Oncology changing-market-dynamics

Oncology Changing Market DynamicsFebruary, 2010

| Copyright © 2010 Grail Research, LLCFebruary, 2010 2

Oncology – a new market dynamic on the horizon

Historically, oncology has been an area of significant sales growth due to favorable factors, such as a cooperative FDA, premium pricing, and prevalent off-label usage

However, we see signs of change… New drugs and indications are crowding the market Payors are having a greater impact on drug utilization

“Traditional” tools such as tiered co-payments, prior authorization and step-edits are being used more aggressively throughout the industry

The industry is responding as well with price caps and pay for performance arrangements

Overall, we believe industry participants need to pay close attention to these signals, and position themselves for a new market dynamic


Table of Contents

Historical Market Dynamics

Evidence of Changes

Case Studies

How to Prepare


Oncology products have grown at more than double the rate of global pharmaceuticals, with a CAGR of 8.39% during 2004–’08 Reasons for the robust growth of the

oncology market:c,d,e

• Increased use of targeted therapeutics, including more patients accessing modern targeted therapies in emerging markets

• Premium pricing for targeted brands as compared to cytotoxic therapies and antihormonal therapies

• Longer treatment duration for patients due to longer survival and adjuvant treatment

• Earlier detection of disease with the availability of new screening procedures

Overview

Oncology agents have experienced exceptional market growth

Note: Projections are extrapolated based on IMS prediction of 3-6% of CAGR till 2012; we have assumed a CAGR of 4.5% till 2012Source: a”Global Pharmaceutical Sales, 2001 – 2008”, IMS Health, March 2009; b”Top 15 Global Therapeutic Classes”, IMS Health, March 2009; c"IMS Health forecasts double-digit growth of cancer drugs", IMS Health Website, May 15, 2008; d’Commercial Insight: Top 20 Therapy Cancer Brands’, Datamonitor, Aug 2008; e“Nuovifarmacie vecchitrend diconsumo: unapanoramicaeuropea”, IMS Presentation; f“Booming oncology market redefines relations between manufacturers and healthcare payers, providers”, Pharmaceutical Commerce Magazine, August 2008; g“IMS Health Lowers 2009 Global Pharmaceutical Market Forecast to 2.5 – 3.5 Percent Growth”, IMS Press Release, April 22, 2009

USD

Bn

Global Pharmaceutical and Oncology Market Trend, 2004–12Ea,b,f,g

4842

3529

24

6560

5552

773715

648605

560

921864

807750

0

25

50

75

100

125

0

200

400

600

800

1,000

2012E2011E2010E20082007 2009E2004 2005 2006

IMS Projections – Global Pharmaceutical MarketIMS Projections – Oncology MarketOncology MarketGlobal Pharmaceutical Market

2004-08 CAGR

USD

Bn

2008-12 CAGR

8.39%

18.92%

4.5%

7.8%


Table of Contents


Evidence of Changes

Case Studies

How to Prepare


New drugs and new indications are crowding the market

Payors are more aggressive in managing Biologics

1

New Pricing Pressures

2

3

Recent events raise the possibility that this market dynamic is changing

Shift to orals enables traditional utilization controls

4


Flavopiridol (Sanofi Aventis)

Zibotentan(AstraZeneca)

Neuradiab(Bradmer Pharma)

AVE 8062(Sanofi Aventis)

BIBW-2992 (Boehringer Ingelheim)

Vadimezan(Novartis and

Antisoma)

Telcyta(Telik)

Lestaurtinib (Cephalon)

Alpharadin (Algeta)

Ramucirumab (Eli Lilly)

Afutuzumab (Biogen Idec)

XL-184(BMS and Exelixis)

BSI-201 (BiPar Sciences)

Figitumumab (Pfizer)

Midostaurin(Novartis)

Farletuzumab (Baxter)

Axitinib(Pfizer)

Motesanib (Amgen)

Brivanib Alaninate

(BMS)

LATE STAGE PIPELINE1998 2001 2002 2003 2004 2005 2006 2007

Tasigna(Novartis)

Tykerb(GSK)

Torisel(Wyeth)

Gleevec(Novartis)

Erbitux(BMS)

Velcade(J&J /

Mellinium)

Revlimid(Celgene Corp.)

Nexavar(Bayer & Onyx)

Campath(Bayer /

Genzyme)

20001997

Bexxar(GSK)

Herceptin(Genentech)

Recentin (Astra-Zeneca)

Rencarex(J & J)

Zactima (AstraZeneca)

Herceptin-DM1

(ImmunoGen)

Aflibercept (Sanofi Aventis)

Galiximab (Biogen Idec)

Lumiliximab (Biogen Idec)

Deforolimus(Ariad)

Omnitarg(Roche)

Anyara (Active biotech)

Enzastaurin (Eli Lilly)

Zybrestat (OXiGENE)

Zarnestra(J & J)

Vargatef (Boehringer Ingelheim)

Neratinib (Wyeth)

Bosutinib (Wyeth)

Zalutumumab (Genmab)

Masatinib Mesylate

(AB Science)

Genasense(Genta)

Ofatumumab (Genmab &

GSK)

Pazopanib(GSK)

Avastin(Genentech)

Tarceva(OSI /

Genentech)

Sutent(Pfizer)

Vectibix(Amgen)

Sprycel(BMS)

Iressa(AstraZeneca)

Rituxan(Genentech)

Zevalin(Spectrum)

Mylotarg(Wyeth)

Note: Late Stage Pipeline includes only those drugs which are either in Phase III or pre-registration stage of development Source: Grail Research; PharmaProjects database (accessed in August 2009)

The pipeline for new targeted therapies is significant1


Many compounds focus on the same biology

Competitive intensity is increasing as companies target similar mechanisms

Current Level of CompetitionExpected

Long Term Competition2

EGFR Antagonist

VEGFR Antagonist

Tyrosine Kinase Inhibitors

8

12

9

Expected Near Term

Competition1

2

2

9

Note : The dates mentioned in the chart are approval dates and not the launch dates; 1Represents the number of molecules in phase III / Pre-registration / Registration stage of development for relevant indications; 2Represents the number of molecules in phase I / II of development; Above mentioned data represent the primary pharmacology action for the marketed and pipeline molecules (a molecule can target more than one receptors; however, we have only considered the primary target in this analysis)Sources: FDA website, Company website ; PharmaProjects database; Grail Analysis

Epidermal growth factor receptor 2 antagonist

1


Adding indications to existing drugs increases competition

5

5

1

2

2

1

2

2

1

1

1

1

10

2

3

5

3

3

2

2

3

1

1

0 2 4 6 8 10 12 14 16 18

Vectibix

Herceptin 31

3

13

Avastin 172

Gleevec 1813

63

Tarceva 94

Tykerb 117

Sutent 158

Erbitux 1510

Revlimid 16

Rituxan 2

4

7

Torisel

Nexavar

Early Stage Pipeline IndicationsLate Stage Pipeline IndicationsApproved Indications

Expansion of existing agents

Note: Late Stage pipeline include molecules in registration / pre-registration / phase III of development, Early Stage pipeline include molecules in phase I or II of developmentSource: PharmaProjects; Clinical Trials Website; Company Websites; “Top 20 Cancer Brands”, Datamonitor

1


Many indications will soon have multiple targeted therapies

Lymphoma

Colorectal Cancer

Leukemia

NSCLC

Kidney Cancer

Breast Cancer

20041997 1998 2000 2001 2003 20052002 20072006 2008 2009 LATE STAGE PIPELINE

Note: Late Stage Pipeline includes only those drugs which are either in Phase III or pre-registration stage of development Source: Grail Research; PharmaProjects database (accessed in August 2009)

Rituxan (CD20

antagonist)

Zevalin (DNA

antagonist)

Bexxar (DNA

antagonist)

Velcade (Proteasome inhibitor)

Revlimid; Torisel; Campath; Afutuzumab; Galiximab; Ofatumumab; Enzastaurin

Herceptin (EGFR

Antagonist)

Tykerb (TKI)

Avastin (VRGF

Antagonist)

Sutent; Ramucirumab; BSI-201; Pazopanib; Herceptin- DM1; Omnitarg; Neratinib; BIBW-

2992

Mylotarg (DNA

antagonist)

Gleevec (Bcr-Abl inhibitor); Campath

(Lymphocyte inhibitor)

Sprycel (Bcr-Abl inhibitor)

Tasigna (Bcr-Abl inhibitor)

Revlimid; Rituxan; Alvocidib; Midostaurin; Lestaurtinib; Lumiliximab; Genasense;

Ofatumumab; Zarnestra; Bosutinib

Iressa(TKI)

Tarceva(TKI)

Avastin (VRGF

Antagonist)

Erbitux; Sutent; Nexavar; Aflibercept; Vadimezan; Telcyta; Figitumumab; Motesanib;

Pazopanib; Recentin; BIBW-2992; Enzastaurin; Zactima; Vargatef

Avastin (VRGF

Antagonist); Erbitux(EGFR

Antagonist)

Vectibix (EGFR

Antagonist)

Tarceva; Sutent; Aflibercept; Brivanib Alaninate; Recentin

Nexavar(B-raf kinase

inhibitor)

Sutent (VEGFR Inhibitor)

Torisel(mTOR kinase

inhibitor)

Avastin (VRGF

Antagonist)Axitinib; Pazopanib; Anyara; Rencarex

1


More aggressive use of utilization tools is underway

Note: 1PBM is Pharmacy benefit management; 2Survey group include Commercial health plans (N=55), Medicare Advantage plans (N=23), Managed Medicaid plans (N=17), PBMs (N=11)Source: aBiotechnology Monitor and Survey, Marketplace Policies, Practices and Perspective: 2009

Management strategy

Commercial health plans

Medicare advantage plans

Managed Medicaid plans PBMs1

% of plans using the

tool in 2008

Incremental % of plans to use the

tool in 2011


tool in 2008


tool in 2011


tool in 2008


tool in 2011


tool in 2008


tool in 2011

Quantity Limits 36.4% 14.5% 43.5% 17.4% 29.4% 23.5% 36.4% 27.3%

Step Therapy 14.5% 23.6% 13.0% 30.4% 17.6% 23.5% 0.0% 36.4%

Prior Authorization by Diagnosis 56.4% 7.3% 60.9% 13.0% 52.9% 17.6% 36.4% 9.1%

Prior authorization by test results 34.5% 21.8% 21.7% 30.4% 41.2% 11.8% 0.0% 36.4%

Coinsurance cost share 29.1% 12.7% 56.5% 13.0% NA NA 18.2% 0.0%

Biologics in Breast Cancer – Usage of utilization tools in 2008 and expected increment in 2011a,2

2


Oncology Drugs Market Share by Launch, 1996–2007a Average Monthly Medicare Price of Drugs at the Time of Approval (1994-2008)b

The cost of cancer therapy is increasing as patients shift to newer, more expensive therapies

Drugs Lanched in 1997 or BeforeDrugs Launched in 1998-02Drugs Launched in 2003-07

32354149576473828893100 37383837

35362718127 8

1999 20011998 2003200220001997

50

10014

0%

31

2006

27

2005

21

2004 2007

Source: a”The Oncology Pipeline: Maturing, Competitive, and Growing?’, Oncology Business Review, Sep 2008; b“Limits on Medicare's Ability to Control Rising Spending on Cancer Drugs”, NEJM Article, February 5, 2009; cManaged Care Oncology Magazine, Q3 2008 Issue

New drugs cost more and are increasing share

6,465

3,610

1,450

0

2,000

4,000

6,000

8,000

2004-20081999-20031994-1998

Utilization of Newer therapies is increasing New Therapies cost more

Per

cent

Mar

ket S

hare

Year of Approval

US

D

The Cost of Treating Cancer is Increasingc

7562

4330

0

50

100

2005200019951990

Annual Cost of Treating Cancer (USD Bn)

3


At the same time, drug benefits may seem modest relative to cost

Some of the newly-approved brands cost USD 150-500K per life year gained

Drug Company Indication Year of Approval

Incremental Benefit

Incremental Cost of Therapy (USD)

Cost / Life Year Gained

(LYG)(USD)1

Avastina Roche Breast Cancer 2008 4 months survival 50,000 150,000

Tykerbb GSK Breast Cancer 2007 0.127 months survival 21,484 169,165

Ixemprac BMS Breast Cancer 2007 1.96 months survival 30,900 189,184

Avastinb Roche Non-small Cell Lung Cancer 2006 2.3 months survival 66,270–80,343 345,757–

419,181

Tarcevab OSI Pharmaceuticals / Roche

Pancreatic Cancer 2005 0.4 months survival 12,156–16,613 364,680–

498,390

Erbituxb BMS Colorectal Cancer 2004 1.44 months

survival 21,954 182,950

Notes: 1LYG costs have been derivedSource: aNew York times; bAmerican Society of Clinical Oncology (ASCO); cJournal of Clinical Oncology

3


This has led to a new and public discussion about the cost/benefit of these new therapies

Sources : a“Costly Cancer Drug Offers Hope, but Also a Dilemma”, The New York Times, July 6, 2008; b “Lilly Erbitux Cancer Drug Not Worth Price, U.S. Scientists Say”, Bloomberg News, June 2009; c“Ixabepilone in Metastatic Breast Cancer: Small Benefit at High Cost”, Medscape, May 2009; d“NHS denies 'effective' cancer drugs due to cost”, The Independent, August 2008; e“U.K. Says Tykerb Isn’t Worth Cost, Even With 12 Free Weeks”, The Wall Street Journal, March 2009

Commentary in the press

New York Times, July 2008 - Cost effectiveness of Avastin - “It’s absolutely critical that we start having a public discussion,” said Barbara Brenner, executive director of Breast Cancer Action, an advocacy group. “I think of Avastin as a model that is showing us where the problem is.”a

Bloomberg News, June 2009 - “Eli Lilly & Co.’s tumor-fighter Erbitux doesn’t prolong lung cancer patients’ lives enough to justify its $80,000 cost, U.S. scientists said in commentary published today. Erbitux added to other cancer drugs extends survival about 1.2 months more than chemotherapy alone, making the price too high for a ‘marginal benefit,’ commentary in the Journal of the National Cancer Institute said”b

Medscape, May 2009 - “Ixabepilone (Ixempra) for metastatic breast cancer is an example of a cancer drug that adds ‘a small benefit at a high cost,’ says an editorial in the May 1 edition of the Journal of Clinical Oncology. The editorial accompanies a new cost-efficacy study in the same issue of the journal that found that the addition of ixabepilone to capecitabine (Xeloda) adds about $31,000 to the overall medical costs of metastatic breast cancer while providing about 1 more month of ‘quality-adjusted’ survival”c

The Independent, August 2008 - “The National Institute for Health and Clinical Excellence (NICE) issued draft guidance rejecting the drugs Sutent (sunitinib), Avastin (bevacizumab), Nexavar (sorafenib) and Torisel (temsirolimus)”“The guidance rejects the drugs because they are not cost effective”d

The Wall Street Journal, March 2009 - “Expert advisers in the U.K. are sticking with their view that GlaxoSmithKline’s Tykerb is too costly to justify routine use in women with advanced breast cancer. The British government’s National Institute for Health Effectiveness, or NICE, put out a final appraisal that said Tykerb hadn’t ‘demonstrated that it was cost effective’ in comparison with other treatments. It put forth a similar view last summer”e

3


Price Caps

Employed as a Tool

In Oct. 2006, Genentech

announced a price cap on

Avastin based on a patient’s

incomea

In Sept. 2006, Amgen

instituted a price cap on Vectibix at

$4,000 per dose (20% lower than BMS’s Erbitux)d

In May 2006, BMS

announced a price cap on Erbitux for

patients that reach a monthly

threshold

The UK government (NICE) uses cost/benefit analysis in evaluating

drugsc

Genentech capped Avastin at USD 55,000/year for patients with a household income less than $75,000 a yeard

If patients spend more than 5% of their annual gross income on copayments, then they become

eligible for free drugs through an assistance programb

Patients who spend over USD 10,000/month become eligible for free or discounted drugs through a charitable programa

A threshold of GBP 30,000 per quality-adjusted life year

(QALY) is used in evaluating drugs for reimbursementc

Examples of price cap initiatives

Companies are reacting with price caps…

Sources : a”Contracting, rebating, risk-sharing – IMS Conference hears about more innovative approaches to pricing”, IMS Global Insights; b“Managed CareBest Practices in Oncology Management”, Conference report, November 2006; c“Cost-Effectiveness of Cancer Drugs Is Questioned”, The Wall Street Journal, June 2009 and “Time to Consider Cost in Evaluating Cancer Drugs in United States?”, Medscape Today, July 2009 ; d“Top Of The Cancer Market?”, Forbes, October 2006

3


… and pay for performance arrangements

Note: 1Pay for Performance is more popular in Europe.US, insurers have less leverage with drug makers because of tough state regulations and marketplace pressuresSource: ; a“Money-Back Guarantee”, Pharmaceutical Executive, April 2008; b“Drug Deals Tie Prices to How Well Patients Do”, New York times, April 2009; c“Pricing Pills by the Results”, New York times, July 2007;d “More Velcade-Style Risk-Sharing In The UK?”, Europharmatoday.com, January 2009;

3

In 2001 Pfizer convinced the State of Florida to put all its drugs on the state's Medicaid formulary. In return Pfizer agreed to rebate a portion of drug costs if its drugs failed to generate long-term cost savings across the healthcare systema

• This model worked for Pfizer, enabling the company to avoid up-front discounts and back-end rebates, while saving the State of Florida USD 41.9MM in other healthcare costsa

In 2007, after the NHS in Britain decided not to pay for the cancer drug Velcade, Johnson & Johnson offered a money-back guarantee if Velcade failed to reduce tumors by at least 25%b,c

• Through this Pay for Performance strategy, the NHS designated Velcade as cost-effective for up to four cycles of treatmentc

In 2007, United Healthcare entered into a risk sharing agreement with Genomic Health. The company sells Oncotype DX®, a USD 3,460 genetic test that determines whether an early-stage breast cancer patient would benefit from chemotherapyc

• United Healthcare agreed to pay for the test for 18 months, on grounds that it would seek a price negotiation if the test failed to have the intended medical impactc

In 2009, in response to a negative UK NICE appraisal, Merck offered to refund the primary care cost of its drug Erbitux, if a patient did not respond within 6 weeksd

In 2009, when Tarceva was declared cost ineffective by NICE, Roche offered a rebate for the cost difference between Tarceva and the incumbent NSCLC treatmentd

Pay for Performance Examples

Drug companies are increasingly offering discounts to insurers based on drug performance rather than quantity of drug utilized1


Companies are also conducting head-to-head trials in order to demonstrate superiority for their agent over alternatives

The crowded market is resulting in increased pressure on drug companies to conduct head-to-head trials to prove that their product is better than the competitor’s product

Note: 1Trial halted in June 2009 as better survival rates could not be established; 2FDA approved Sprycel for treatment of CML since the study established better survival rates in Gleevec-resistant patients. The drug fulfills the need for second line treatmentSource: aClinicaltrial.gov, b“Pfizer halts Sutent breast-cancer trial”, fiercepharma.com, June 2009; c“FDA Grants Full Approval For SPRYCEL For The Treatment Of Adults With Chronic Myeloid Leukemia”, MedicalNewsToday, May 2009

Comparison Condition

Second line NSCL Cancer

First line metastatic Colorectal Cancer

First line metastatic Breast Cancer

First line CML

Adjuvant Breast Cancer

Zactima vs Tarcevaa

Recentin vs Avastina

Sutent vs. Avastin1,b

Sprycel vs Gleevec2,c

Tykerb vs Herceptina

Trial Sponsor Expected Completion Date

Results were expected in September 2009;

Regulatory submissions withdrawn

May 2011

Halted in June 2009

Complete

May 2013

Astrazeneca

Astrazeneca

Pfizer

Bristol-Myers Squibb

GlaxoSmithKline

3


Share of Biologics Within Top 100 Products

Greater use of oral therapeutics is changing oncology

Source: aWorld Preview 2014, May 2009, Evaluate Pharma report; bMonthly oncology report, October 22, 2007, Rodman and Renshaw equity research

2322212019181716141312111099

777879808182838486878889909191

0

20

40

60

80

100

2014E2013E2012E2011E2010E2009E200820072006200520042003200220012000

ConventionalBiologics

Tech

nolo

gy %

of

Rx

& O

TC S

ales

343126

0

666974100

0

20

40

60

80

100

2015E2010E20062000BiologicsConventional

% o

f Tot

al S

ales

Percentage of Worldwide Rx & OTC Pharmaceutical Sales from Biotech vs. Conventional Technologya

Unlike the overall industry, orals are gaining share in Oncology

Oncology Market for Targeted Therapies: Biologics vs. Conventional Technologyb

60%40%20%0%

2000 11%

2008 28%

2014 50%

10% 30% 50%

4


Oral oncologics are managed using traditional utilization tools…

204417 417 417 417 417

22222 10814810941

36

3434343434

0

500

1,000

1,500

2,000

Tamoxifen

1,648

1,444

Tykerb

1,648

210

877

Thalomid

1,648

174

873

Tarceva

1,648

207

879

Sutent

1,648

275

879

Glivec

1,645

274

882

Num

ber o

f PD

Ps

cove

ring

drug

s

Traditional tools such as tier status, prior authorization, quantity limits and co-payments are being adopted for oral oncologics

Note: 1Selected drugs include Glivec, Sutent, Tarceva, Thalomid, Tykerb and Tamoxifen (Data from November 2008 for Medicare Part D plan)Source:a“Cost Sharing for Cancer Patients in Medicare, 2009”, Avalere Health and American Cancer Society Cancer Action Network, December 2008

Formulary Status of Oral Oncology Brandsa,1

Tier 1Tier 2Tier 3Tier 4Tier 5Tier 6

Drug % of Plans withDrug on Formulary

Primary TierPlacement

% of Plans:Prior Authorization

% of Plans:Quantity Limits

Primary Cost-Sharing Range

Gleevec 100% 4 70% 29% 26% - 35%

Sutent 100% 4 62% 32% 26% - 35%

Tarceva 100% 4 62% 32% 26% - 35%

Thalomid 100% 4 68% 25% 26% - 35%

Tykerb 100% 4 74% 42% 26% - 35%

Tamoxifen 100% 1 0% 2% $ 0 - $10

4


… and this trend is increasing over time

4641

57

40

7167

42

5348

6264

556360

7271686876

0

20

40

60

80

Tykerb2ThalomidTarcevaSutentGleevec

2009200820072006

PD

Ps

requ

iring

Prio

r au

thor

izat

ion

(% )

PDP’s1 Requiring Prior Authorization, 2006–2009a

Enr

ollm

ent-W

eigh

ted

Ave

rage

C

oins

uran

ce A

mou

nt (%

)

Note: 1PDP’s are Prescription Drug Plans; 22006 data omitted for Tykerb because the Food and Drug Administration (FDA) approved the drug in March 2007Source: a“Cost Sharing for Cancer Patients in Medicare, 2009”, Avalere Health and American Cancer Society Cancer Action Network, December, 2008; b“Oncology trends report”, NCCN

282727272930

2829283030303030

3331

333333

0

5

10

15

20

25

30

35

Tykerb2SutentGleevec ThalomidTarceva

% Coinsurance Amount, 2006-2009a

PDPs are increasing the use of prior authorization to control access to branded cancer drugsa,b

• However, the administrative burden of obtaining prior authorization is high, and the process is time-consuming for payers and providersb

PDPs are shifting the cost burden to the patients by gradually increasing co-insurance amounts for brand-name oral anticancer drugsa

2009200820072006

PDP’s are increasing the use of traditional utilization tools such as prior authorization and co-payments

4


Table of Contents


Evidence of Changes

Case Studies

How to Prepare


Case Studies: Close But Not Yet

We are clearly seeing different dynamics in the oncology market than we have historically

However, we have not yet seen significant competition driven solely by pricing. This is a scenario which could emerge when there are multiple, largely equivalent agents available in the marketplace

To date, potential competitive situations (Erbitux vs Vectibix, Nexavar vs Sutent and Tykerb vs Herceptin) have resolved quickly with clear winners based on clinical data, labeling, and physician preference (not payorpressure)


Case Study 1 – Vectibix position to displace the similar Erbituxwas thwarted by clinical data

Erbitux was launched by BMS/Imclone in 2004 for metastatic colorectal cancer patients1

Vectibix was launched in September 2006 by Amgen for metastatic colorectal cancer patients2

• Analysts expected that Vectibix would replace Erbitux as a treatment for colon cancera,b

Both Vectibix and Erbitux are antibody-based therapies that are administered intravenously; however Vectibix had a few potential advantages

• More convenient (every other week) administration and lower cost (20% discount) compared to Erbituxb

• Lower frequency of infusion reactions (1% compared to 3% for Erbitux) i,j

Sales of Vectibix in 2006 (Oct-Dec) were USD 39MM and the company was upbeat about the futurec

Analysts at Merrill Lynch predicted that Vectibix would eventually take 60% of Erbitux's market. They also lowered their projected sales figures for Erbitux for 2008-2010d

Scenario at Launch

In March 2007, Amgen discontinued a trial of Vectibix due to 231 cases of death or disease progression. Vectibix sales in the second quarter of 2007 fell from USD 51MM to USD 46MMe,f

Erbitux maintained steady growth even after the launch of Vectibix

• The total number of patients treated with Erbitux increased in October 2007, and market share rose to 14.8% in that month g

• Vectibix did not show any month-to-month market share increase (in October 2007) and was underperforming according to analystsg

In 2009, label changes for both Erbitux and Vectibix were implemented; these are expected to narrow the eligible pool of patients for both the drugs by up to 40%h

What Happened?

Erbitux vs Vectibix

Note: 1Approved as a single agent for EGFR-expressing metastatic colorectal cancer after failure of both irinotecan- and oxaliplatin-based regimens or in patients who are intolerant to irinotecan-based regimens OR used in combination with irinotecan, EGFR-expressing metastatic colorectal carcinoma in patients who are refractory to irinotecan-based chemotherapy; 2Approved as a single agent for the treatment of metastatic colorectal carcinoma with disease progression on or following fluoropyrimidine, oxaliplatin, and irinotecan chemotherapy regimensSource: aPress release, September 27, 2006, Amgem company website; b“Vectibix Will be EGFR Antibody of Choice for Colon Cancer Therapy”, October 6, 2006, GLG group website; cAnalyst conference summary of Amgen quarter results, January 27, 2007, Openicon website; d”Amgen wins approval for colorectal cancer drug”, September 28, 2006, Marketwatch website; e”Amgen Discontinues Vectibix(TM) Treatment in PACCE Trial Evaluating Vectibix(TM) as Part of Triple Combination Regimen”, March 23, 2007, Biotechnoloogy-europe website; fPress Release, July 26, 2007, Pfizer company website; g“Monthly oncology regimen report through September 2007”, Rodman & Renshaw, Inc.,October 22, 2007; h“New US labelling for Erbitux and Vectibix recommends against their use for large subset of colorectal cancer patients”, July 20, 2009, Scripnews website; i"Vectibix(R) Now Available For The Treatment Of Advanced Colorectal Cancer In Belgium, October 03, 2008, Medicalnewstoday website; jErbitux website"


Case Study 2 – In another potential head-to-head battle, physicians chose Sutent over Nexavar

Note: 1Sutent is a kinase inhibitor indicated for the treatment of: (i)Gastrointestinal stromal tumor after disease progression on or intolerance to imatinib mesylate (ii) Advanced renal cell carcinoma; 2Nexavar is a kinase inhibitor indicated for the treatment of advanced renal cell carcinomaSource: aPress Release, December 20, 2005, Company website; b”Stakeholder Opinions: Renal Cell Carcinoma - Novel Targeted Treatments to Fill the Void”, December 2005, Researchandmarkets report; c”FDA approves Bayer's kidney cancer drug”, December 22, 2005, Pharmafocus Website; d”Torisel: The New Kid on the Block for Advanced Renal Cell Carcinoma”, September 2007, Oncbiz website; e”Nexavar and Sutent, Both Indicated for Metastatic RCC, Look Set to Compete Well to the End of the Decade - Nexavar's 2010 Revenues Are Forecast to Reach $122 Million and Sutent's $179 Million”, February 13, 2006, Business Wire

Nexavar was launched by Bayer/Onyx in December 2005 for advanced renal cell carcinomaa,2

Sutent was launched by Pfizer in 2006 for the same indication1

Direct competition was expected:• Datamonitor forecasted Nexavar revenues would

reach USD 122MM and Sutent would reach USD 179MM by 2010b

• Although Nexavar had a first-to-market advantage, Sutent was expected to have superior efficacye

• Nexavar on the other hand, was expected to have better tolerability – side-effects were limited mainly to blistering and rashesc

• Cost of treatment was similar for both Sutent and Nexavar at USD 4,600 per treatment/monthd

Scenario at Launch

Sutent rapidly captured over 50% market share in renal cell carcinoma for all lines of therapy (July 2006)d

• Sutent became the standard therapy for first-line treatment of mRCC after launche;

• Nexavar competed more successfully in second line therapy with 35.1% patients receiving Sutent and 32.4% receiving Nexavar (October 2007)d

What Happened?

Nexavar vs Sutent

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0

20

40

60

80

100

06/2006 10/200608/2006 12/2006 02/2007 04/2007 06/2007

Nexavar

Sutent

Mar

ket S

hare

%

Renal Cell Carcinoma Market share (All stages/ All lines)d


Case Study 3 – Tykerb could not displace Herceptin without more data and a better label

Note: 1Reported as £ 62 million, conversion factor used as on November 16, 2009Source: a“Analysts raise NPVs of Promacta and Rezonic; Tykerb still star of GSK oncology pipeline”, Goliath Business News, July 2007 ; bBear Stearns report September 21, 2007; cPR News wire August 14, 2007; dGSK Annual Report, 2008; Grail analysis; eDrugs @ FDA; fClinicaltrial.gov; gkomenozark.org; hGenentech Website; iGSK press release; j“Tykerb Approved for Metastatic HER2+ Breast Cancer “, cancernetwork.com, April 2007; k“Glaxo's Tykerb still has some convincing to do”, Evaluate Pharma, March 2008

Herceptin was the first targeted therapy to be launched for the treatment of breast cancer in 1998

Tykerb (oral therapy) was launched in 2007 as combination therapy with capecitabine (Xeloda), for the treatment of patients with advanced or metastatic breast cancer (mBC) with HER2 over-expression and who progressed on prior therapy including an anthracycline, a taxane, and Herceptine

• Tykerb was approved in a second or third line settingk

• At the time of launch, GSK marketed Tykerb as a more convenient and user-friendly oral therapyg

Expectations for Tykerb were mixed at the time of launch:• Some analysts expected the drug to achieve blockbuster status by

2010a. Analysts assumed that drug would be effective in difficult to treat patients and patients with brain metastases, Tykerb was expected to gain share in first line and adjuvant settings.

• Others predicted Tykerb’s use would be limited until it demonstrated significant benefits when added to Herceptin.

• Analysts forecasted Tykerb sales to reach USD 104 MM1 in 2008b

At the time of launch, analyst expected the biggest sales opportunity for Tykerb to be in the adjuvant setting in the breast cancer marketb

Scenario at Launch

Tykerb reported modest global sales of USD 145.3MM in 2008d

• Sales were far behind Herceptin’s, which recorded global sales of USD 1.82 billion in 2008h

Factors contributing to Tykerb’s limited revenues were:• In August 2007, a study conducted by Decision Resources suggested

that oncologists did not prefer Tykerb as a replacement for Herceptin. Instead they were only using it as an alternative for Herceptin-refractory patients in the treatment of advanced breast cancerk

• 58% of oncologists opined that they would favor IV Herceptin over Tykerb because the administration of IV drugs remains an important source of income for their practicec

To boost revenues from Tykerb in breast cancer, the company decided to expand use of Tykerb in an adjuvant setting:• As of April 2007, GSK was studying Tykerb for its application in adjuvant

breast cancer : "We are dedicated to the further study and development of Tykerb in a variety of settings, including adjuvant breast cancer as well as in other solid tumor types“j

-Paolo Paoletti, MD, Oncology Medicine Development Center,GSK• GSK launched a head-to-head trial of Tykerb versus Herceptin in

adjuvant breast cancer in 2008. Results for this trial are expected by May 2013f

• In April 2009, GSK submitted an application to expand Tykerb use for first-line treatment of metastatic breast canceri

What Happened?

Tykerb vs Herceptin


Table of Contents


Evidence of Changes

Case Studies

How to Prepare


Preparing for a New Dynamic

While direct, payor-driven competition among oncology agents has not yet arrived, manufacturers need to be prepared for changes in the oncology market

Manufacturers may want to conduct head-to-head trials, or define market subsets where they can demonstrate superiority to potential alternative agents

Manufacturers may also want to consider scenarios where there are multiple agents with similar therapeutic profiles available for a given indication


For More Information Contact:

Grail Research([email protected])

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