SNY/REGN: Eligible Patients and Sales Potential for Praluent

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Richard Evans / Scott Hinds / Ryan Baum

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richard@ / hinds@ / baum@ssrllc.com

@SSRHealth

July 26, 2015

SNY/REGN: Eligible Patients and Sales Potential for Praluent

  • Praluent received US approval for patients with atherosclerotic cardiovascular disease (ASCVD) or HeFH who are on maximally tolerated statin doses but who need additional LDL-C lowering. There are between 8.4M and 10.6M US persons who meet these criteria, depending on whether we assume an LDL-C treatment target of 70 mg/dl (lower patient total) or 40 mg/dl (higher patient total)
  • As expected the label excludes persons at risk of ASCVD; the number of US persons who do not have ASCVD but who: 1) meet the ACC definition for primary prevention; and 2) are currently under active treatment but 3) above a reasonable LDL-C target is between 8.7M (70 mg/dl goal) and 10.1M (40 mg/dl goal). All together, the post-outcomes eligible US population is between 17.1M and 20.9M persons
  • Pricing is $933 per month at ‘list’ for all doses. However, more than 2/3rds of patients can reach goal on 75mg every two weeks; and, these patients can very easily purchase the 150mg syringe ($466.50) and divide its volume across two separate doses. As long as this trade package is readily available, this is what we expect a very large number of the 75mg every-two-week patients to do
  • Ahead of outcomes data (earliest is November 2016, latest is January 2018) we see US sales potential for PCSK9’s in total (both Praluent and AMGN’s Repatha) of $3.1B to $5.1B, assuming outcomes data are available on or around January 2018. Post-outcomes, we see US sales potential for PCSK9’s in the range of $9B to $20B

Where we’re BULLISH: Biopharma companies with undervalued pipelines (e.g. AMGN, BMY, CELG, GILD, SNY, VRTX); Biopharma companies with pending major product approvals (e.g. ABBV, ALIOF, AMGN, AZN, BDSI, BIIB, CLVS, ENDP, GNMSF, HLUYY, HSP, ICPT, JAZZ, LLY, MACK, MRK, NVS, PTCT, RLYP, RPRX, SHPG, SNY, SRPT, TSRO, UCBJY, ZSPH); SNY on undervalued basal insulin franchise and sales potential for Praluent (alirocumab), in addition to its undervalued pipeline; ABBV and ENTA on sales prospects in Hep C; RAD as an acquisition target as WBA and CVS seek to defend against narrowing retail networks; CFN, BCR, CNMD and TFX on rising hospital patient volumes; XRAY and PDCO on rising dental patient volumes and rising average dollar values of dental products and services consumed per visit; CNC, MOH and WCG on bullish prospects for Medicaid HMOs; and, DVA and FMS for the likely gross margin effects of generic forms of Epogen

Where we’re BEARISH: PBMs facing loss of generic dispensing margin as the AWP pricing benchmark is replaced (e.g. ESRX); Drug Retail as dispensing margins are pressured by narrowing retail networks and replacement of AWP (e.g. WBA, CVS); Research Tools & Services companies as growth expectations and valuations are too high in an environment of falling biopharma R&D spend (e.g. CRL, Q, ICLR); and, suppliers of capital equipment to hospitals on the likelihood hospitals over-invested in capital equipment before the roll-out of the Affordable Care Act (e.g. ISRG, EKTAY, HAE)

SNY’s Praluent (alirocumab) gained US FDA approval on Friday, with the following indication:

Praluent is indicated as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease, who require additional lowering of LDL-C. The effect of Praluent on cardiovascular morbidity and mortality has not been determined

This indication excludes persons who are at risk of atherosclerotic cardiovascular disease (ASCVD). Assuming outcomes trials are positive, at risk patients also would become candidates for therapy; additionally we would expect positive outcomes trials to lower the effective LDL-C target, thus further expanding the applicable patient population

Pre-Outcomes Patient Population

According to NHANES[1] there are an estimated 7.2M US persons who have been told they have ASCVD, and who have LDL-C levels above what virtually any prescriber would consider an acceptable threshold — 70 mg/dl (Exhibits 1a,1b). If we instead use 40 mg/dl as the treatment goal, this adds a further 2.4M persons who have ASCVD, and are already on LDL-C lowering therapy, yet remain above goal

To estimate the number of patients with HeFH[2] who are not already captured in the count of patients with ASCVD, we looked for patients who had not been given a diagnosis of ASCVD, but who despite being on any type of cholesterol-lowering therapy, had LDL-C levels greater than 95 percent of the comparable peer group (i.e. > 160 mg/dl). By this approach we estimate an additional 1.2M US persons have HeFH, are under active treatment, but do not have ASCVD (Exhibits 2a, 2b). Thus in total, we estimate roughly 8.4M US persons fall within the current labeled indication assuming prescribers pursue a 70 mg/dl goal, rising to 10.8M if prescribers pursue the more aggressive 40 mg/dl goal

N.B. statin-intolerant patients with ASCVD and/or HeFH are captured in this 8.4M total (70 mg/dl goal) – specifically in the roughly 577,000 patients with ASCVD and the roughly 124,000 patients with likely HeFH being treated by non-statin therapies alone

Post-Outcomes Patient Population

According to NHANES there are an estimated 8.7M persons who have not been given a diagnosis of ASCVD, but who do fall into at least one of the ACC primary prevention groups, who are already under some type of active LDL-C lowering therapy, and who were not captured in our estimate of HeFH (aka LDL-C’s > 160 mg/dl) (Exhibit 3). If we use a more aggressive LDL-C target of 40 mg/dl, the number of persons without ASCVD, and in need of primary prevention and above target despite being on therapy increases by 1.4M to 10.1M

Pricing

SNY disclosed AWP[3] pricing of $1,120 per 28 days of therapy for both the 75mg q2w[4] and 150mg q2w doses. This translates to WAC[5] or ‘list’ pricing of $933 per 28 days of treatment (Exhibit 4)

N.B. roughly 75% of non-HeFH patients and 58% of HeFH reach their LDL-C target on the 75mg q2w dose. By selling the 150mg form at the same price as the 75mg form, SNY leaves the door open for patients to purchase the 150mg syringe (but not the pen, which auto-fires a full ml), and inject a half ml (75mg) q2w, instead of the full ml. We appreciate that the 150mg syringe is not ‘intended or approved’ for multiple doses, but at the prices involved it’s hugely likely patients will split the 150mg syringe[6]

At least two-thirds of patients are likely to reach goal on the 75mg dose, and have the option of reducing cost by splitting the 150mg syringe into two doses. By extension, this implies that at least two-thirds of the market can buy at $466.50 ‘list’ or WAC per month, instead of the $933 ‘labeled’ figure

Some time ago we estimated[7] net US PCSK9 pricing of $250 – $340 / month – which is roughly consistent with the net pricing one might achieve by ‘splitting’ a 150mg syringe into two doses. At issue are several factors, beginning with the fact that the PCSK9’s are drugs that patients take today to prevent something bad happening tomorrow, instead of drugs taken today to feel better today. Because most of these patients are taking multiple other drugs, they’re facing multiple co-pays. And because many of the other drugs these patients are taking have a more immediate and tangible effect on their well-being (e.g. arthritis, asthma, COPD, etc.), preventive drugs are the first to go when money gets tight – i.e. demand for preventive drugs is highly elastic. What’s more, just over half of the likely PCSK9 patients are on Medicare or Medicaid – meaning these patients cannot use co-pay cards or coupons. This means that whatever copay the plan establishes for these patients is the amount the patients will actually have to pay at pharmacy

Being a monoclonal with a four-figure monthly cost of therapy, Praluent (and eventually Repatha) will be defaulted to higher-copay specialty tiers, with copayments in the $100 range and beyond. This is simply too high for most PCSK9 patients to afford, and since the companies cannot reach most patients with co-pay cards, we believe they have little choice but to negotiate net prices that move them into preferred tiers and lower copays – i.e. prices more in the range of other preventive therapies. That range is roughly $250 – $340 net per month

Sales Potential

Within the limits of the current label there are between 8.4M and 10.8M patients who are eligible for PCSK9’s, depending on whether prescribers are treating to a 70 mg/dl target, or the more aggressive 40 mg/dl target. Assuming a net price range of $250 to $340 per month, for every ten percent of this eligible population that is prescribed a PCSK9, we see US sales potential ranging from $1.5B (70 mg/dl target at $240 net / month) to $2.6B (40 mg/dl target at $340 net / month) (Exhibit 5). Assuming outcomes trials are positive[8] the eligible US patient population increases to between 17.1M (70 mg/dl target) and 20.9M (40 mg/dl target); at our assumed range of net pricing this translates into a US sales range of $3.1B to $5.1B for each 10 percent of eligible patients receiving a PCSK9

Assuming Praluent has a positive effect on outcomes, this could be disclosed as early as November of 2016 if efficacy is well in excess of the rate assumed in trial design. If efficacy is on par with that assumed in the trial design, the trial should run until its scheduled endpoint of January 2018

Assuming we have no outcomes evidence before 2018, we believe 20 to 30 percent penetration of the pre-outcomes patient population is realistic by this date, corresponding to US sales (for both PCSK9’s, not just Praluent) of $3B to $8B. After outcomes, we believe 30 to 40 percent penetration of the eligible population is realistic, corresponding to US sales of $9B to $20B

©2015, SSR, LLC, 1055 Washington Blvd, Stamford, CT 06901. All rights reserved. The information contained in this report has been obtained from sources believed to be reliable, and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. The views and other information provided are subject to change without notice. This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is not construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Through a wholly-owned subsidiary, SSR Health provides paid advisory services to Pfizer Inc (PFE) on both securities-related and non-securities-related topics. One or more of SSR Health’s analysts holds a long position in ENTA

  1. National Health and Nutrition Examination Survey
  2. Heterozygous familial hypercholesterolemia
  3. Average wholesale price
  4. Every 2 weeks
  5. Wholesale acquisition cost
  6. Which, despite not having volume markings, has a clear barrel, making it quite easy to approximate a one-half ml dose
  7. “The Bull Case for PCSK9: Why Estimates are Too Low”, SSR Health LLC, April 2, 2014; and “Bull Case for PCSK9: COGS a Major Advantage for SNY/REGN”, SSR Health LLC, March 17, 2015
  8. “SNY/REGN: When to Expect Outcomes Data for Praluent”, SSR Health LLC, June 16, 2015
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