The Friday Five – 5 questions raised this week in pharma

June 26, 2014
Ref: The Friday Five Desk

Can AstraZeneca deliver sufficient momentum over the next six months?... thwart a potential second approach from Pfizer that is. Since the beginning of May – when Pfizer went public in its chase for the UK drugmaker – AstraZeneca has made consistently bullish noises about its late-stage pipeline, citing such opportunities as a key fundamental in its suggestion that Pfizer's offer significantly undervalued its worth.

A negative AdCom vote for the ovarian cancer treatment olaparib on Wednesday was therefore unfortunate; investors are certainly hopeful that AstraZeneca has not overpromised and will underdeliver; an accusation that was often levied at the company's previous management.

Likely delay to the launch of olaparib is not a mortal blow to AstraZeneca's defence strategy, suggested Bernstein analyst Tim Anderson, but rather a timely reminder that things often don't go to plan. Perhaps no surprise then that AstraZeneca has been touting alternative methods of making itself less feasible to a second approach from Pfizer – see Report: AstraZeneca mulling sale of some future revenue from existing drugs.

More positively on the R&D front, a recent poll of oncologists by FirstWord indicates that AstraZeneca's non-small-cell lung cancer (NSCLC) treatment AZD-9291 is currently viewed as having a superior clinical profile to Clovis Oncology's competitor product CO-1686 – see Physician Views Poll Results: Oncologists eager for new targeted NSCLC therapies – incumbents will lose out if first-line data impresses.

What does Shire really want?

The type of defence strategy utilised by AstraZeneca has clearly found favour with some. Prompted by AbbVie's public confirmation that it has made three bids to acquire the Irish-based specialist drug developer, Shire initiated a near identical strategy this week by suggesting that revenues at the company will double by 2020 – see ViewPoints: Shire looks to compatriot for M&A defence play.

This M&A story looks particularly tricky to call. There are contradictory suggestions from prominent industry commentators and analysts that Shire is both aggressively fending off its acquisition at any cost or simply looking for a higher price. At present, only Shire's management knows what the company's primary motives are. See ViewPoints: Pharma's M&A-themed cat-and-mouse game intensifies with AbbVie's bid for Shire.

Consensus suggests that AbbVie will at least come back with a higher offer, with its motivations for a deal the combination of a reduced tax rate and a reduction in its dependency on Humira, which accounted for approximately 60 percent of the company's sales last year.

With tax inversion remaining high on the M&A agenda, confirmation by AbbVie that it would expect its tax rate to fall as low as 13 percent by 2016 suggests that the company can exert pressure on the Shire board with a higher offer, noted a number of analysts.

While some analysts expect a price of around £51 per share to secure a deal, those at Bank of America Merrill Lynch suggested on Wednesday that AbbVie's updated financial disclosures could allow the company to offer up to £59 per share. Expect this one to roll.

Is Gilead winning its hepatitis C battle with US payers?

The hepatitis C market continues to evolve rapidly, both in terms of short-term commercial dynamics and longer-term development opportunity.

On the development side, Boehringer Ingelheim's confirmation that it was withdrawing regulatory submissions for faldaprevir – and halting development in hepatitis C altogether – provided a particularly striking reminder of how quickly the market for this disease area continues to evolve. See ViewPoints: Boehringer Ingelheim exits hep C market as Idenix reveals how much Merck & Co. initially bid.

On the commercial front, Medicare part D now appears to be the focal point of efforts by the democrat representatives Waxman and DeGette to negotiate greater discounts on the pricing of Gilead Sciences' hepatitis C treatment Sovaldi.

Not only is the remit of this 'politically-led' push-back of Sovaldi pricing now significantly narrower, argues Bernstein analyst Geoffrey Porges, but the data being used to justify significant forecast increases in Medicare Part D expenditure appear erroneous – see ViewPoints: Waxman seeks Medicare Part D Sovaldi savings – but has he got his sums right?

In troublesome news for US payers both public and private, feedback from physicians this week also suggests that the forthcoming launch for Gilead's Sovaldi and ledipasvir combination will be notably stronger than that of Sovaldi alone. See Physician Views Poll Results: Gilead's all-oral hepatitis C combo launch poised to better Sovaldi US debut despite payer scrutiny.

Can Vertex now drive home its advantage in CF?

In the end, Vertex Pharmaceuticals may not have delivered the knockout data that some were expecting, but results from two Phase III studies for its new cystic fibrosis combination therapy were sufficient to push the proverbial ball over the goal line.

The score was not reserved for Vertex alone, but the broader biotechnology sector; with data from the TRAFFIC and TRANSPORT studies viewed as the key binary catalyst event across the industry for 2014.

Having revolutionised the treatment of CF in a small subset of patients via the launch of Kalydeco in 2012, successful Phase III data for a combination of Kalydeco and lumacaftor in a larger group of patients validates the approach that Vertex is working towards as a means to offering therapy across the entire CF population; albeit if the breakthrough for the combination is not as significant as that it delivered with Kalydeco.

Further analysis - ViewPoints: Biotech breathes a sigh of relief as Vertex delivers on cystic fibrosis data.

Can Bristol-Myers Squibb deliver more positive surprises in immuno-oncology race?

Having arguably delivered the most underwhelming immuno-oncology performance among the leading players in the field at this year's ASCO annual meeting – due in part to high expectations, it must be said – Bristol-Myers Squibb delivered positive and unexpected news this week by confirming that a Phase III study of nivolumab versus dacarbazine in first-line melanoma was stopped early due to superior efficacy for nivolumab.

With the CheckMate-066 study designed to support a regulatory filing in Europe (where Bristol-Myers Squibb's Yervoy is not established as a first-line melanoma therapy), it is in this region where the most significant impact will be felt; with the company now expected to file nivolumab by the end of 2014. That said, with Bristol-Myers Squibb set to share the data with the FDA, some analysts speculated that the regulator may initiate a registrational pathway based on the study, particularly given the favourable status of the PD-1/PD-L1 antibodies in the eyes of the agency.

Analysts at BMO Capital Markets also suggested that nivolumab would likely now reach the US market in early 2015 for third-line squamous patients with non-small-cell lung cancer, but also melanoma, thereby closing the gap on Merck & Co.'s pembrolizumab, which is expected to become the first PD-1/PD-L1 to gain approval (for melanoma, likely in October). Analysts at Credit Suisse suggest the data improves confidence levels that nivolumab will be the initial product to gain approval in the first-line melanoma setting.

Bristol-Myers Squibb's underperformance since ASCO abstracts were released has primary been driven by concerns as to how quickly it can deliver nivolumab to market and the probability of success in key lung cancer trials – see ViewPoints: Bristol-Myers Squibb – down but not out in immunology lung cancer race.

While, this new development will not alleviate concerns regarding the latter issue, early stoppage of the '066 study is likely to ease some broader timing concerns, note analysts at Credit Suisse.