In the long term forecasts that GlaxoSmithKline (GSK) has shared with the street they assume that their respiratory sales in 2020 will be at least at the same level as in 2015 (GBP 5.5 billion).
In my previous article I have estimated the amount of erosion in respiratory sales that GSK will face on account of generic competition for its largest selling respiratory drug - Advair. The respiratory business sales could be wiped off by 50 percent on account of Advair generics. The respiratory business constitutes 40 percent of GSK's overall pharmaceutical revenues and hence it is important to understand whether or not GSK is in a good enough position to achieve the shared forecast.
The key drugs in the respiratory therapy area that should achieve a meaningful sales number by 2020 and help GSK replace the loss due to generic erosion would be
- Closed Triple therapy combination (FF+VI+UMEC) delivered through a single inhaler.
- Nucala (recently approved)
In this article I would be doing an indepth assessment to evaluate the potential sales opportunity for GSK's closed triple therapy combination, which is the most advanced pipeline candidate as of now.
Fluticasone furoate (ICS) + Umeclidinium (LAMA) + Vilanterol (LABA) combination in a single Inhaler
The most advanced drug as of now in GSK's respiratory pipeline is the triple therapy combination - LABA + LAMA + ICS in a single inhaler. The components in the triple therapy combination include
1) Fluticasone furoate (once daily ICS)
2) Vilanterol (once daily LABA)
3) Umeclidinium ( once daily LAMA)
The regulatory hurdles for this fixed dose combination are expected to be lower than any typical pipeline drug as its individual components are already approved and marketed globally.
The value proposition of this fixed dose combination would be
1) Those patients who are currently on a concomitant treatment of LABA/ICS and LAMA would need to take just one dose a day. Currently the majority of the patients take the LABA/ICS inhalation twice daily (Advair / Symbicort) and the LAMA once daily. So basically its offers patients the convenience of a single dose versus taking three doses daily.
2) The convenience of once daily dosing is expected to translate into better compliance which should translate into superior clinical outcomes (lower exacerbations). The primary endpoint for the ongoing Phase 3 trial in the US is reduction in exacerbations.
Potential Market Opportunity
18 percent of the COPD patients on treatment are prescribed a combination treatment of LABA/ICS (Advair/Symbicort/Dulera)and LAMA (Spiriva / Intruce / Seebri). The COPD market was approximately $13b in sales in 2013.
COPD patients on triple therapy comprising LABA, LAMA and ICS comprise the highest value segment in COPD market. 40 percent of cumulative LAMA and LABA/ICS COPD sales comes from these patients. The cumulative LABA/ICS and LAMA sales from COPD indication globally was close to $7.5b in 2013. So the potential market opportunity is approximately $3b (40 percent of $7.5b). Assuming a 3 percent volume growth the potential market size should be $3.4b by 2018.
How much market share can GSK's triple therapy combination get ?
GSK's closed triple therapy combination is expected to be the first to market. EU filing is expected in 2016, while US filing is expected in 2018. Other players that are currently developing a triple thereapy combination include AstraZeneca (NYSE:AZN), Novartis (NYSE:NVS) and Chiesi. Chiesi's triple therapy combination is also in Phase 3 and they should do a filing either by YE 2016 or 1H-2017. AZN's triple combination is currently in Phase 2 trials and it will take longer to reach the market.
Potential peak sales potential for GSK's triple therapy combination
Not all the potential opportunity market ($3.4b) would be cannibalized by once daily triple therapy combination. The following factors would impact GSK's ability to make the most of this opportunity
1)Getting formulary coverage would be a challenge
Copy cat versions of Advair are expected to reach the market by 2017. The generic versions will put downward pricing pressure on the triple therapy fixed dose combination.
It is getting harder for companies to negotiate with payors as innovators are now forced to offer heavy discounts. A case in point being GSK's own Advair which lost 22 percent sales in 2015 as payors dropped it from their coverage. The discounts/rebates offered by competitors (Symbicort / Dulera) have led to the loss.
Assuming GSK prices its triple therapy combination at a 20 percent discount to sum total of cost of individual therapies (LAMA + LABA + ICS), the market opportunity available to it would be $2.7b. Since GSK would be the first to market and has an established presence in the space it can capture upto 35 percent market share. This should translate into a peak sales opportunity of approximately $1b.
However not all of this would reflect in 2020 GSK sales. Going by the recent launches of GSK in the respiratory space (Breo and Anoro), the sales ramp up is extremely slow. I expect GSK to attain just 25% of its peak sales by 2020.
Hence $250m in annual sales by 2020 is my base case assumption for GSK's triple therapy fixed dose combination.
Chiesi may prove to be a dark horse and can challenge GSK's leadership position
One of the downside risks to the forecasted opportunity for GSK is that Chiesi is taking a more aggressive approach in planning the launch of its triple therapy fixed dose combination. GSK is comparing its triple therapy combination to LABA/ICS fixed dose combination. This is rather a conservative way as it is chasing a lower hurdle.
But Chiesi is being more aggressive it is planning a head to head trial that compares its close triple therapy combination delivered via single inhaler to another triple therapy combination of Breo(LABA/ICS) and Spiriva(LAMA) delivered through two different inhalers. In the event Chiesi is able to outperform its comparator arm, it would be better poised than GSK to grab the leadership position in the triple therapy combination market.
Fundamental risk to the Triple therapy combination Value proposition
In a large clinical study it has been proven that systematic withdrawal of Inhaled corticosteroid dose in severe but stable COPD patients undergoing triple therapy treatment is non-inferior to continuation of triple therapy treatment with respect to risk of moderate to severe exacerbations. The study has been published in NEJM.
In the event there is more evidence that gathers around the subject we could see a change in treatment guidelines, which in turn could severely dent the prospects of triple therapy combinations in COPD
Contribution of the triple therapy combination to the overall GSK's respiratory sales by 2020 may be immaterial. I see the triple therapy combination reaching $250m by 2020 which is just 3.2% of the 2015 respiratory sales base. In my next article I would be assessing the potential of other respiratory assets in GSK's pipeline.
Disclosure: I/we 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.