Aegerion Pharmaceuticals Inc. (NASDAQ:AEGR) won approval from the FDA for the drug JUXTAPID (lomitapide) capsules for Homozygous Familial Hypercholesterolemia, on December 24, 2012. Although this drug is promising and is expected to bring in a great equity return for the company, on Tuesday January 29th 2013, a competing drug named Kynamro manufactured by Sanofi (NYSE:SNY) was approved by FDA for the same use.
Which Drug Will Take the Controlling Market Share?
The patients suffering from a deadly hyper-cholesterol disorder now have two new drugs to choose from. This has created unusual competition in the world of rare-disease treatments, a competition even over how expensive these expensive drugs should be.
Juxtapid's maker, Aegerion Pharmaceuticals, priced the pill between $235,000 and $295,000 a year. On the other hand, Sanofi's recently divulged its price for Kynamro: only $176,000 a year. Although both prices are high, Aegerion acknowledged that the anticipation of competition kept its price from being even more. Aegerion CEO Marc Beer stated, referring to the competition,
"We priced the product and built our sales force and medical marketing and education strategy assuming they will be on the market."
The Street's interview with Aegerion CEO Marc Beer explains that rare-disease drugs are hands-on products. Unlike mass-market drugs, they don't launch and then take on a life of their own, with some DTC support and pharma rep detailing to keep things fresh. With rare-disease drugs, every patient is shepherded through the reimbursement process. Many patients get assistance, whether from the company or from patient groups. And patient relationships are managed as therapy continues.
Payers are never eager to spend extra if they don't have to. And as Sanofi's recent experience with oncologist pushback on its Zaltrap price shows, doctors are considering price tags these days, too. With more and more drug makers piling into niche markets, companies will be under more and more pressure to prove their drugs are superior to their rivals and worth whatever price they choose to set.
FDA Performance Results
Of course, doctors and patients will look at more than just the price. The FDA said Juxtapid lowered bad cholesterol by about half during 26 weeks of study in patients who tolerated the drug. Aegerion notes that patients need only swallow a capsule the size of a Tylenol, as opposed to getting an injection. "Aegerion does not expect physicians will prescribe medicine to treat HoFH patients based on cost. These are extremely sick patients and their physicians will select the medicine that they believe has the best benefit / risk profile for their patients," the company said. On the other hand, the FDA said Kynamro reduced bad cholesterol levels by an average of 25% during the first 26 weeks of treatment. But further analysis shows that Kynamro was tested on a larger patient group of 51, while Juxtapid's results are based on 29 patients.
Separately, Juxtapid's 10 of the 29 patients in the study had at least one elevation in liver enzymes greater than or equal to three times the upper limit of normal, including four patients who experienced liver enzymes greater than or equal to five times the upper limit of normal. This risk of liver toxicity is clearly pointed out in the FDA's report on the drug as a possible negative side effect. On the other hand, Kynamro has not displayed any potential serious damage to the liver.
Aegerion is fighting a tough battle to get proper returns for its long time investment of Juxtapid. Although the price tag may sway a lot of patients and doctors to Sanofi's Kynamro, test results are seemingly better for now, so they will still have a large number of consumers. Bullish investors of Aegerion should take this competition from the well established company such as Sanofi, which has a market cap of $129 billion, into account as it could take large market share away from Aegerion. Further, Aegerion will have to spend more on advertising and pushing the product into the market now that its drug has a cheaper twin. Aegerion was not expecting competition from Sanofi so early, so investors should expect a cut to profit margin for Jaxtapid, as well as more spending in the marketing of the product, to be announced in 4th quarter 2012 earnings.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.