Fierce Competition In The RA Market

by: Peter Geschek

The rheumatoid arthritis (RA) market is huge. According to Wolters Kluwer Pharma Solutions, nine drugs currently approved for RA generate over $16 billion in worldwide sales each year. While these drugs are prescribed to treat a variety of autoimmune conditions, approximately three quarters of the users are RA patients.

Five of the nine drugs are used as first line treatment for patients who failed to improve on so called oral "DMARDs." DMARDs, such as Methotrexate and others, are "disease-modifying antirheumatic drugs" that slow the progression of joint damage from rheumatoid arthritis.

These are the five: Enbrel from Amgen (NASDAQ:AMGN) and Pfizer (NYSE:PFE), Humira from Abbott (NYSE:ABT), Remicade from Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK), Cimzia (UCB SA, a Belgian company), and Simponi (Johnson & Johnson). All five are TNF inhibitors.

Tumor necrosis factor (TNF) promotes an inflammatory response which in turn causes many of the clinical problems associated with autoimmune disorders, such as rheumatoid arthritis, Crohn's disease, psoriasis, refractory asthma and others. These disorders may be treated by using a TNF inhibitor.

Inhibition can be achieved with a monoclonal antibody such as infliximab (Remicade), adalimumab (Humira), certolizumab pegol (Cimzia), and golimumab (Simponi), or with a circulating receptor fusion protein such as etanercept (Enbrel).

Many of these injectable biologics have been tested and approved for the treatment of other autoimmune diseases as well. An autoimmune disorder is a condition that occurs when the immune system mistakenly attacks and destroys healthy body tissue. There are more than 80 different types of autoimmune disorders.

For patients who do not respond to TNF inhibitors, rheumatologists have some other options: Rituxan from Roche (OTCQX:RHHBY) and Biogen Idec (NASDAQ:BIIB), a B cell depletory; Orencia from Bristol-Myers Squibb (NYSE:BMY), a T-cell inhibitor; and Actemra from Roche, an IL6 inhibitor.

Sales figures: Below are the sales figures of some major players for the first quarter of 2012, as reported by the companies. Also shown are the percentage increases from the same quarter of the previous year:

Humira $1.934B +18.5% Abbott

Remicade $1.895B +20.5% J&J/Merck

Enbrel $938M +7% Amgen/Pfizer

Copaxone $909M +18% Teva

Rituxan $792.2M +9.7% Roche/Biogen

Price: These drugs cost patients and their insurers a considerable sum.

For example, Enbrel costs more than $20,000 a year per patient.

Remicade can cost $19,000 to $22,000 a year per patient wholesale.

Humira costs patients, their employers, and health insurance companies about $20,000 for one year of treatment. Doctors say costs can run higher depending on the patient and the dosage needed.

Rheumatoid arthritis is a lifelong, chronic disease, and patients experience a broad range of complications. Compared with the general population, RA patients are at a higher risk for cardiovascular disease, lymphoma, lung cancer, and serious infections. The disease is characterized by inflammation, joint destruction, and progressive disability. Destruction of the joints is believed to be irreversible.

RA affects women three times more frequently than men. The typical onset of RA occurs between the ages of 20 and 40 years.

The clinical consequences of RA are substantial. In addition to loss of employment during years of typically high productivity, the disability hinders patients from carrying out their daily activities.

RA world market: According to the World Health Organization, RA affects roughly 1.3 million Americans and 23.7 million people worldwide. According to Visiongain, a London-based business information company, the worldwide RA market will reach $17.3bn in 2015. The RA market has the potential for considerable growth.

A Credit Suisse survey found that people's opposition to injections is one of three main obstacles to putting patients on biologic medication. Safety concerns and cost are the other two.

In February 2012, Abbott launched a disease awareness campaign to help consumers understand the role of treatment in preventing joint damage, an RA hallmark which the company says can occur no matter how much, or how little, pain patients feel.

All current RA drugs are injectable. Could a drug administered orally have greater appeal for the untreated, as well as those already in therapy who want a more convenient, or cheaper, alternative? Pfizer and competitors think so.

Tofacitinib: Pfizer's Tofacitinib is the first oral pill in this segment and the most advanced pill in a family of experimental drugs to target a protein called JAK. Approval is expected in the summer of 2012.

If approved, Tofacitinib would be the second JAK inhibitor to reach the market, after Jakafi from Incyte, which was approved in late 2011 for the treatment of cancer myelofibrosis.

Incyte is also developing an RA JAK1/2 inhibitor, now known as LY3009104, with its partner, Eli Lilly. The company will report early phase IIb data in rheumatoid arthritis in June.

Galapagos, a biotech based in Mechelen, Belgium, joined Abbott Laboratories in promoting its candidate GLPG0634. In February 2012, biotech Galapagos signed a deal with Abbott Laboratories worth $1.35 billion over rights to the drug GLPG0634. Galapagos's small-molecule Janus kinase 1 (JAK1) inhibitor is currently in phase 2. Abbott assumes sole responsibility for final phase 3 studies and manufacturing.

Also in play for the oral pill market are Rigel and its partner AstraZeneca (NYSE:AZN), whose Syk inhibitor fostamatinib (R788) is in phase 3. Results are expected to pave the way for the filing of new drug applications with the FDA and the European Medicines Agency (EMEA) in 2013. Other biotechs are trying to catch up to Pfizer by offering similar treatments: Vertex (NASDAQ:VRTX), Chelsea (NASDAQ:CHTP).

Although Pfizer leads the pack in the clinical and regulatory process, thanks to tofacitinib's imperfections, opportunity abounds for other companies to improve upon the drug and capture a sizable chunk of the RA market.

At present, Pfizer's pill is the only one to have completed Phase 3, and on May 9, 2012 the FDA Advisory Panel voted 8 to 2 in favor of approval. The FDA's final decision is slated for August 2012 and European approval is expected during the summer. Although the panel's vote suggests a "yes," victory for the drug is not assured. Committee members rejected the 10mg dose in favor of a 5mg dose, and even floated the idea of a 3mg dose, which Pfizer has not tested.

Among the concerns are malignancy rates, shown to increase with exposure to the drug. Additionally, tests failed to show a significantly slower progression of the disease in response to the 10mg dose versus the 5mg version. Pfizer requested a label that would allow tofacitinib to be prescribed to patients who failed to improve on one or more disease-modifying anti-rheumatic drugs (DMARD), meaning methotrexate. The panel's vote was 8-2 in favor, with the two negative votes coming from experts who wanted use restricted to patients no longer responding to a biological drug.

Side effects: All drugs have risks, and as long as RA therapies rely on suppressing dysfunctional immune system function to relieve disease symptoms, cases of infection and cancer will occur.

Humira and Enbrel, the two biggest sellers in the segment, have black box warnings about infections, with Enbrel carrying a warning for lymphomas.

Tofacitinib data have been mixed. While the drug met its primary endpoint in some phase 3 trials, Pfizer reported four patient deaths in the treatment arm of another trial. Still, data support tofacitinib as a viable oral therapy in a world of largely injectable drugs, much like Novartis' oral, multiple sclerosis drug, Gilenya.

Sales forecast: Tofacitinib is forecast to sell $49m in the few months following its launch in 2012, with sales for Pfizer increasing to $2.14 bn worldwide by 2018, and Takeda earning $137m from its co-promotion in Japan, according to consensus data from EvaluatePharma.

Analysts on average have forecast annual tofacitinib sales of $1.1 billion by 2015, according to Thomson Reuters Pharma.

Bernstein Research's Tim Anderson predicts tofacitinib hitting-and likely surpassing-the current sales estimates of $1.7B in 2016 and $2.5B in 2020.

Pricing: Pricing is the key to gaining market share. The costs have to be lower than the current biologicals. But how much lower?

Small molecule drugs are cheaper to manufacture. On the other hand, Tofacitinib does not show obvious superiority in efficacy over injectable drugs, and it also comes with side effects, including risk of infection and raised cholesterol levels.

Georg Schett, head of rheumatology and immunology at the University of Erlangen-Nuremberg, believes tofacitinib should be priced between biological anti-TNFs, which cost up to $20,000 a year, and the older drug methotrexate, which is priced at around $1,000.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.