Welcome to a new issue of The Biopharma Report!
Johnson and Johnson Announces New Spravato Data
I wouldn’t say that the data is game changing, but it certainly fortifies Spravato’s position in the treatment resistant depression (TRD) space.
In the mind of J&J and a lot of investors, Spravato was destined to become the next blockbuster, but (spoiler alert) it didn’t. Sales were extremely disappointing due to a number of factors.
J&J has been on the receiving end of a litany of criticism in terms of Spravato’s pricing. After a long game of cat-and-mouse, UK’s pharmaco-economic appraisal body NICE finally came to the conclusion that Spravato isn’t cost-effective and that they were not recommending it for the treatment of TRD. US non-profit ICER was also critical of Spravato’s price tag but to a lesser degree. Unlike NICE, ICER recommendations are not binding in any form - US payors only care about ICER recommendations when they want to find a reason to deny or limit coverage for a specific drug.
Insurance coverage for Spravato hasn’t been catastrophic but is unsurprisingly far from optimal with a lot of hoops to jump through and a generally high out-of-pocket cost - which is impacting sales. That being said, I expect more payor flexibility as more long-term data is generated.
Due to Spravato’s safety/tolerability profile and the risk for abuse, the drug can only be administered in a medical setting, and patients have to stay under observation for 2 hours after taking the drug - which would deter a number of patients from getting the drug. Not only does Spravato need to be administrated in a clinic, but it needs to be a certified one, which significantly limits the pool of locations where patients can get the drug. And to make things worse, the pandemic has made these already problematic logistical hurdles seem unsurmountable. No wonder Spravato wasn’t even mentioned in J&J’s last couple of quarterly reports!
As the number of certified centers increase and the effects of the pandemic dissipate, I expect access to Spravato to become easier, which will - hopefully - translate into better sales.
One of the main reasons Spravato was touted as a potential blockbuster is the fact that the drug’s onset of action ranges from a few hours (2 to 4 hours in one trial) to a few days - which is in stark contrast with typical antidepressants that take weeks or even months to actually provide clinical benefit.
But the fact is that Spravato will always been competing to a degree with dirt-cheap generic antidepressants that have significantly more data in terms of durability and long-term safety. In addition, Spravato should not be taken by patients with a history of psychosis - which is around 20% of patients with major depression. Antidepressants like sertraline for example on the other hand can very well be used in psychotic patients.
One other established treatment that Spravato is competing with in the realm of TRD is electroconvulsive therapy (ECT). ECT might have a bad reputation outside the medical community but is actually seen by a lot of physicians as the unipolar depression treatment with the best efficacy profile. In a small trial, ECT was found to be superior to ketamine in terms of efficacy. There have been no head-to-head trials comparing ketamine to Spravato, but meta-analysis is suggesting that they may be similar in terms of efficacy - in other words, ECT might be superior to Spravato in terms of efficacy.
Now, I am not saying that the rationale for J&J’s ESCAPE-TRD trial is flawed, and any positive data is welcomed and can boost uptake of the drug - but if you want to really get more physicians on board, comparing Spravato to ECT would make more sense. It would obviously be more “risky” for J&J since there would be a significant probability that Spravato would not outperform ECT, hence why I understand the rationale.
With time, more data will be published, and payors and physicians will gradually become more comfortable with Spravato. This, coupled with hopefully better access will all contribute to an increased uptake - but I don’t see Spravato becoming a blockbuster.
One factor that can negatively impact Spravato’s growth potential is competition from novel drugs. Sage Therapeutics’ Zuranolone, an investigational fast-acting GABA-A receptor positive allosteric modulator as well as Axsome Therapeutics’ Auvelity are two assets that can potentially give Spravato a hard time.
Horizon Therapeutics Confirms Preliminary Discussions With Sanofi, Amgen, and J&J Regarding Potential Offer
This could very well be the biggest biopharma takeover of the year. Horizon Therapeutics is a relatively large biotech with a bunch of very interesting assets.
Horizon Therapeutics itself is no stranger to M&A - which considerably contributed to the growth and diversification of its pipeline/portfolio. In 2014, Horizon reverse-merged with Vidara Therapeutics in order to take control of Actimmune, a drug for chronic granulomatous disease and severe malignant osteopetrosis. In 2015, Horizon acquired Hyperion Therapeutics. The acquisition further fortified Horizon’s position in the rare disease space and allowed the biotech to scoop up 2 urea cycle disorders assets: Buphenyl and Ravicti. Later in 2015, it acquired Crealta and its lead asset Krystexxa. Then in 2021, Horizon bought Viela Bio - the AstraZeneca spinout - mostly to scoop up CD19-directed antibody Uplizna as well as other assets for autoimmune conditions.
The main attractions of Horizon’s portfolio are without a doubt Tepezza and Krystexxa.
Tepezza is currently the only approved drug for thyroid eye disease. It is a drug with a solid efficacy profile and a relatively good tolerability profile - although one of its most frequent side effects, alopecia, might deter a few patients from getting the drug. Horizon has been very creative and active in raising awareness about the condition through a myriad of events and promotions - which positively impacted sales. One potential competitive threat to Tepezza however are Veredian Therapeutics assets VRDN-001 and VRDN-002, which are both being studied for thyroid eye disease.
Chronic gout asset Krystexxa is an example of very good life cycle management in this industry. After more than a decade on the market, Horizon was successful in obtaining a label expansion. The approval in combination with methotrexate in uncontrolled gout gave Krystexxa more room to grow. This is because when used as a monotherapy, Krystexxa can cause the production of anti-drug antibodies in some patients - which can negatively impact the effectiveness of the drug. Not only does the combo decrease the risk of producing anti-drug antibodies, but it also has a better tolerability profile. Like with Tepezza, Horizon was very creative in marketing to both rheumatologists and nephrologists.
Uplizna, approved for the treatment of neuromyelitis optica spectrum disorder (NMOSD), might not be as exciting as Tepezza or Krystexxa, but is certainly an asset that hasn’t reached its full potential yet. Demand was negatively impacted by the pandemic since it is an infused drug that has to be administered in a clinic - which means that there is room for more uptake. The challenge here is that Uplizna is not the only antibody approved for NMOSD, it is actually competing with 4 other antibodies in this space. Uplizna’s dosing regimen is attractive when compared to some of its competitors but what is really needed to give this drug a push is having more long term data since the pivotal trial was stopped early - which means that there is a risk that the efficacy of the drug can be overestimated.
I have to say, part of me is disappointed that Horizon is entertaining these offers. The biotech has been so far very impressive in terms of portfolio and life cycle management, M&A, and marketing - and I wanted to see how they will continue to grow. But that doesn’t mean that this isn’t an exciting development. It’s not hard to see why 3 of the largest pharmas (and possibly even more!) are currently flirting with Horizon.
Earlier this year, J&J acquired small biotech Anakuria Therapeutics. Since then, J&J’s Janssen has been relatively inactive in terms of M&A. It allegedly competed - and lost - with Pfizer for the acquisition of rare disease biotech Global Blood Therapeutics. If anything, this signals J&J’s appetite for large deals in the rare disease space. If J&J is successful in acquiring Horizon, this would be the largest pharma deal under new CEO Joaquin Duato - so there could be some personal motivation here. J&J recently announced that it was spinning off its consumer health business, so the Horizon would make strategic sense for the company.
Sanofi’s CEO Paul Hudson has been “playing to win” since he took the reins of the company. His offloading of several of Sanofi’s less strategic assets was a very smart approach to make the company leaner. But his eagerness to create the perfect portfolio and appetite for acquisitions might have led Sanofi to make a string of bad M&A decisions in the immunology space. Hudson is certainly looking to redeem himself and beef up both Sanofi’s pipeline and portfolio - and Horizon Therapeutics seems like a perfect choice given its track record.
And last but not least, Amgen. In my opinion, Amgen has the most motivation to acquire Horizon. Amgen is facing important challenges. Its PCSK9 inhibitor, Repatha, has had disappointing sales due to the entire drug class literally getting killed by US payors. The biosimilar franchise is suffering from severe competition and this is not not likely to end soon - although Amjevita seems to be promising. Aimovig and Otezla are facing strong competition. KRAS inhibitor Lumakras is also posting disappointing sales and will eventually have to lock horns with Mirati Therapeutics’ adagrasib - which is another big challenge for Amgen. And finally, Enbrel, Prolia and Xgeva are going-off patent in a few years. If I were Amgen, I would be dying to buy Horizon Therapeutics. Amgen recently acquired ChemoCentryx, which is a step in the right direction - but it’s not enough. Horizon’s lead assets can revitalize Amgen’s portfolio and significantly improve its outlook.
Based on how motivated all 3 potential suitors are, I would say that there is a (very) high probability that a deal will close. Let’s hope we find out who’s the lucky winner before January 10th!
DISCLAIMER: This is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
DISCLOSURE: I have no business relationships with any company that is mentioned in this article.