Threats And Opportunities In Atopic Dermatitis: What's Next For Sanofi And Regeneron?

| About: Sanofi (SNY)

Summary

Atopic Dermatitis will be one of the key growth franchises for Sanofi and Regeneron.

There is a huge unmet meet in this space. Dupixent has been the first branded drug approved for the treatment of moderate to severe atopic dermatitis, or AD.

The competition in AD will not be a concern.

Unless payors block access to the drug, Dupixent is likely to become a multibillion-dollar blockbuster drug.

Atopic Dermatitis (AD or severe eczema) will be one of the key growth franchise for Sanofi (NYSE:SNY) and Regeneron (NASDAQ:REGN), estimated by the sell-side brokers to generate at least $3B of sales in 2025 (10% of pharma sales) driven by the excellent clinical profile of Dupixent, which has been recently approved by the FDA.

What is Atopic Dermatitis?

According to Med Scape:

Atopic dermatitis (AD) is a chronic, pruritic inflammatory skin disease (see image below) of unknown origin that usually starts in early infancy, but also affects a substantial number of adults. AD is commonly associated with elevated levels of immunoglobulin E (NYSEARCA:IGE). That it is the first disease to present in a series of allergic diseases—including food allergy, asthma, and allergic rhinitis, in order—has given rise to the “atopic march” theory, which suggests that AD is part of a progression that may lead to subsequent allergic disease at other epithelial barrier surfaces.

Incessant pruritus is the only symptom of AD. The disease typically has an intermittent course with flares and remissions occurring, often for unexplained reasons.

Primary physical findings include the following:

  • Xerosis
  • Lichenification
  • Eczematous lesions

Treatment options for AD

While there isn't a cure, atopic dermatitis treatments may offer relief. If a patient suffers for mild to moderate AD, a doctor can prescribe:

  1. Topical treatments (e.g. Hydrocortisone, triamcinolone or betamethasone), which usually are creams applied on the skin and are the current most prescribed treatment for AD, even though their efficacy for severe eczema isn’t satisfactory.
  2. Light therapy (phototherapy), which implies the use of natural or artificial ultraviolet light (UVA or UVB), especially if topical creams are not sufficient.
  3. Moisturizers, as Petrolatum or Aquaphor, which can be helpful to treat and prevent dry skin.

From this analysis, it’s clear that there is a huge unmet meet in this space, especially for the treatment of moderate to severe AD; which is properly the category of patients which will be targeted by Sanofi with Dupixent. Thus, in this article, I will show why the clinical profile of Dupixent will offer an attractive option for the AD space and what will be the key innovations in this space in the foreseeable future which could threaten the leadership of Sanofi/Regeneron.

Why Dupixent will have an excellent launch

I believe that the launch of Dupixent in AD has the potential to revolutionize the treatment paradigm in this space. There are few reasons behind my bullish expectations for this drug.

  • As discussed above, before Dupixent, there wasn’t any branded drug approved for the treatment of moderate to severe AD and the main competitors are at least 24 to 36 months behind Sanofi/Regeneron.
  • The clinical profile of Dupixent has been excellent, with outstanding efficacy and a benign safety profile.
  • In the SOLO 1 and SOLO 2 Phase III studies, Dupixent demonstrated superiority over placebo on both the primary and the secondary endpoints.

At 16 weeks for SOLO 1 and SOLO 2, respectively, 37 and 36 percent of adult patients who received Dupixent 300 mg weekly, and 38 and 36 percent of patients who received Dupixent 300 mg every two weeks, achieved clearing or near-clearing of skin lesions as measured by the 5-point Investigator's Global Assessment (NYSE:IGA) scale, compared to 10 and 8 percent with placebo (p less than 0.001). This was the primary endpoint of the study in the U.S. and one of the primary endpoints in the EU.

At 16 weeks for SOLO 1 and SOLO 2, respectively, 52 and 48 percent of adult patients who received Dupixent 300 mg weekly, and 51 and 44 percent of patients who received Dupixent 300 mg every two weeks, achieved a 75 percent or greater reduction in their Eczema Area and Severity Index score (EASI-75) compared to 15 and 12 percent with placebo (p less than 0.001). This was the key secondary endpoint in the U.S. and one of the primary endpoints in the EU.

  • The safety profile of the drug looks attractive, given a similar adverse event rates and a lower serious adverse event rate compared to placebo

The competition in AD will not be a concern

There are not many players which are developing similar drugs for the treatment of moderate to severe atopic dermatitis:

  • Roche’s (OTCQX: OTCQX:RHHBY) Lebrikizumab: In October 2016, Roche has reported positive data from a Phase II trial in AD, called TREBLE. In fact, according to an article on MDedge, based on the clinical data published at EADV Congress in October 2016:

TREBLE was a double-blind, dose-ranging study involving 209 adults with moderate-to-severe AD despite intensive topical corticosteroid therapy. The primary endpoint in TREBLE was the percentage of patients who achieved at least a 50% reduction from baseline on the EASI, or EASI 50. A dose-response effect was apparent: the EASI 50 rate was 62.3% in patients on placebo plus daily topical steroids, 69.2% with a single 125-mg dose of Lebrikizumab, 69.8% with a single 250-mg dose, and 82.4% with 125 mg of Lebrikizumab at weeks 0, 4, 8, and 12. Only the group with monthly dosing of the biologic plus daily triamcinolone 0.1% BID had an EASI 50 response rate significantly better than the controls on placebo plus topical steroid therapy.

Lebrikizumab Phase III trials will start in 2017, so this drug will not be on the market at least until 2019/2020.

  • AstraZeneca’s (NYSE:AZN) tralokinumab: In March 2017, AZN reported mixed results for a Phase IIb for tralokinumab, given that the drug was superior to placebo on the EASI endpoint, but only numerically better than placebo on the IGA scale. In fact, According to a press release from Leo Pharma, which is developing this drug in partnership with AstraZeneca:

After treatment with tralokinumab for 12 weeks, 150 mg and 300 mg tralokinumab significantly reduced total EASI from baseline (adjusted mean difference of –4.4, p=0.027 and –4.9, p=0.011, respectively) compared with placebo. The number of patients achieving EASI 50 at week 12 in the tralokinumab 300 mg group was significantly higher compared with placebo (73.4% versus 51.9%, p=0.025).

The number of patients with an IGA of 0 or 1 (clear or almost clear) was numerically higher but not statistically significantly superior to placebo (26.5% in the tralokinumab 300 mg versus 11.7% in the placebo group). Treatment with Class 3 TCS before, during, and after study drug treatment may have influenced the study results.

Tralokinumab Phase III trials will start in 2017, so this drug will not be on the market at least until 2019/2020.

Lastly, I don’t believe that Pfizer’s (NYSE:PFE) Eucrisa could be considered as a competitor of Dupixent. This drug has been recently approved by the FDA but only for the treatment of mild to moderate AD.

Key risks

There is one big risk on my thesis about Dupixent. It will be crucial for Sanofi and Regeneron to manage the relationship with PBM in order to avoid a situation in which the payors will block the access to the drug, as seen for example with Praulent or Entresto. As a reminder, Sanofi and Regeneron Pharmaceuticals have launched Dupixent in US with a gross price of $37,000. The comments from the payors have been mixed, thus it will be crucial to analyze over the coming weeks how good will be the formulary coverage for this drug. As reported by Morningstar:

CVS Health Corp., one of the largest PBMs, said it is working to ensure the drug is available to patients with a demonstrated need for it. "While we believe our advocacy on behalf of our clients did ultimately influence Regeneron's initial pricing strategy, the drug will be expensive," a CVS spokeswoman said.

"I'd characterize it as a responsible price," says Steven Miller, chief medical officer at Express Scripts Holding Co., the largest PBM. "Neither side got everything it wanted, but this has been responsible."

Conclusion

Atopic dermatitis will be clearly one of the strongest franchises of Sanofi and Regeneron. Despite some new treatment options could be launched over the next couple of years, there is an unmet need in this space and the profile of the drug is excellent. Unless the payors will block the access to the drug, Dupixent is likely to become a multi-billion blockbuster drug.

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.

Additional disclosure: Not investment advice.

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