In this end of year review, Peter Keeling predicts that trade winds will favor the most seaworthy of pharma companies.
The outlook in brief
High and Low Pressure Points Likely To Impact Pharma’s 2016 Personalized Medicine Plans –
Surprise Squalls Later in the Year –
50%+ more targeted therapy launches than in 2015 –
The Diaceutics database of clinical trials lists approximately 3000[i] Phase 2 and 3 therapy trials which now include a meaningful or actionable biomarker (up 50% on the same period last year). The impact on the competitive and regulatory landscape will be significant. A third of the targeted assets fuelling this explosion in biomarker-enabled trials will be submitted for approval in 2016.
If the pace and speed[ii] of recent approvals continues, specific indications like lung and melanoma which make up 14 per cent of the almost 3000 trials, will be transformed from treatment deserts with few contenders into a therapy real estate grab, with each staking out its targeted patient subset. Second half 2015 approvals with CDx in lung cancer alone include:
Based on recent submissions, the first half of 2016 will also see approval for new indications for existing lung therapies:
We have already seen the opening salvoes from BMS and Merck in the PD-L1 arms race in 2015 and, with the prospect of PD-L1 being added to panels alongside BRAF, EGFR mutation, KRAS and other recently-launched biomarkers, the complexity of the battle for PD-L1 expressing patients will intensify. A particular skirmish will occur when Keytruda and Opdivo both earn the most valuable first line indications in lung cancer[iii] dependent upon PD-L1 companion tests. BMS has nudged into the lead because its lung launch was first and didn’t have the PD-L1 CDx complexity in third line patients but, as Bernstein & Co. analyst Tim Anderson said in a recent note to investors, Opdivo could lose its labelling advantage if and when both drugs are approved for first-line use[iv] (see [php snippet=34 param=”title=How big can Merck’s Keytruda be in lung cancer? It’s too early to call in the PDL1 arms race!&id=970″]).
Finally, with all these therapy launches will come high profile marketing campaigns, some of which will integrate testing into their positioning and others which (at least for now) will seek to avoid the perceptual restrictions carried by pre-treatment testing. Either way, expect at least one new targeted therapy launch or biomarker-enabled indication change per month throughout 2016.
Unequivocal payer action on high personalized medicine therapy pricing
Despite ‘fence sitting’ by payers on the value of personalized medicine, the window of test avoidance for pharma will close in 2016 as US payers start to introduce NICE-style value models to their drug negotiations and coverage determinations (see [php snippet=34 param=”title=Drug Pricing Models!&id=964″]).
Such value calculations have been part of the European access narrative for some years (at the time of writing NICE had rejected BMS’s Opdivo for use in squamous NSCLC, citing the drug’s high cost.[v]) It is disappointing then that in early US value models, like the one recently announced from Express Scripts[vi],the clinical and outcomes value of pre-testing is only implicit and not explicit in the calculations (in other words, the value of the test in improving clinical outcome is mashed together with the therapy outcomes). Nonetheless, as oncology and other novel therapies seek $10,000+[vii] per patient per month, payers will want to know the right patients are getting these drugs. For example, only about 22 per cent of NSCLC patients have high enough levels of PD-L1 for Merck’s Keytruda to be effective, limiting the size of Merck’s potential market, but at the same time it promises to reassure health care providers and insurers that the $12,500 per month price is worth paying.
The incentive for pharma to lean further towards integrating testing into their go-to-market programs will therefore be to achieve optimized pricing and attain payer coverage versus no coverage. As Greg Rossi, head of the oncology business for AstraZeneca UK recently commented, “We can offer a better value proposition if we can identify the patients who will benefit and remove those who will not”[viii]. Further discussions about alternative and more personalized medicine integrated value models are on the horizon.
An emboldened diagnostic supplier chain will seek chunkier returns from pharma deals
It has been well covered elsewhere that low test volumes, molecular test profit margins and lack of IP protection, position diagnostic companies more often as passengers in the personalized medicine arena rather than proactive market builders, latching on to the coat tails of richer pharma partners, seeking fee-for-service and development contracts (70 per cent of the 30+ deals between leading pharma and diagnostic companies done in 2015 were development-only contracts). But diagnostic companies are getting smarter and some will grow powerful on the back of biomarker IP or proprietary positions. It is likely we will see either a play by some diagnostic companies for a royalty on the related drug sales in 2016 or the first billion dollar biomarker acquisition. As Rudi Pauwels, the CEO of Biocartis, said “Pharma is realizing that having diagnostics hand in hand with drug development is really important…you cannot have precision medicines without precision diagnostics.”[ix]
Such confidence will continue to be a beacon for diagnostic companies dismayed at extracting less than $1 for every $100 in therapy revenues they have enabled. Expect some hard Rx/DX negotiations in 2016. [x]
It’s all about the test data, stupid
Prescribing behavior is one of the most widely studied and analysed facets of health care. An estimated one billion dollars is spent annually in the US alone on researching pre- and post-launch physician attitudes to competitive therapy benefits, with Customer Intelligence (CI) departments challenged to supply fresh insights to asset and development teams. In contrast, comparatively little attention has been paid to testing behaviour and the correlation between testing and prescribing behaviors.
Several years back, Diaceutics described a metric called Propensity to Prescribe, or P2P, a ratio quantifying the conversion of patients who test positive to those who receive the targeted therapy ([php snippet=34 param=”title=French ALK study helps illuminate the high negative…&id=982″] shows the metric in use). The P2P ratio is in effect a way to look at prescribers’ reaction to test results and testing service. Although we are only beginning to understand this complex space, it is clear that three factors consistently influence the P2P ratio:
However, our analysis tells us the matrix of these three factors is indication and often treatment-specific. Put another way, we can see high P2P ratios (and commensurately high prescribing) when pharma has understood the relationship between testing efficiencies and prescribing and, conversely, disappointingly low P2P ratios when the testing landscape is assumed to be functioning but is in fact not doing so. This all starts with greater levels of evidence-based decision-making and the need to plug in to expert lab-to-physician data flows and resulting behavioral norms. Expect pharma CI teams in 2016 to re-arm in this space in an effort to democratise the understanding of personalized medicine beyond a few internal gurus and avoid high profile targeted therapy launch failures.
Smart investors to ask smarter personalized medicine-related questions
With forecasts that new personalized medicine oncology therapies will rapidly deliver billion dollar revenues[xi] to key players, pharma investor briefings will provide analysts with the opportunity to question the C-Suite on their diagnostic strategy and readiness to support these important therapy launches. The traditional view that pre-testing patients reduces a market’s size has become more nuanced towards an understanding that the well-prepared testing strategy and not the absence of testing per se differentiates good returns from bad. As combination therapies increasingly feature, especially in the PD-L1 arena, there will be a thirst for a better understanding of how testing panels are being engineered and commercialized to support seamless prescribing from launch onwards to ensure returns are optimized. Watch out for informed test strategy questions in quarterly investor briefings.
Labs not diagnostic companies will be recognised as the better commercial partner for pharma
Two-thirds of almost 150 pharma-Dx deals over the past five years have been development-focused, designed to address the regulatory requirements of the FDA, provide pharma with a validated test for clinical trials and to launch enabling early testers. Companies like DAKO, Qiagen and Ventana have all benefited, together taking over a third of deal flow around CDx development in oncology between 2011 and 2015. However, two trends are driving a renewed interest in partnering with key labs and lab networks:
So whilst the pharma world is thinking ‘kit kit kit’, physicians are thinking ‘service service service’. Pharma and the FDA cannot ignore this reality by placing their faith just in the ‘you can only use an approved kit to prescribe this drug’ dogma. Expect more confusion in 2016 as LDT regulations miss the mark.
Surprise Squalls Later in the Year
GSK will reveal personalized medicine intentions with a notable acquisition
On the basis that you cannot be a top ten pharma company and not have an integrated top down personalized medicine strategy, investors will act to push GSK towards meaningfully re-entering the personalized medicine space after the sell-off of oncology therapies and its repeated build up and let go of personalized medicine expertise. Since 2005, GSK has created and shut down dedicated internal Dx teams three times!
Foundation Medicine will launch the ‘Roche Therapy Specific’ IO Biomarker Panel
Foundation Medicine, supported by significant levels of Roche investment, will deploy its immuno-oncology (IO) panels to profile patients suitable for single and combination Roche therapies. As many of Roche’s competitors grapple with the ‘one biomarker-one therapy’ business model, Roche will start to change the game towards IO profiling and customized guided therapy choices.
CFO of AZ will provide evidence on an investor call that personalized medicine delivers 30 per cent greater ROI than a ‘one size fits all’ model
The CFO of AZ will reveal results showing the ROI for a targeted therapy well executed is 30 per cent greater than most ‘one size fits all’ therapies. This will take other industry CFOs by surprise if they have not yet completed similar portfolio assessments.
A mid-tier pharma company will outstep the big guys by launching the first novel joint Rx/Dx marketing and communications campaign, winning the hearts and minds of patients, physicians and laboratories.
As our Bioceutics’ Brand Index revealed[xii] no pharma company has yet leveraged the opportunity to comprehensively integrate the therapy, test messaging and communications (see [php snippet=34 param=”title=Whatever anything is it ought to begin by being personal&id=1007″]). But this will change as a mid-tier biotech without the legacy thinking of ‘one size fits all’ will speak to physicians and patients in a way that empowers them to personalize their own health care. The resulting targeted drug sales will rocket.
This concludes our long range forecast for 2016. Let’s see if pharma can ride the waves in a year of rapidly evolving and exciting personalized medicine events.
Webinar – Personalized Medicine: Where will the pharma winds take us in 2016 and beyond?
Diaceutics Group hosted a complimentary webinar on January 28 about the latest trends in targeted therapies and what you should be thinking about for your successful launch. Click here to listen.
[i] Diaceutics PM TRIALS TRACKER December 2015 data .
[ii] (FDA’s accelerated approval of Geentech’s Alecensa took only three months after the agency granted it priority review in September. )
[iii] Lung cancer represents a lucrative opportunity for the class, with $21 billion in potential sales by 2022 http://www.fiercepharma.com/story/uk-cost-gatekeeper-says-ok-mercks-keytruda-advanced-skin-cancer/2015-10-07
[vii] Genentech launched Alecensa at a list price of $12,500 per month.The list price for one month of Zykadia is $13,500 and $11,500 for Xalkori, Tegrisso is $12,750. http://www.ft.com/cms/s/2/c1fed4c0-944c-11e5-bd82-c1fb87bef7af.html#ixzz3ugEPPsza & https://www.genomeweb.com/regulatory-news/fda-acts-quickly-personalized-nsclc-drugs-reviewing-xalkori-ros1-positive-cases
[x] Calculation based on therapy area models in Melanoma, Lupus, NSCLC and Diabetes utilizing Diaceutics Financial Planner
[xii] Bioceutics Brand Index Surveillance Report, https://www.diaceutics.com/competitive-benchmarking-report-premium-content/?id=3570