced therapy class with impressive glucose-lowering, weight loss, and other benefits (including possible cardioprotection) – but we’d love to see concrete information on total prescription volume for the class, in order to know for sure. Farxiga held 29% of the $857 million SGLT-2 inhibitor market by value in 2Q17, compared to Jardiance’s 36% and Invokana’s 34%, but continues to lead the class by volume with 40% TRx (total prescriptions) share (slide 15). In very exciting news, AZ management announced that results from the DECLARE CVOT are now expected in 2H18 (!), moved up from April 2019.

4. Revenue from GLP-1 agonist Bydureon (exenatide once-weekly) fell 6% YOY as reported and operationally and also fell 5% sequentially to $146 million. This sluggish performance follows the release of topline EXSCEL results in May, and management acknowledged the disappointment that Bydureon showed no significant CV benefit, although the drug did meet its safety endpoint for CV non-inferiority vs. placebo. While AZ management expressed optimism around Bydureon’s “encouraging growth” in 1Q17, when sales rose 13% YOY to $153 million, this was very much a rebound from 8% and 11% YOY drops in 4Q16 and 3Q16, respectively. Product sales have fluctuated between $120-$160 million over the past three years, compared to quarterly sales in the $700-$800 million range for market leader Victoza (Novo Nordisk’s liraglutide), and we imagine that a lack of CV benefit may further jeopardize Bydureon’s prospects for commercial growth, given that Victoza already demonstrated cardioprotection in LEADER, has a CV indication approved for the EU label, and may be approved by the FDA for a new CV indication as well. Bydureon captured only 11% of the $1.4 billion GLP-1 agonist market in 1Q17, compared to Victoza’s 57% and Trulicity’s (Lilly’s dulaglutide) 26% (stay tuned for our pooled analysis for 2Q17, after Novo Nordisk reports August 9). One potential bright spot for the Bydureon business is that AZ expects an FDA decision in 2H17 on a new autoinjector, which would eliminate the need for reconstitution upon dosing (this is a cumbersome process and an autoinjector will be much more patient-friendly). Management also announced plans to file the autoinjector with the EMA in 2H17. Approval would bring Bydureon closer in competition with Lilly’s Trulicity, which is known for its IDEO-designed, patient-friendly pen, and could potentially buoy the struggling franchise.

5. Byetta (exenatide twice-daily) sales totaled $43 million in 2Q17, down 43% YOY as reported and operationally. Sequentially, sales fell 7%, following a 16% sequential drop to $46 million in 1Q17. It seems that Byetta is continuing to yield prescriptions to Bydureon, and that it’s struggling in an increasingly competitive GLP-1 agonist market, with newer products offering more potency and lower injection burden.

6. Sales of DPP-4 inhibitor Onglyza (saxagliptin) fell 22% YOY (21% operationally) and 3% sequentially to $150 million, continuing the trend of lackluster returns for this franchise. This is not entirely surprising, considering fluctuating sales of-late for all DPP-4 inhibitors as competition from SGLT-2 inhibitors and GLP-1 agonists continues to rise. Moreover, AZ management has been candid about the company’s deliberate shift of focus away from Onglyza in favor of SGLT-2 inhibitor Farxiga. Some thought leaders have suggested that DPP-4 agents are most effective in recently-diagnosed patients, but that they can’t compete with the potency of SGLT-2 or GLP-1 agents later in the course of disease – as the field moves toward personalized diabetes care, this means that DPP-4 inhibitors maintain their important niche in treatment algorithms, but that there’s also a distinct logic in AZ’s strategy to position Farxiga as the therapy of choice for patients looking to switch off of a DPP-4 inhibitor.

Pipeline Highlights

7. We were thrilled to hear that preliminary, 24-week results from the phase 3 DEPICT 1 trial of Farxiga in type 1 diabetes will be presented in September at EASD 2017, a quick turnaround following the trial’s August expected completion date. This will be the first phase 3 read out of an SGLT-2 inhibitor in type 1 diabetes, and our fingers are crossed that dapagliflozin will demonstrate clinically-meaningful efficacy as well as a manageable safety/tolerability profile – particularly with respect to DKA, historically the greatest clinical concern when it comes to SGLT-2 inhibitors in type 1. Lilly/BI’s EASE-2 and EASE-3 trials for Jardiance (empagliflozin) in type 1 are close behind with expected completion dates of October 2017 and September 2017, respectively. The other trial of Farxiga in type 1 diabetes, DEPICT 2, is expected to complete in April 2018. J&J presented phase 2 data on Invokana (canagliflozin) in type 1 diabetes at ADA 2016, and it remains unclear if the company will pursue phase 3 investigations anytime soon.

8. Management provided no update on the US launch timing for Qtern, FDA-approved in March 2017 and the second DPP-4 inhibitor/SGLT-2 inhibitor fixed-dose combination to reach the US market (after Lilly/BI’s Glyxambi, approved more than two years ago in February 2015). Data is anticipated in 2H17 for three phase 3 trials comparing the A1c-lowering efficacy of Qtern to other diabetes agents: glimepiride, insulin glargine, and both monotherapies of saxagliptin and dapagliflozin.

9. A number of notable phase 3 studies remain on track, including the Dapa-HF and Dapa-CKD outcomes trials of Farxiga in heart failure and chronic kidney disease (newly-launched in 1Q17), the DERIVE outcomes study of Farxiga in people with type 2 diabetes and moderate renal impairment (enrollment completed in 2Q17), and the THEMIS CVOT of antiplatelet agent Brilinta (ticagrelor) in patients with type 2 diabetes (data expected in 2019).

10. Disappointingly, AZ has discontinued two phase 2 candidates: MEDI4076, an anti-miR103/107 oligonucleotide for NASH, and MEDI4166, a PCSK9 inhibitor/GLP-1 agonist fusion for diabetes and CV disease. There was no explanation for either decision during prepared remarks, but both terminations are listed in AZ’s clinical trial appendix.

11. On the diabetes complications front, the company’s clinical trial appendix listed the advancement of URAT-1 inhibitor verinurad into phase 2 for chronic kidney disease comorbid with type 2 diabetes.

Pooled Market Highlights

1. SGLT-2 Inhibitor Class Grows 20% YOY to $857 Million; Jardiance Outstrips Invokana to Lead by Value; Farxiga Leads by Volume

The SGLT-2 inhibitor market grew 20% YOY, reaching $857 million in 2Q17. Sequential growth for the class was also 20%, although this occurred against an easy comparison of 15% sequential decline in 1Q17. For the first time in 2Q17, sales of Lilly/BI’s Jardiance (empagliflozin) surpassed sales of J&J’s Invokana (canagliflozin), which had previously been the market leader by value since 2014 launch. By our calculations, Jardiance captured 36% of the market by value in 2Q17, Invokana captured 34%, and AZ’s Farxiga (dapagliflozin) captured 29%. Notably, this analysis uses our estimate of total Jardiance franchise sales since only Lilly’s portion is reported publically. (In a full-year 2015 diabetes update, BI listed global net sales for the franchise at €165 million, or ~$183 million, while Lilly collected $60 million in revenue from Jardiance in 2015, putting Lilly’s share at ~33%.) While a 20% YOY rise for the entire class is markedly lower than growth in the 40%-50% range observed throughout much of 2016, and while we expected higher growth margins in the wake of EMPA-REG OUTCOME and the new CV indication for Jardiance, we note that Invokana revenue was the limiting factor driving down growth in 2Q17. Jardiance revenue more than doubled YOY to $312 million and revenue from AZ’s Farxiga (dapagliflozin) also rose 19% YOY to $250 million, whereas in contrast, Invokana revenue fell 23% YOY to $295 million. AZ management mentioned on today’s call that US Farxiga sales actually declined 4% YOY in 2Q17 due to intense pricing pressure and a greater proportion of prescriptions going to patients on Medicaid – J&J management cited these same reasons for sluggish Invokana performance, showing that SGLT-2 inhibitors are not immune to the pricing debate surrounding diabetes (and other) prescription drugs in the US. We’d love to learn total prescription volume for all three SGLT-2 inhibitors in the US, as this would shed light on patient access to these advanced therapies distinct from recorded revenue.

• We can’t imagine that CANVAS data is already having a meaningful impact on overall volume and sales for the class, but we recognize that the FDA’s decision to add a boxed warning for amputations on all Invokana franchise medicines could draw more attention to safety concerns surrounding SGLT-2 inhibitors. J&J’s CVOT found a significant 14% risk reduction for CV events, on par with EMPA-REG OUTCOME, but also found a nearly 2x risk of lower limb amputations with canagliflozin vs. placebo. The FDA warning applies only to Invokana, Invokamet (canagliflozin/metformin), and Invokamet XR (canagliflozin/metformin extended-release), but the EMA has recommended strengthened warnings for amputations on all SGLT-2 product labels. We’re not yet sure how this risk compares for Jardiance vs. Invokana vs. Farxiga, but this reinforces the need for more standardization in how CVOTs are conducted. Lilly/BI issued an announcement shortly after the CANVAS presentation at ADA emphasizing that empagliflozin showed no heightened risk for lower-extremity amputations across 19 studies (n=12,500), but we in turn emphasize that amputations were collected prospectively in CANVAS vs. retrospectively in EMPA-REG OUTCOME. Moreover, as Manchester’s Dr. Andrew Boulton very notably pointed out, amputations are a “soft endpoint,” meaning patients/providers can subjectively decide whether or not to amputate, and we should view safety data from both CANVAS and EMPA-REG OUTCOME (and DECLARE for AZ’s Farxiga, for that matter), through this lens. There are many moving variables to CVOT trial design, including patient perspectives, and we call attention to this as a precaution for comparing CANVAS and EMPA-REG OUTCOME, at least until subsequent analyses further elucidate the amputation signal… on our part, we certainly have more questions than answers right now.
• AZ’s presentation slides highlighted that Farxiga continues to lead the SGLT-2 inhibitor class by volume, holding 40% TRx (share of total prescriptions). Slide 15 lists “competitor 1” with 30% TRx share (we imagine this is Jardiance) and “competitor 2” with 22% (we imagine this is Invokana). This particular graph also shows how Jardiance has been slowly-but-surely “stealing share” from Invokana since January 2016, while Farxiga has maintained its solid 40% volume share over that time span. In the past, AZ management has emphasized this point as a reason for continued high-confidence in Farxiga, despite the fact that EMPA-REG OUTCOME results and the subsequent expanded indication served as a boost to the Jardiance franchise, one that AZ won’t experience until at least after DECLARE reports (although this has been moved up to 2H18!). We agree that this bodes well for the Farxiga business – if the product has been able to keep its stronghold thus far, not yielding prescriptions to Jardiance even without the CVOT advantage, we’ll be extremely excited to see what AZ does with positive DECLARE results (and maybe a CV indication, further down the line) to spur even more growth. In spreading awareness of the new Jardiance CV indication, Lilly/BI are beginning to improve patient education on the overlap between diabetes and CV disease, and we can’t wait for J&J and AZ to also join this effort.

Figure 1: Pooled SGLT-2 Inhibitor Sales (1Q13-2Q17)

Financial Highlights

2. Diabetes Portfolio Falls 7% YOY to $600 Million, Driven by Challenging Commercial Landscape for Diabetes Drugs in the US

AZ’s diabetes portfolio fell 7% YOY to $600 million in 2Q17, what management described as a “softer quarter” for the diabetes business. This financial performance was driven by US sales of the company’s major diabetes products, which were down 9% YOY due to “intense pricing pressure” and “competition for market share.” SGLT-2 inhibitor Farxiga (which posted the highest sales of all AZ diabetes products) accounted for 42% of total diabetes revenue, but even that drug experienced 4% YOY decline on the US market (US sales of $110 million vs. $115 million in 2Q16). Notably, this comes on the heels of what management called a “subdued” 1Q17 for AZ Diabetes, when overall revenue fell a moderate 1% YOY. Diabetes sales were up 5% sequentially in 2Q17, but against an easy comparison of 4% sequential decline in 1Q17.

• Management spoke to the competitive pricing environment for diabetes drugs in the US and to increased segment mix, or a greater proportion of prescriptions going to patients on Medicaid vs. managed care. We recently learned that rebates to Medicaid and Medicare are even higher than we expected, and this is one likely factor contributing to AZ’s lower realized sales in 2Q17. Quite notably, these variables have been mentioned on several recent earnings calls: J&J in both 1Q17 and 2Q17, Lilly in 2Q17 (particularly in discussing rapid-acting insulin Humalog), and Merck in 1Q17. We like the notion that more patients in-need are accessing essential therapies, despite the sales decline recorded by manufacturers due to lower net realized prices, and we love the idea that more patients are seeing discounts and facing lower out-of-pocket costs through savings programs. Of course, we can’t know with certainty that this is the case without more concrete information on prescription volume for different diabetes drugs, or in the absence of knowledge on rebate values. Lilly management highlighted recently that the company returns 50% of pharmaceutical profits in the form of patient discounts or rebates to PBMs – we suspect this is just as high if not higher for other diabetes pharma companies. A recent JAMA article showed that 27% of total pharmaceutical sales in the US (including non-diabetes) – a grand sum of $115 billion – was paid by industry to payers and PBMs in 2015. We think this is very important context for AZ’s “softer” 2Q17 and 9% YOY decline in US diabetes product sales. And, it highlights the urgent need for more transparency surrounding drug pricing and rebates (we’re particularly keen to hear from PBMs.)
• We noticed that the company once again broke out Symlin (pramlintide) sales in 2Q17: $11 million, flat YOY. This follows several quarters for which AZ did not report specific revenue from Symlin, most likely because this amylin analog for type 1 diabetes has never quite taken off commercially. The product comes with cumbersome dosing (injections at every meal) and adverse side-effects like GI symptoms and hypoglycemia – that said, the latter, at least, could very well be attributed to a lack of patient/provider knowledge on how to properly titrate the drug. It’s unlikely that AZ is preparing a resurgence of investment in Symlin ($11 million quarterly sales are relatively low for a diabetes drug, although type 1 is a smaller market than type 2), but we are curious about the decision to include separate Symlin revenue in 2Q17. To be sure, there is a great unmet need for adjunct therapies in type 1 diabetes.

3. Farxiga Sales Rise 19% YOY to All-Time-High $250 Million; DECLARE to Report Early – Now 2H18

Revenue from the SGLT-2 inhibitor Farxiga franchise totaled $250 million, which represents 19% YOY growth as reported (20% in constant currencies) from a base of $211 million in 2Q16. US sales fell 4% YOY to $110 million, which management attributed to pricing pressure and segment mix (a greater proportion of prescriptions going to patients on Medicaid). This echoes commentary from J&J management to explain Invokana’s 26% YOY decline on the US market in 2Q17 (down to $256 million from $348 million in 2Q16). Presumably, this means more US patients in-need are accessing this advanced therapy class with impressive glucose-lowering, weight loss, and other benefits (including possible cardioprotection) – but we’d love to see concrete information on total prescription volume for the class, in order to know for sure. The US was the only market featuring YOY decline for Farxiga, which means global sales would have reflected an even higher growth margin if not for US commercial challenges. The product posted $55 million revenue in Europe (up 23% YOY in constant currencies), $58 million in emerging markets (up 78% YOY in constant currencies), and $27 million in the “established rest of the world” (up 69% YOY in constant currencies). Management credited Farxiga’s near-doubling YOY for a strong quarter of overall pharmaceutical sales in emerging markets. We noticed that Farxiga was the only product management mentioned in speaking to diabetes highlights, although this is fitting, given that the SGLT-2 inhibitor accounted for the largest share of total diabetes revenue at 42%, and was the only AZ diabetes drug to experience YOY and sequential sales growth in 2Q17. Management emphasized during prepared remarks that the company is committed to optimizing patient access programs for Farxiga in the US, which we were glad to hear. Overall, this most recent earnings call reinforced the tone we’ve gathered from AZ management – that growing the Farxiga franchise is a major company priority, and is the biggest diabetes portfolio priority. Previously, management has implied a willingness to let Farxiga sales cannibalize some DPP-4 inhibitor Onglyza sales, since one commercial strategy is to position Farxiga as the SGLT-2 inhibitor of choice for patients looking to switch from a DPP-4 to an SGLT-2 inhibitor. We still remember this key quote from management during AZ’s 1Q17 call: “We believe that the SGLT-2 inhibitor class is going to be the foundation of diabetes therapy in the future.”

• In very exciting news, AZ management announced that results from the DECLARE CVOT are now expected in 2H18 (!), moved up from April 2019. DECLARE will be the third SGLT-2 inhibitor CVOT to report, following EMPA-REG OUTCOME for Lilly/BI’s Jardiance at EASD 2015 and CANVAS for J&J’s Invokana at ADA 2017. In our view, it’ll be extremely advantageous for Farxiga to demonstrate cardioprotection, given that both in-class competitors have shown a significant CV benefit, and that the bar for diabetes drugs continues to rise. Patients and providers are looking to new therapies for benefits beyond A1c-lowering, not the least of which is risk reduction for CV morbidity and mortality. Dr. William Cefalu underscored this point at the recent Keystone conference, explaining that as the potential fourth-to-market SGLT-2 inhibitor, Merck/Pfizer’s ertugliflozin will have to show CV efficacy (the VERTIS CV trial is expected to complete in October 2019), and the same extends to dapagliflozin and DECLARE. Farxiga already boasts a strong clinical profile, with glycemic, weight loss, and blood pressure-lowering efficacy – data from DECLARE, if positive, would take this to the next level by showing a distinct improvement in outcomes. After all, A1c is only a biomarker, and best practice diabetes care should aim to prevent long-term complications and save lives.
  
  • If positive, DECLARE results will lend compelling evidence to a cardioprotective class effect for SGLT-2 inhibitors. This was one of the most exciting aspects to CANVAS full results, in our view, that they confirm EMPA-REG OUTCOME as more than a chance finding and provide reassurance to HCPs that there is a real CV benefit to these agents (at least to empagliflozin and canagliflozin, for now). We expect the safety data from DECLARE will also be scrutinized closely for lower-extremity amputations, as the field continues to sort out the worrisome amputation signal from CANVAS.
  • DECLARE enrolls the largest primary prevention population of the three SGLT-2 inhibitor CVOTs, and we look very forward to results from this subpopulation of type 2 diabetes patients at lower risk for CV events. Many thought leaders, including Yale Unviersity’s Dr. Silvio Inzucchi, have suggested that primary CV prevention is the next step for SGLT-2 inhibitor outcomes trials. We’d love to see interventions with known cardioprotective value initiated even earlier for people with diabetes, to extend their CV disease-free life. Depending on the strength of DECLARE results, we wonder if this trial might support a broader CV indication for Farxiga that also encompasses patients at lower CV risk, since the expanded Jardiance indication applies only to patients at high CV risk. But maybe we’re getting ahead of ourselves… we’re already eager for this 2H18 read out.
• The AZ-sponsored CVD-REAL study is another sure sign of the company’s investment in Farxiga. It also suggests optimism for a cardioprotective class effect and for positive DECLARE results, as we gleaned from an interview with AZ’s VP of US Medical Affairs Dr. Jim McDermott and VP of US Cardiovascular and Diabetes Business Mr. Mike Crichton at ACC 2017 (where CVD-REAL was first presented). Management highlighted the new CVD-REAL data that was just recently shared at ADA 2017, showing that real-world patients starting new SGLT-2 inhibitor therapy (Farxiga, Jardiance, or Invokana) experience significant, double-digit risk reduction for heart failure hospitalization and all-cause mortality vs. patients starting on another glucose-lowering drug (whether it be metformin, sulfonylureas, TZDs, DPP-4 inhibitors, GLP-1 agonists, or insulin). AZ’s presentation slides confirmed that the scientific rollout of CVD-REAL continues full steam ahead: additional findings will be presented at ESC 2017 in Barcelona.
• Farxiga held 29% of the $857 million SGLT-2 inhibitor market by value in 2Q17, compared to Jardiance’s 36% and Invokana’s 34%, but continues to lead the class by volume with 40% TRx (total prescriptions) share compared to Jardiance’s 30% and Invokana’s 22% (slide 15).
• We imagine that the US launch of Qtern (following FDA approval in March 2017) could be another substantial boost to the Farxiga franchise. Management provided no updates on launch timing, however, for this DPP-4/SGLT-2 fixed-dose combination (saxagliptin/dapagliflozin). We discuss this further in our pipeline highlights section below.

Figure 2: Farxiga Franchise Sales (1Q13-2Q17)

4. Bydureon Sales Fall 6% YOY to $146 Million; Disappointing Topline Data from EXSCEL, but FDA Decision on New Autoinjector Expected 2H17

Revenue from GLP-1 agonist Bydureon (exenatide once-weekly) fell 6% YOY as reported and operationally to $146 million. This represents 5% sequential decline. This sluggish performance follows the release of disappointing topline results from the EXSCEL CVOT in May, in which Bydureon showed no significant CV benefit, although the drug did meet its safety endpoint for CV non-inferiority vs. placebo. While AZ management expressed optimism around Bydureon’s “encouraging growth” in 1Q17, when sales rose 13% YOY to $153 million, this was very much a rebound from 8% and 11% YOY drops in 4Q16 and 3Q16, respectively. Product sales have fluctuated between $120-$160 million over the past three years, compared to quarterly sales in the $700-$800 million range for market leader Victoza (Novo Nordisk’s liraglutide), and we imagine that a lack of CV benefit may further jeopardize Bydureon’s prospects for commercial growth, given that Victoza already demonstrated cardioprotection in LEADER, has a CV indication approved for the EU label, and may be approved by the FDA for a new CV indication as well. Whether Lilly’s Trulicity (dulaglutide) shows a CV benefit remains to be seen when the REWIND CVOT reports in April 2018. Bydureon captured only 11% of the $1.4 billion GLP-1 agonist market in 1Q17, compared to Victoza’s 57% and Trulicity’s 26% (stay tuned for our pooled analysis for 2Q17, after Novo Nordisk reports August 9). Management acknowledged that SGLT-2 inhibitor Farxiga has become the main priority for AZ diabetes, and used this is as one piece of explanation for Bydureon’s falling sales. On the other hand, management noted that positive developments could come from the 2016 agreement with 3SBio Inc. for the commercialization of Bydureon and Byetta in China.

• One upcoming bright spot for the Bydureon business is that AZ expects an FDA decision in 2H17 on a new autoinjector, which would bring Bydureon closer in competition with other, more patient-friendly competitors. The autoinjector was accepted for active review in 1Q17. Management also stated plans to submit the autoinjector to the EMA in 2H17. Currently, Bydureon is available in two possible delivery forms – (i) single-dose reconstitution kits and (ii) a multi-use prefilled pen – both of which are rather cumbersome and error-prone. The reconstitution kit comes in a trade pack with four single-dose trays (lasting one month), each containing a vial of exenatide 2 mg, a vial connector, a prefilled diluent syringe, and two custom needles (one spare). All of this, patients must assemble themselves. The Bydureon pen is pre-filled, thus eliminating the hassle of reconstitution, but still requires a fairly elaborate and time-consuming “mixing” process before use. In contrast, Lilly’s Trulicity comes in an IDEO-designed, patient-friendly pen – patient feedback on ease of use has been resoundingly positive, and sales for Trulicity just more-than-doubled YOY to hit $480 million. Pending approval, this move to become more patient-friendly could be a significant win for AZ’s Bydureon franchise.
• In more good news from 2Q17, the FDA and EMA accepted for active review results from DURATION-7 for inclusion on the Bydureon label. First presented at ADA 2017, DURATION-7 (n=461) found that adding once-weekly exenatide to background insulin therapy in patients with type 2 diabetes was effective and safe. Participants randomized to exenatide experienced an average 1.0% drop from baseline A1c of 8.5% vs. a mean 0.3% drop for patients on placebo after 28 weeks(p<0.01). In addition, 25% more patients in the exenatide arm achieved a target A1c <7% by the end of the study. Bydureon also showed superiority vs. placebo in reducing fasting plasma glucose, 2-hr postprandial glucose, and body weight (see our coverage of the ADA presentation here). An expanded label affirming exenatide as an effective add-on to basal insulin therapy could help the franchise grow, especially in the context of new fixed-ratio basal insulin/GLP-1 agonists (a highly-anticipated new drug class), namely Novo Nordisk’s Xultophy and Sanofi’s Soliqua. Lilly is investigating a once-weekly basal insulin/GLP-1 agonist combo (currently in phase 1), and recently received a label update for Trulicity supporting co-administration with basal insulin (based on AWARD-9 data) – we suspect AZ is seeking a similar label revision for Bydureon based on DURATION-7.
  
  • Both DURATION-7 and DURATION-8 presentations at ADA 2017 were listed on AZ’s presentation slides as noteworthy scientific highlights. The latter oral presentation covered 52-week results, from the DURATION-8 trial extension investigating Bydureon/Farxiga co-administration. Combination therapy with a GLP-1 agonist and an SGLT-2 inhibitor is certainly intriguing, given that these advanced agents show profound A1c-lowering and weight loss efficacy, and we’ll be keeping a close watch on this therapy area.
• By geography, US sales of Bydureon fell 8% YOY to $116 million, while ex-US sales were flat at $30 million. We found this interesting in the context of 9% YOY decline for AZ’s overall diabetes portfolio in the US, and it’s important to note that pricing pressure and high rebates are likely affecting GLP-1 agonists as they are other diabetes drug classes.

Figure 3: Bydureon Sales (3Q12-2Q17)

5. Byetta Sales Continue Downward Trend, Falling 43% YOY to $43 Million in Competitive GLP-1 Agonist Market

Revenue from AZ’s older GLP-1 agonist Byetta (exenatide twice-daily) totaled $43 million in 2Q17, down 43% YOY as reported and operationally. Sequentially, sales fell 7%, following a 16% sequential drop to $46 million in 1Q17. These results mark the sixth consecutive quarter of YOY decline for Byetta (sales dipped 31% YOY in 1Q16, 7% in 2Q16, 15% in 3Q16, 24% in 4Q16, and 26% in 1Q17). For the full year 2016, Byetta sales were only $254 million in total (down 20% YOY) and accounted for a small 5% of pooled GLP-1 agonist sales (leading only Sanofi’s Lyxumia and GSK’s Tanzeum in market share by value). It seems that Byetta is continuing to yield prescriptions to AZ’s more adherence-friendly once-weekly GLP-1 agonist Bydureon, which has experienced more positive growth in the past two fiscal years. Indeed, it is somewhat difficult to imagine Byetta, a twice-daily injection, returning to great commercial growth when a once-weekly formulation is available in Bydureon (at base, in terms of investment priorities for AZ within its diabetes portfolio and within its GLP-1 agonist business). Moreover, Byetta appears to be struggling in an increasingly competitive GLP-1 agonist market, with newer products offering greater efficacy and even cardioprotective benefits, at least Victoza’s case. GSK’s recent decision to withdraw support from Tanzeum was a sharp reminder of this competitive commercial landscape, although we do want to emphasize that very few type 2 diabetes patients are currently being treated with a GLP-1 agonist (relative to the size of the epidemic) – on the whole, we see plenty of room for multiple GLP-1 agonist products to be successful on the market, but the bar for these drugs is unmistakably on the rise.

• Cumulative revenue for the exenatide franchise (Bydureon plus Byetta) totaled $189 million in 2Q17, down 5% sequentially from $199 million in 1Q17 and down 19% YOY from $232 million in 2Q16. Byetta’s $43 million accounts for 23% of 2Q17 franchise sales, while Bydureon’s $146 million accounts for 77%. Over the years, this ratio that has been shifting in Bydureon’s favor, but remained constant from 1Q17. In public remarks, AZ has focused almost entirely on Bydureon over Byetta.
• According to our 1Q17 pooled analysis, the exenatide franchise captured 14% of the $1.4 billion GLP-1 agonist market by value, (11% for Bydureon, 3% for Byetta) ahead of GSK’s Tanzeum with 2% and Sanofi’s Lyxumia with <1%. Novo Nordisk’s Victoza and Lilly’s Trulicity captured the lion’s share of the market by value –  57% and 26%, respectively. We learned earlier this week that Lilly’s Trulicity hit $480 million in 2Q17. Market leader Victoza has yet to report 2Q17 earnings (Novo Nordisk’s call is scheduled for August 9), but posted sales of $824 million in 1Q17.

Figure 4: Byetta Sales (3Q12-2Q17)

6. DPP-4 Inhibitor Onglyza Sales Fall 22% YOY to $150 Million, Reflecting AZ’s Shift in Focus to SGLT-2 Business

Sales of DPP-4 inhibitor Onglyza (saxagliptin) fell 22% YOY as reported (21% operationally) and 3% sequentially to $150 million, continuing the trend of lackluster returns for this franchise. Ex-US sales were hit particularly hard, falling 30% YOY to $72 million, while US sales fell 11% YOY to $78 million – a reversal of the trend seen in  1Q17, when US sales bore the brunt of the decline (falling 35% YOY vs. a 16% YOY decline for ex-US sales). This performance is not entirely surprising, considering fluctuating sales of-late for the DPP-4 inhibitor class as competition from more potent agents such as SGLT-2 inhibitors and GLP-1 agonists continues to intensify – a fact that management pointed out specifically during the call. AZ management has been candid about the company’s deliberate shift of focus away from Onglyza in favor of its SGLT-2 inhibitor Farxiga. Some thought leaders have suggested that DPP-4 agents are most effective in recently-diagnosed patients (and may even prove useful for diabetes prevention), but that they can’t compete with the potency of SGLT-2 or GLP-1 agents later in the course of disease. Others have defended the use of DPP-4 inhibitors in specific pockets of the patient population – namely the elderly and people with renal impairment – due to the class’ benign safety/tolerability profile, massive safety database built over a longer history on the market, and patient-friendly oral formulation. As the field moves toward personalized diabetes care, this means that DPP-4 inhibitors maintain their important niche in treatment algorithms, but that there’s also a distinct logic in AZ’s strategy to position Farxiga as the therapy of choice for patients looking to switch off of a DPP-4 inhibitor. The DPP-4 market is currently dominated by Merck’s Januvia franchise, which captured 61% of the $2.2 billion market by value according to our 1Q17 pooled analysis. Onglyza captured only 7% in 1Q17, just ahead of Takeda’s Nesina (alogliptin) with 5% market share, while Novartis’ Galvus (vildagliptin) and Lilly/BI’s Tradjenta (linagliptin) took home 13% and 14%, respectively. Lilly’s share of Tradjenta revenue grew an impressive 17% YOY and 26% sequentially to $142 million in 2Q17, and total Tradjenta revenue, including BI’s share, totaled ~$394 million based on our estimate of Lilly’s share of revenue at ~36% (Lilly reported $357 million in Tradjenta franchise sales for 2015 and global net sales for the franchise that year, as reported by BI in a diabetes update, were €909 million, or ~$1 billion). Novartis reported flat sales of Galvus in 2Q17 of $310 million. We’ll be back with an updated pooled analysis of the DPP-4 inhibitor market after 2Q17 updates from Merck and Takeda.

Figure 5: Onglyza Sales (4Q12-2Q17)

Pipeline Highlights

7. Preliminary Results from DEPICT 1 Trial of Farxiga in Type 1 Diabetes Scheduled for EASD 2017

We were thrilled to hear that preliminary, 24-week results from the phase 3 DEPICT 1 trial of Farxiga in type 1 diabetes will be presented in September at EASD 2017, a quick turnaround following the trial’s August expected completion date. This will be the first phase 3 read out of an SGLT-2 inhibitor in type 1 diabetes, and our fingers are crossed that dapagliflozin will demonstrate clinically-meaningful efficacy as well as a manageable safety/tolerability profile – particularly with respect to DKA, historically the greatest clinical concern when it comes to SGLT-2 inhibitors in type 1. Lilly/BI’s EASE-2 and EASE-3 trials for Jardiance (empagliflozin) in type 1 are close behind with expected completion dates of October 2017 and September 2017, respectively. The other trial of Farxiga in type 1 diabetes, DEPICT 2, is expected to complete in April 2018. J&J presented phase 2 data on Invokana (canagliflozin) in type 1 diabetes at ADA 2016, and it remains unclear if the company will pursue phase 3 investigations anytime soon.

• Type 1 diabetes is one of multiple investment opportunities for Farxiga, which AZ is also developing for heart failure and chronic kidney disease (CKD), as discussed below. This is also the case for Jardiance and Invokana: Lilly/BI launched the EMPEROR HF clinical trial program in March 2017 to assess Jardiance in people with heart failure (both with and without diabetes), and a few months later in June, announced plans to initiate a dedicated outcomes trial for empagliflozin in CKD. J&J’s CREDENCE trial (expected completion in June 2019) investigates Invokana in diabetic kidney disease – though these results will have to be considered in light of CANVAS full results, which showed significant CV risk reduction but also a nearly two-fold increase in lower limb amputations with Invokana vs. placebo. We realize that type 1 diabetes is a smaller market compared to heart failure and CKD, but we remain optimistic about the potential of SGLT-2 inhibitors as an adjunct type 1 therapy option. On that note, we’re very happy to see continued investment from AZ (alongside Lilly/BI) in SGLT-2 inhibitor therapy for type 1 diabetes.
• Notably, the emerging class of SGLT-1/2 inhibitors may prove an even better adjunct therapy option for type 1 diabetes because of the mitigated DKA risk. Safety concerns surrounding DKA and euglycemic DKA in particular (when the absence of hyperglycemia makes it more difficult for patient/provider to identify and treat the complication) have been a major roadblock in the clinical development of SGLT-2 inhibitors for a type 1 indication. According to remarks from Dr. John Buse earlier this month at Keystone 2017, patients with type 1 diabetes taking an SGLT-2 inhibitor off-label face a 5%-10% risk for DKA over one year of treatment – a rate he characterized as “scarily high” (that said, studies show that 67% of DKA episodes attributed to SGLT-2 inhibitor therapy had an obvious precipitating event like alcohol intake, reduced insulin dose, or dehydration). SGLT-1/2 inhibitors show promise of side-stepping this issue, and Lexicon’s sotagliflozin is closest-to-market for this indication (the company scheduled a meeting with the FDA in 2Q17 to discuss a New Drug Application). Lexicon’s presentations of inTandem1  and inTandem2 for sotagliflozin at ADA 2017 marked the first phase 3 studies to report for any oral type 1 diabetes therapy, and trials across the inTandem program have shown sotagliflozin to be effective in lowering A1c without increasing hypoglycemia, reducing bolus insulin dose, promoting weight loss, and decreasing both fasting and postprandial glucose – all the while with very small DKA event rates. All this said, we’re of the firm view that SGLT-2 inhibitors could also be quite beneficial for many type 1 patients, provided they are educated to monitor ketones and avoid precipitating factors, in Dr. Buse’s words.  

8. US Launch Timing Still Unspecified for Recently-Approved Qtern

Management provided no update on the US launch timing for Qtern (saxagliptin/dapagliflozin), FDA-approved in March 2017 and the second DPP-4 inhibitor/SGLT-2 inhibitor fixed-dose combination (FDC) to reach the US market (after Lilly/BI’s Glyxambi, approved more than two years ago in February 2015). Qtern was first-to-market in Europe, EMA-approved in 2Q16 vs. Glyxambi in 4Q16. The lack of specifics on Qtern’s launch comes as a bit of a surprise, given how highly-anticipated the product’s US approval had been, following the FDA Complete Response Letter in October 2015 (Qtern was resubmitted in 2Q16). Our fingers are crossed for an update soon.

• Sales of Lilly/BI’s DPP-4 inhibitor/SGLT-2 inhibitor FDC Glyxambi (linagliptin/empagliflozin) have been sluggish to-date, but we believe AZ is uniquely positioned to grow this class. Whereas Glyxambi has suffered from a relatively high list price, less-than-ideal reimbursement and formulary positioning, and a lack of emphasis on marketing and promotion on the part of Lilly/BI (a fact that Lilly management has readily acknowledged), AZ appears set to position Qtern as a major priority within its Farxiga franchise – a cornerstone of future growth for the company’s comparatively small diabetes portfolio. To this end, management has previously expressed a willingness to cannibalize some Onglyza sales by positioning Farxiga as the ideal alternative for patients switching from DPP-4 inhibitors – promotion of Qtern would fit nicely into this strategy. One potential challenge for Qtern uptake will be the lack of a completed CVOT (after all, Glyxambi’s label includes positive CV data from EMPA-REG OUTCOME). That said, with AZ’s pharmaceutical expertise behind Qtern, we envision DPP-4 /SGLT-2 combination tablets playing a larger role in diabetes care – their clinical profile is strong, with greater efficacy than either component alone, and they come with the convenience of a single daily pill.
  
  • A potential third-in-class product from Merck/Pfizer is under FDA review – a combination of Merck’s Januvia (sitagliptin) with SGLT-2 inhibitor candidate ertugliflozin (decision expected by year-end). We expect Merck/Pfizer will join AZ in devoting significant energy and resources to establishing the DPP-4 inhibitor/SGLT-2 inhibitor FDC market, given that both companies have emphasized the sitagliptin/ertugliflozin combination at scientific meetings (most recently ADA 2017) as a key product within the upcoming ertugliflozin franchise.
• Data is anticipated in 2H17 for three phase 3 trials comparing the A1c-lowering efficacy of Qtern to other diabetes agents: the sulfonylurea glimepiride, insulin glargine, and Qtern’s component monotherapies of saxagliptin and dapagliflozin. We hope these comparative effectiveness studies help support a wider indication for Qtern, which is currently indicated only for adults with type 2 diabetes who are inadequately controlled on Farxiga alone, or those who are already being treated with both Onglyza and Farxiga separately. The study comparing Qtern to saxagliptin and dapagliflozin monotherapies, if positive, could play an especially important role in positioning this more intensive dual therapy option on par with Farxiga and Onglyza as initial therapies after metformin, rather than its current status as an intensification option when Farxiga is no longer enough.

9. Phase 3 Dapa-HF, Dapa-CKD, DERIVE, and THEMIS Remain On Track

A number of notable phase 3 studies for diabetes-adjacent CV and renal indications remain on track, including the Dapa-HF and Dapa-CKD outcomes trials of Farxiga in heart failure and chronic kidney disease (newly-launched in 1Q17), the DERIVE outcomes study of Farxiga in people with type 2 diabetes and moderate renal impairment (enrollment completed in 2Q17), and the THEMIS CVOT of antiplatelet agent Brilinta (ticagrelor) in patients with type 2 diabetes (primary completion expected in November 2018 and results expected in 2019). See the table below for a comprehensive list of AZ’s clinical development efforts.

• Initiated in early February 2017, Dapa-HF will investigate the efficacy of dapagliflozin vs. placebo in 4,500 patients with heart failure and reduced ejection fraction (with and without type 2 diabetes). The primary endpoint is a composite of CV death, hospitalization for heart failure, and urgent heart failure visit. Secondary outcome measures include a composite renal endpoint (≥50% sustained decline in eGFR, ESRD, or renal death) and change in score of a heart failure-specific patient-reported outcome questionnaire – we’re very excited to see the incorporation of patient-reported outcomes in this trial. The trial is expected to complete in December 2019.
  
  • Notably, Dapa-HF will evaluate Farxiga in a narrower patient population than Lilly/BI’s EMPEROR-HF program for Jardiance. The EMPEROR-HF program was initiated in March of this year and includes two trials, both enrolling heart failure patients with and without diabetes. The EMPEROR HF-Preserved trial will enroll patients with heart failure and preserved ejection fraction, while the EMPEROR HF-Reduced trial will more closely mirror the Dapa-HF trial by enrolling patients with reduced ejection fraction only. The combined EMPEROR program will also include more participants than Dapa-HF – Lilly/BI hope to enroll 4,126 patients in EMPEROR HF-Preserved and 2,850 patients in EMPEROR HF-Reduced, for a total of nearly 7,000 participants. Given that Jardiance has already demonstrated a very impressive heart failure benefit (35% risk reduction, p=0.002) in EMPA-REG OUTCOME, we’re not surprised that Lilly and BI are doubling down on this opportunity with a large and ambitious phase 3 program. Our sense from cardiology meetings is that there is a hunger for new, more effective medications for heart failure and many cardiologists are already eager to consider Jardiance a CV drug (this is further underscored by the inclusion of Jardiance on heart failure guidelines).
• Also initiated in February 2017, Dapa-CKD will investigate the efficacy of dapagliflozin in 4,000 patients with stages 2-3 CKD (eGFR 25-75 ml/min/1.73m²) – both with and without diabetes, as in Dapa-HF. The primary endpoint is a composite of ≥50% sustained decline in eGFR, ESRD, or CV/renal death. Secondary endpoints include each individual component of the primary endpoint, a composite endpoint of CV death and hospitalization for heart failure, and all-cause mortality. Dapa-CKD is expected to complete in November 2020, according to ClinicalTrials.gov.
• To parallel Dapa-CKD, the ongoing DERIVE trial investigates Farxiga in patients with type 2 diabetes and CKD. The primary endpoint of this trial is change in A1c, so, rather than support a renal indication, we assume that this trial is aimed at expanding the diabetes indication of Farxiga to those with mild to moderate CKD, as the drug is currently not recommended in this population due to a lack of demonstrated efficacy.
• The ongoing THEMIS CVOT investigates AZ’s antiplatelet agent Brilinta (ticagrelor) in 19,000 patients with type 2 diabetes and coronary artery disease, but with no history of MI or stroke. Participants in the trial were randomized to treatment with 60 mg Brilinta twice-daily or placebo. The trial has a primary endpoint of three-point MACE (CV death, non-fatal MI, and non-fatal stroke). The trial is expected to complete in November 2018 according to ClinicalTrials.gov. People with type 2 diabetes experience great residual risk for macrovascular events even when treated to standard of care and we’re thus glad to see AZ investigating whether Brilinta can narrow this gap. We’re intrigued by the eventual possibility of an explicit indication for patients with type 2 diabetes and coronary artery disease in the Brilinta label, to complement AZ’s hopes of receiving an explicit CV indication for heart failure in its diabetes drug Farxiga. We’re fascinated by this trend of a blurring line between diabetes and CV drugs, though it makes perfect sense, given the ever-present overlap between these two chronic conditions – we’re just happy more industry players are noticing it and investing appropriately. Novartis also presented a sub-analysis of the PARADIGM-HF trial at ACC 2017, showing CV drug Entresto’s glycemic efficacy in patients with diabetes. Perhaps AZ and Novartis will lead the foray of applying CV therapies in diabetes.

10. Disappointing Discontinuation of PCKS9 Inhibitor/GLP-1 Agonist Fusion MEDI4166 and NASH Candidate MEDI4076

Disappointingly, AZ has discontinued two phase 2 candidates: MEDI4166, a PCSK9 inhibitor/GLP-1 agonist fusion for diabetes and CV disease, and MEDI4076, an anti-miR103/107 oligonucleotide for NASH. There was no explanation for either decision during prepared remarks, but both terminations are listed in AZ’s clinical trial appendix.

• A phase 1/2 trial of MEDI4166 completed in April 2017 and we speculate that the candidate’s discontinuation is related to less-than-promising results in this study, though to our knowledge the data has not yet been published. The notion of shortcomings for this candidate in either safety or efficacy is disheartening, particularly considering the excitement generated at ADA 2016 over preclinical data for this fusion molecule in rodents and non-human primates. We saw enormous potential for the candidate particularly given the precedent for cardioprotective effects in both GLP-1 agonists and PCSK9 inhibitors, and wonder if other companies will attempt to take another stab at PCSK9 inhibitor/GLP-1 agonist fusion development. Notably, AZ’s fusion involved physically linking PCSK9 inhibitor and GLP-1 agonist molecules together. A co-formulation of separate PCSK9 inhibitor and GLP-1 agonist molecules in a single injection (much akin to the emerging class of basal insulin/GLP-1 agonist co-formulations) may be a more technically feasible approach for combining these agents.
• Despite the discontinuation of MEDI4076, AZ continues to develop a separate phase 2 anti-miR103/107 oligonucleotide for NASH, Regulus-partnered AZD4076. A phase 1 trial for AZD4076 completed in 4Q16 and a phase 1/2 trial is ongoing with expected completion in December 2017. We are glad to see AZ’s continued involvement in this therapeutic area of persistent and high unmet need. See our NASH/NAFLD competitive landscape for more. 

11. URAT-1 Inhibitor Verinurad Enters Phase 2 for CKD in Type 2 Diabetes

On the diabetes complications front, the company’s clinical trial appendix listed the advancement of URAT-1 inhibitor verinurad into phase 2 for chronic kidney disease comorbid with type 2 diabetes. AZ was initially developing the candidate for the treatment of chronic hyperuricemia in people with gout, but this appendix reveals that this has been discontinued in favor of the CKD program. To this end, a phase 2 study (n=60) was launched in May 2017 to examine the effect of verinurad (in combination with febuxostat, an existing uric acid-lowering drug) vs. placebo on albuminuria in people with CKD, hyperuricaemia, albuminuria, and type 2 diabetes over the course of 24 weeks. The study is expected to complete in March 2018. We are pleased to see increasing focus on CKD from AZ: verinurad joins the diabetic nephropathy competitive landscape alongside Farxiga, which is being studied for renal outcomes in both the Dapa-CKD study and the DERIVE study, and alongside phase 3 roxadustat, a 2-OG inhibitor with expected US submission in 2018.

Table 2: AZ Diabetes Pipeline Summary

Questions & Answers

Q: On pricing pressures in diabetes for Farxiga, is the company sacrificing the price to serve promotion? How is pricing impacted by patent expiries and competition?

A: Our focus is trying to get medicines to as many patients as we can. We’re not trying to minimize or reduce promotional efforts in exchange for lower prices. We’re trying to get the right combination to get this to as many patients as we can. In terms of the dynamics in the marketplace, I think realistically we’re going to see rising pressure in countries around the world, and the US is no different. We’re trying to find ways to balance the cost of this pressure. Things like generics or analogs add pricing pressure, but over time it will stabilize. I think it’s hard for us to say precisely when that will happen, given different factors in the market. Right now, we’re focusing on making sure we’re getting the medicine to as many people we can, making the case for the value of our medicines, and bringing new medicines to market that are going to make a difference and have a high value. We’re waiting for the DECLARE study to further demonstrate the value of Farxiga – this could add high value to payers and to patients.

-- by Ann Carracher, Abigail Dove, Payal Marathe, and Kelly Close