Global Blood Therapeutics: Nothing Exciting Yet
Summary
- GBT has just begun commercializing Oxbryta, used in SCD treatment.
- The drug is expensive and is up against stiff competition from generic Droxia.
- However, commercial success could still be achieved and GBT has a promising pipeline.
Thesis Summary
Global Blood Therapeutics Inc (GBT) has recently begun commercializing Oxbryta (Voxelotor). The drug is used in treating Sickle Cell Disease (SCD). While there is not much sales data to go on yet, given the results of the clinical trial and positive feedback from physicians, while the drug could become a standard treatment in managing SCD it is up against stiff competition and there is no evidence of its commercial success yet.
Company Overview
GBT has been developing Oxbryta for some time now and commercialization finally began last quarter, reporting a total of $2.1 million in revenues which can be attributed mainly to the sale of existing stockpiles. Not surprisingly, the company is still operating at a loss, reporting EPS of -$1.73.
Having said this, let’s let a quick look at the Balance Sheet.
As we can see, the company has increased its liabilities, mainly in the form of long-term debt. This coincides with the commercialization effort that will take place in 2020. Notably, the company didn’t have much debt before that and holds a strong cash position of over $300 million. However,m it is worth noting the accumulated deficit of over $700 million.
In any case, the company is now well-positioned to begin commercializing Oxbryta. The question is as always: Will the drug succeed?
Product and Market
Let’s take a look at what exactly Oxbryta does. This drug is used to treat SCD which is a rare affliction that occurs in red blood cells. It can take many forms but it means that oxygen has more trouble getting around the body. The active ingredient in Oxbryta, Voxelotor, binds to hemoglobin and increases its ability to carry oxygen. It works somewhat like this:
Source: Investor Presentation
Clinical trials have proven success and the drug has been approved by both the FDA and the EMA. Below we can see some results.
Source: Investor Presentation
The results show that in 51% of cases, Oxbryta increased hemoglobin and reduced hemolysis. Furthermore, the drug has been proven to be safe with few of any side effects.
As far as the addressable market, the drug is currently labeled for adults and kids over 12 years of age. However, GBT us currently working on expanding the label to children aged below that. In terms of diagnosed cases, at least 100.000 people are suffering from this disease in the United States and 60.000 in Europe. The map below shows the amount of SCD births per year by country.
Source: As we can see, the disease is especially prevalent in Africa, which is still an untapped market. Latin America and the Middle East could be promising near-term growth catalysts.
Competition
It is worth mentioning, that Oxbryta is one of the first drugs approved to treat SCD in the last 20 years. The only real competition in this area is Droxia. Arguably, it seems that Droxia does pose some advantages over Oxbrtyta. Firstly, the drug, having lost its patent years ago, is now incredibly cheap, with a price of $30 for a 400 mg bottle. Compare this to the $120.000 yearly estimate that Oxbryta treatment would have. The yearly cost for Droxia would come in at a mere $1000 per year according to research by the New York Times.
Furthermore, while Oxbryta does increase oxygen circulation, it has not been proven to reduce vaso‐occlusive crises, which are painful and incredibly costly. When running clinical trials, GBT argued that the duration would be too long and changed the endpoint of the study to simply increase hemolysis. However, there is no correlation so far between this increase and a reduced risk of vaso-occlusive crisis. Meanwhile, Droxia has been proven to reduce these crises by up to 60%.
What comes next
Sadly, the healthcare market is one of imperfect information and the success of Oxbryta won’t necessarily be determined by its actual efficacy. Treatments for SCD are currently partially covered by Medicare and Medicaid. The next step for GBT is to lobby public and private insurers to cover the cost of this treatment in their plans. How successful they are in doing this should come down to whether this drug will reduce the expenses of treating SCD for us as a society. In their investment presentation, GBT points out that we spend up to $286,000 treating patients with SCD, complications, which arguably Oxbryta could avoid. It also argues a $700.000 loss of lifetime income per patient. At over $100.000 per year on treatment, it is hard to see how Oxbryta is going to benefit us as a whole. But then again, the decision to pay for and commercialize the drug won’t fall upon us.
Don’t get me wrong, Oxbryta does have some merit in reducing long-term organ damage and reducing the risk of stroke. However, what could be seen as the more prominent problem, Vascular Inflammation, is not addressed. GBT knows this and is currently working on Inclacumab to treat just this.
Takeaway
Overall, I see nothing to get particularly excited about just yet. The addressable market is not huge and with management refusing to give any forward guidance is another potential red flag. The drug in itself doesn’t appear to be revolutionary and has the competition from generic Droxia. However, I am open to investing in the company if and when commercialization deals begin to appear and we get some solid numbers. I will also be keeping my eye open for the development of Inclacumab.
This article was written by
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