Memorandum

J&J Pharmaceutical Business Review – Emphasis on Invokana’s dominance; No interest in DPP-4 inhibitor FDC; New type 2 diabetes candidate to enter clinic this year – May 20, 2015

Executive Highlights

  • Management strongly emphasized Invokana’s (canagliflozin’s) dominant position in the US SGLT-2 inhibitor market; its volume and share in the US are nearly twice that of its two competitors combined.
  • J&J continues to believe that pursuing a fixed-dose combination (FDC) of Invokana and a DPP-4 inhibitor is not the best use of resources. The company is focusing instead on combinations with metformin and a range of expanded indications (including prediabetes!) for the product.
  • We learned that J&J plans to advance a novel GPR40 agonist (JNJ-076) for type 2 diabetes into clinical trials this year.

J&J hosted a Pharmaceutical Business Review today, featuring almost six hours of presentations and discussions led by Worldwide Pharmaceutical Chairmen Dr. Paul Stoffels and Mr. Joaquin Duato. Below we enclose our top five highlights from the presentation, followed by a transcript of diabetes-related Q&A.

1. Management strongly emphasized Invokana’s dominant position in the US SGLT-2 inhibitor market and suggested that concerns about euglycemic DKA would not have a significant impact on the product’s success.

2. Notably, J&J is pursuing a number of expanded indications for Invokana, including prediabetes; the presentation included a timeline overview for these projects.

3. J&J continues to believe that pursuing a fixed-dose combination (FDC) of Invokana and a DPP-4 inhibitor is not the best use of the company’s resources.

4. Excitingly, we learned that J&J plans to advance a novel GPR40 agonist (JNJ-076) for type 2 diabetes into clinical trials this year.

5. J&J has apparently taken advantage of its LifeScan division to help promote Invokana, reflecting a shift toward the drug side of its diabetes portfolio in recent years.

Top Five Highlights

1. Management strongly emphasized Invokana’s dominant position in the US SGLT-2 inhibitor market throughout the day. Management repeatedly noted that the drug’s volume and share in the US are nearly twice that of its two competitors (AZ’s Farxiga [dapagliflozin] and Lilly/BI’s Jardiance [empagliflozin]) combined and that it is the only SGLT-2 inhibitor that has demonstrated superiority in head-to-head trials vs. a DPP-4 inhibitor (Merck’s Januvia [sitagliptin]) and a sulfonylurea (glimepiride) – although this is true for the primary outcomes of the head-to-head pivotal studies, some trials for the other agents have demonstrated superiority with longer-term follow-up. Cardiovascular & Metabolism head Dr. James List also referred to clinical trial results demonstrating greater urinary glucose excretion with Invokana compared to Farxiga (Sha et al., Diabetes, Obesity and Metabolism 2015), suggesting that this is one factor underlying its “superb efficacy.” While the company also highlighted the recent growth for the SGLT-2 inhibitor class as a whole, the rhetoric was generally consistent with the more directly competitive statements we have been hearing over the past few months, particularly in J&J’s 1Q15 update. Notwithstanding J&J’s suggestions of an efficacy advantage for Invokana, our sense is that the three SGLT-2 inhibitors on the market have fairly comparable clinical profiles and that Invokana’s continued dominance is largely a result of its first-in-class status and favorable reimbursement position – as management noted during prepared remarks, >90% of Medicare patients and 80% of commercially insured patients are able to access Invokana at the lowest branded copay. However, we would not completely rule out a slight difference in clinical efficacy if Invokana’s slightly greater SGLT-1 inhibitory action vs. its competitors may be playing a meaningful role.

  • Management suggested that the recent concerns about ketoacidosis with SGLT-2 inhibitors are unlikely to have a significant impact on Invokana’s commercial success. While the FDA’s recent drug safety communication about the risk of “euglycemic DKA” with the class has clearly led to increased awareness and concern, J&J management stressed that the rates of DKA in patients with type 2 diabetes on Invokana have been very low (less than 0.1%) in clinical trials and from continued surveillance, and that the product’s overall risk/benefit profile is very favorable. While most of the 20 cases reported to the FDA Adverse Event Reporting System were in type 2 diabetes patients, the risk in that group does appear to be fairly low and mostly linked to specific situations such as surgery. The risk seems to be a bit more substantial in patients with type 1 diabetes taking SGLT-2 inhibitors off-label, and we wonder whether it will have an impact on the class’ chances of gaining approval for that indication – we still suspect that the class’ many compelling benefits for that population will outweigh what is likely a manageable risk.
    • We heard a great deal of commentary about euglycemic DKA at last week’s AACE. Dr. Anne Peters (USC, Los Angeles, CA) offered the strongest words of caution on day #2 of the conference, advising providers to refrain from off-label use of the class in type 1 diabetes until the risks are better understood. Dr. John Buse (University of North Carolina, Chapel Hill, NC) took a bit more of a reassuring tone on day #3, suggesting that the risks should be manageable, even in type 1 diabetes, as long as people are aware of the phenomenon. The consensus among speakers seemed to be that raising awareness of the issue is the most important near-term goal and that it will take more time to understand the full implications for the class as well as the underlying mechanisms.
  • The Invokana franchise has reached the milestone of 100 global approvals, including 65 for standalone Invokana and 35 for Invokamet/Vokanamet (canagliflozin/metformin). Management noted that this represents an average of one approval per week since the first approval in the US in March 2013. However, the product does not occupy the same dominant position in OUS markets as in the US; for example, AZ’s Forxiga (dapagliflozin’s European trade name) holds close to a 90% market share within the class in the EU, illustrating the power of first-in-class status.
  • J&J fielded a question about how SGLT-2 inhibitors may be impacted by increased growth of the GLP-1 agonist and DPP-4 inhibitor classes as safety concerns for those classes subside. Management did not comment in detail on the trends for the competing classes but reiterated that the company is very confident in Invokana and expects that it can eventually become the standard second-line treatment option after metformin. We do not expect the increased growth of the GLP-1 agonist class to pose a significant threat to SGLT-2 inhibitors – if anything, we expect to see the two classes used more frequently in combination in the future. With regard to DPP-4 inhibitors, we do not share the questioner’s confidence that the recent results from TECOS (the CVOT for Januvia) will lead to resurgent growth for the class; we anticipate that any uptick in the coming years is likely to come from the success of fixed-dose combinations with SGLT-2 inhibitors (see below for more).

2. J&J reviewed its portfolio of projects to expand Invokana’s indication beyond type 2 diabetes, notably including prediabetes. During the event, management highlighted the ongoing trials of Invokana in type 1 diabetes (primary completion expected this month), obesity (in combination with phentermine; primary completion this month), and diabetic nephropathy (the CREDENCE outcomes trial; primary completion in 2019). We assume that results from the type 1 diabetes and obesity studies could be available later this year as both have primary completion dates this month, although the wait will be longer if the company waits until next year’s ADA. Excitingly, management also listed prediabetes as a potential expanded indication for Invokana, though we did not find any trials currently listed on ClinicalTrials.gov – this seems like the longest-term of the existing projects. We are very eager to hear more on this, as prediabetes is an area of enormous unmet need (and unfortunately very little regulatory clarity). We learned at GTC Bio that Dr. DeFronzo is conducting a study with support from the ADA to investigate the use of SGLT-2 inhibitors to correct glucotoxicity in prediabetes, though we assume this is separate from Janssen’s efforts. J&J management also highlighted several studies designed to support Invokana’s effectiveness at various points in the type 2 diabetes treatment algorithm or on other metabolic parameters – see the table below for an overview of ongoing trials mentioned during the presentation.

Invokana Clinical Trials

Indication (ClinicalTrials.gov Identifier)

Status

Expected Study Completion Date

Add-on to metformin and sitagliptin (NCT02025907)

Recruiting

September 2015

Add-on to basal insulin (NCT02220920)

Recruiting

July 2015

Blood pressure (NCT01939496)

Completed

April 2015

Cardiovascular outcomes (CANVAS; NCT01032629)

Ongoing

June 2018

Diabetic nephropathy (CREDENCE; NCT02065791)

Recruiting

January 2020

Type 1 diabetes (NCT02139943)

Ongoing

May 2015

Obesity (combination with phentermine; NCT02243202)

Ongoing

June 2015

3. J&J continues to believe that pursuing a fixed-dose combination (FDC) of Invokana and a DPP-4 inhibitor is not the best use of the company’s resources. During Q&A, management stated that the company’s ultimate goal is to establish Invokana as the standard second-line therapy for type 2 diabetes and that focusing resources on combinations with metformin and new indications will likely be more productive. In terms of current prescribing habits, management shared that 20% of Invokana’s usage is as monotherapy, 30% as dual therapy, and 50% as triple therapy – J&J has cited similar statistics in the past to make the point that patients are able to pursue the DPP-4 inhibitor combination themselves (although still in separate pills). We have wondered for some time whether Invokana’s dominance will be threatened by the arrival of SGLT-2 inhibitor/DPP-4 inhibitor combinations from Lilly/BI (Glyxambi [empagliflozin/linagliptin]; launched in March) and AZ (saxagliptin/dapagliflozin; under FDA review). While Invokana should continue to benefit from its well-established position in the market, we do imagine that the promise of greater efficacy vs. SGLT-2 inhibitor monotherapy (albeit to a limited degree) and the consolidation of copays for those taking both components separately could tilt the balance in favor of the FDCs for some patients. However, at this point J&J is likely correct that the benefits of developing a third-to-market product would not be worth the substantial investment (including a partnership) that would be required. We did wonder whether the recent initiation of a Mitsubishi Tanabe-sponsored trial investigating Invokana alongside the DPP-4 inhibitor Tenelia (teneligliptin) could potentially lay the groundwork for an FDC; however, during this presentation, management framed that trial primarily as a part of Janssen’s strategy to establish Invokana as an effective option at multiple points in the type 2 diabetes treatment algorithm.  

  • In the absence of a DPP-4 inhibitor FDC, management has positioned combinations with metformin as a key part of the company’s strategy for Invokana. Management described Invokamet as a potential best-in-class product (though we are not sure what the basis of this claim is) and highlighted the development of an Invokana/metformin XR FDC, which is in phase 3 in the US. AZ has already launched Xigduo XR (dapagliflozin/metformin XR) in the US, making it the first once-daily SGLT-2 inhibitor/metformin FDC to reach the market. J&J management framed the metformin combinations as part of the company’s efforts to establish Invokana as the standard second-line treatment option for type 2 diabetes, and we do expect that such combinations should hold strong appeal for many patients, including those transitioning from monotherapies and those for whom cost is an obstacle.
  • There was no mention of GLP-1 agonist/SGLT-2 inhibitor combination therapy during the event. As a reminder, Dr. Ralph DeFronzo (University of Texas Health Science Center, San Antonio, TX) is currently conducting an open-label trial of Invokana in combination with Novo Nordisk’s Victoza (liraglutide) that is expected to complete in February 2016. There has been a great deal of excitement in the field around these combinations; the hope is that GLP-1 agonists’ ability to inhibit glucagon secretion and hepatic glucose production (HGP) could blunt the increases in glucagon and HGP seen with SGLT-2 inhibitor monotherapy and potentially produce additive or even synergistic glycemic efficacy. AZ is also conducting a trial of exenatide/dapagliflozin combination therapy, and we suspect that this will continue to be an active area of research in the coming years.

4. Excitingly, we learned that J&J plans to advance a novel GPR40 agonist (JNJ-076) for type 2 diabetes into clinical trials this year. While we are impressed by the substantial resources J&J has devoted to lifecycle management for Invokana since its launch, we are also glad to see the company taking steps to expand its diabetes drug portfolio beyond a single product. We will be watching this candidate’s progress very closely, as the GPR40 agonist class has a complicated history: Takeda discontinued its phase 3 GPR40 agonist TAK-875 (fasiglifam) in 2013 due to liver safety concerns, and we are not aware of any other companies with candidates in clinical development. However, the class certainly holds great mechanistic appeal; GPR40 agonists have been billed as “better SFUs” that would stimulate insulin release in a glucose-dependent manner and offer more durability and less risk of hypoglycemia.

  • Cell-based therapies are another key aspect of J&J’s early-stage diabetes pipeline. Management referred throughout the day to Janssen’s efforts (though subsidiary BetaLogics) to develop cell-based therapies for diabetes and highlighted the recent publication of results from a team led by Dr. Tim Kieffer (University of British Columbia, Vancouver, British Columbia, Canada) showing that cells produced by BetaLogics’ differentiation procedure successfully ameliorated hyperglycemia in mouse models of type 1 diabetes. We are glad to see these efforts receiving more attention in Janssen’s presentations, as BetaLogics has generally operated under the radar over the past few years. Janssen also signed a rights agreement with ViaCyte last summer giving it an option to license/acquire the company’s VC-01 cell replacement therapy as early studies progress. While Janssen is probably smart to keep its options open in this young field, we are curious how the company will navigate its investments in both projects going forward.
  • The day’s presentations also characterized Janssen’s new emphasis on disease prevention as a key component of the company’s philosophy. As a reminder, Janssen recently announced the launch of three new research platforms focused on disease prevention: the Janssen Human Microbiome Institute, the Janssen Prevention Center, and the Disease Interception Accelerator, which is focusing on type 1 diabetes as its first major research area.

5. J&J has apparently taken advantage of its LifeScan division to help promote Invokana. This is consistent with comments from management during this event and in the past (particularly at JP Morgan in January) emphasizing the company’s integrated, holistic approach to diabetes that combines assets from the pharmaceutical and device divisions. Specifically, management explained that J&J has been able to take advantage of LifeScan’s established presence among endocrinologists to co-promote Invokana since its launch. These comments came in response to several polite but pointed questions about how J&J can gain the most leverage from its diabetes device portfolio in such a challenging environment. We have seen a noticeable shift in emphasis from J&J toward Invokana and away from its Diabetes Care portfolio over the past year or so, which is understandable given Invokana’s impressive growth and the challenges facing the LifeScan/Animas divisions. However, we have heard some positive news for the device portfolio over the past few months: during J&J’s 1Q15 update, management specifically mentioned Diabetes Care as a driver of Medical Devices growth and suggested that the early launch of the Animas Vibe had been very strong.

Questions and Answers

Q: What are the commercial implications of the FDA’s update on DKA?

A: It’s important to note that DKA is something that happens in type 2 diabetes but it’s very rare. We’ve looked at the Invokana database, which is over 10,000 people in phase 3 trials and 16,000 now. There have been very few events – less than 0.1%. And these events have happened on drug and on placebo. With so few events, it’s impossible to assess causality. We will continue to watch the database and work with the FDA. Remember that this is a medicine that’s helping lots of people. We have over 4 million prescriptions written and 700,000 patients treated, and it continues to have a favorable benefit/risk profile.

We’re really pleased with the Invokana launch. It’s clearly the number one SGLT-2 inhibitor with a volume and share nearly twice that of the others combined. We have over 4 million prescriptions and 700,000 patients treated in the US and have established a really good track record of efficacy and safety. We have lots of confidence to continue moving forward effectively and seeing good growth. We’re involved in extensive lifecycle management and feel really good.

Q: We’ve seen a strong acceleration in the GLP-1 agonist class since some of the safety concerns were allayed, and that may now happen in the DPP-4 inhibitor class after the TECOS data comes out. We’re also seeing a strong acceleration in the SGLT-2 inhibitor class. What are your thoughts on how the therapies will play out? What will be the ultimate position of the SGLT-2 inhibitors?

A: If you look at the therapies and think about the changes, SGLT-2 inhibitors bring a great advance for patients. They’re extremely efficacious, especially Invokana, which is the only one that has shown superiority to a DPP-4 inhibitor and a sulfonylurea. It’s also shown additional benefits of weight loss and improvement in blood pressure, which in a metabolically deranged patient is a movement in the right direction. It’s the innovative advance we’re looking for. We’ll see how it plays out with the other classes.

We think Invokana has performed really well over the last year in the face of numerous competitors in its class and from the GLP-1 agonists, as well as heightened competition among the DPP-4 inhibitors. We’re proud of the continued uptake. We ideally want Invokana to be the first choice after metformin, and we’re trying to get it into that solid second-line position. We think with the superior A1c reductions vs. Januvia, the superior blood pressure reductions and weight loss, that’s where we should be. We’ve made nice progress. We’re starting in the later lines and moving up.

Q: How much usage is there of Invokana in combination with DPP-4 inhibitors? Is J&J interested in combining those two?

A: It’s important to note that Invokana is very efficacious by itself. It doesn’t need to be combined to work well, which gets back to the superiority. We have to think about where to put our resources. We’ve made the combination with metformin, where it’s part of the foundational therapy. We’re developing a fixed-dose combination with metformin XR. We have to think further about where we want to use our resources and where we can make the best difference, which is really in these new areas we’re exploring: diabetic kidney disease, type 1 diabetes, prediabetes, and the possibility of a fixed-dose combination with phentermine for weight management.

I don’t have the exact number about usage with DPP-4 inhibitors. 20% of the usage is as monotherapy, 30% is dual, and the remaining is triple. DPP-4 inhibitors are part of the triple therapy. We feel good being the first choice add-on to metformin, so our first priority is Invokamet and Invokamet XR. This is critical to our strategy. As we’re deploying resources, we think other areas are more productive and can yield greater gains.

Q: What benefits do you derive from the Consumer and Medical Device businesses, which have been anchors to growth in recent years?

A: The pharmaceutical business went through a major change in 2007 and needed to reestablish itself. Our strength at the time in our device and consumer businesses were enablers of growth. The pharmaceutical division lost $8 billion from patent expirations, and it would have been difficult to reemerge without support from the other two businesses. It could happen in the future to any one of the three…We look at how we can provide solutions for diseases like cancer and diabetes. How can we combine drugs and devices to get to a holistic solution?...We represent the largest healthcare company in the world, and we are always a preferred partner. With the launch of Invokana, we used the know-how that LifeScan had with endocrinologists to launch Invokana.

Q: How can you leverage the device portfolio to help with the expanded indications for Invokana? You’re pursuing four new indications for Invokana, including type 1 diabetes. Is that something you can work on with Animas and have integrated delivery?

A: We are applying the same philosophy as we have been and looking forward to see what are the opportunities to improve in medical devices. We’re sourcing the best designs and going for real development with differentiated products. It takes time. We’re working in our portfolios of existing technology and will continue to do well.

-- by Emily Regier, Manu Venkat, and Kelly Close