Novo Nordisk (NYSE:NVO) today announced the much-awaited CardioVascular (NYSE:CV) outcome data from the LEADER study. Top line data suggests that Victoza when added to the standard of care is superior to existing treatment options in reducing the CV risk among type 2 diabetes patients who are at high risk of such events. Detailed data will be announced later at the 76th scientific session of American Diabetes Association in June 2016.
With a successful outcome from LEADER study, Victoza becomes the second drug after Eli Lilly's Jardiance to have demonstrated a reduction in CV risk. The study has wide ranging implications for the type 2 diabetes class as a whole. We should see a significant change in the treatment paradigm of type 2 diabetes going forward.
Topline data from LEADER Study
The primary endpoint was composite outcome of the first occurrence of cardiovascular death, myocardial infarction or non-fatal stroke. Victoza achieved the primary endpoint of statistically reducing the risk of these events. The superiority of Victoza was driven by a reduction in all three components of the endpoint, which lends even more credibility to the outcome.
Broadly I foresee the following implications of this event for various companies
- Victoza Sales should more than double from here- I foresee Victoza sales clearly trebling from current levels. Victoza belongs to the GLP-1 class of drugs, which has a meager 2% volume share in the diabetes space. With a CV benefit to boast now, the share can become much larger. I foresee a 5% share for the GLP-1 class over the next 5 years. Victoza being the only GLP-1 so far to have demonstrated superiority on CV outcome should ride most of the upside for the class. Victoza share within the GLP-1 class should also expand. I expect the share to go up from 55% now to 70% by 2021.The CV claim on its label should also help Victoza garner better formulary status and pricing power.
- The CV benefits of Victoza should also benefit Saxenda Saxenda which is intended for the treatment of obesity contains the same active ingredient as Victoza (liraglutide). While Saxenda may not get a CV outcome benefit on its label, but the fact that Victoza reduces CV risk should prompt physician to prescribe Saxenda more often. One of the important objectives of treating obesity is to reduce CV risk. Saxenda currently has about 7% TRx share among anti-obesity drugs. Saxenda share can easily double from here as none of the other obesity drugs on the market have demonstrated CV benefit in outcome studies.
- Sanofi and Zeland Pharma's Lyxumia would face difficulty ramping up - Sanofi (NYSE:SNY) / Zealand Pharma's (OTCPK:ZLDPY) has already published the CV outcome data on its GLP-1 drug candidate Lyxumia. The ELIXA trial, which evaluated CV benefit Lyxumia against standard of care, found Lyxumia non-inferior in reducing CV events. With a superiority outcome in the LEADER study Victoza has reinforced its leadership in the diabetes class. Henceforth it would be challenging for Lyxumia to establish its foothold in the diabetes segment. Lyxumia is yet to be approved in the US and was perceived to be a threat to Victoza since it came from the stable of Sanofi, which as well is an established player in the diabetes class.
- DPP-IV would lose market share- Currently DPP-IV drugs take about 8% volume share of the anti-diabetes market as against 2% for the GLP-1 class. None of the marketed DPP-IV inhibitors have so far demonstrated cardiovascular benefit. With a superiority outcome from the LEADER study, we should see Victoza use replacing DPP-IV's to a great extent. A CV benefit on the label would prompt physicians to prescribe Victoza early in the treatment paradigm, even prior to DPP-IV's. Merck's (NYSE:MRK) Januvia which dominates the DPP-IV market segment should be the most impacted. Januvia / Janumet put together generates about $6.2b annually and comprise about 15% of Merck's pharmacutical sales. I see the Januvia/Janumet franchise sales declining 20% from current levels.
- AstraZeneca's (AZN) diabetes franchise too would be under pressure - Onglyza, Farxiga and Bydureon are the key drivers of the AstraZeneca diabetes franchise. I see all three drugs facing growth pressures going forward. Onglyza belongs to the DPP-IV class of drugs which should loose share to Victoza as discussed in the previous point. Bydureon competes directly with Victoza. However Bydureon has no CV risk benefit to its claim. It is yet to report a CV outcome study. The results are expected in 2018. Hence till then Bydureon may not be able to effectively compete against Victoza in the GLP-1 market. Farxiga is an SGLT2 inhibitor and its direct competitor Eli Lilly's Jardiance has demonstrated superiority in reducing CV outcome. Farxiga will show CV outcome data by 2020. Hence, Jardiance would be in a better position till then to drive sales.
A superiority benefit on CV outcome is a positive surprise for Novo Nordisk. This should be a boon for Victoza and Saxenda sales going forward. I expect cumulative sales of Victoza and Saxenda to reach about $9b by 2021 driven by superiority claim in reducing CV risk. Sales estimate for Sanofi and Zealand Pharma's Lyxumia would be revised downwards. Likewise, Merck's Januvia and AstraZeneca diabetes franchise sales should also face notable competitive pressures. The diabetes franchise is critical to AstraZeneca as it represents 10% of its sales and is one of its growth platforms. I recommend a buy on Novo Nordisk as I expect Victoza and Saxenda to reshape Novo Nordisk growth trajectory going forward. They should cumulatively add about $8-$9b to Novo Nordisk sales over the next five years.
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