Both Teva and the analyst community at large were wrong-footed this week as Biogen suddenly released additional details of the results of its phase III DEFINE study on BG-12, an oral treatment for multiple sclerosis (MS), following its initial presentation at the American Academy of Neurology meeting in Honolulu earlier this month. The market had already been somewhat disappointed by Teva’s data from the ALLEGRO trial on Laquinimod, its own oral MS candidate, so the fact that BG-12 appeared to perform much better in the key area of relapse reduction just served to crystallise the view that Teva is going to have difficulty establishing Laquinimod in a marketplace that already contains Novartis’s Gilenya.
Comparing MS trials is always difficult unless they are actually head-to-head, but the fact remains that Laquinimod showed an annualised relapse rate of only 23%, which is well below that of the existing injectable therapies as well as Gilenya (54% after two years). On disability progression, where Laquinimod achieved a reduction of 36%, it was in line with Gilenya (37%). BG-12, meanwhile, managed a relapse rate at two years of 49% and an annualised relapse rate of 53%, with disability progression reduction of 38%. Thus, with the reduction in disability progression seemingly much the same across all three drugs, it is hard to see why physicians are going to prefer a product that offers a significantly inferior performance on relapse rate. Unless, of course, Teva can produce long-term data that supports its view that Laquinimod has disease-modifying characteristics that are not necessarily shared with other oral treatments. One caveat is that both Teva and Biogen will be presenting the results of their second phase III trials on their respective products later this year (the BRAVO trial on Laquinimod and the CONFIRM trial on BG-12), so the data from these could differ from that released to date. Also, we don’t yet have full safety data on BG-12. Nevertheless, as things stand, Teva appears to have a tough row to hoe in the oral MS market. This is unfortunate because, as we highlighted in our most recent note on Teva (‘Overshadowed by Copaxone, 28th February 2011) the one thing that might have diverted attention from concern over generic and other competition to Copaxone would have been the hope that Laquinimod would be a major success.
As the number of oral MS therapies grows, it is possible that price competition will also become a factor. Historically, the manufacturers of MS drugs have increased prices annually and the introduction of newer, better therapies (Tysabri and Gilenya, for example) has simply led to a step-up in the price of all the drugs on the market. As a result, the cost of treatment has almost quadrupled over the last decade. In our view, Teva is likely to be cautious about changing this trend, given the huge profits that it makes from Copaxone, but if it looks likely that BG-12 will actually be approved, Teva may decide to position Laquinimod as a lower-cost option to the other oral therapies in an effort to persuade the health insurance companies to give it a more favourable formulary position than its rivals. The counter-argument to this is that the market is not very price-sensitive, since health insurers pick up most of the tab and patients often have their co-pays subsidised by the drug manufacturers, who recycle some of their annual price hikes into support programmes. However, looking at the broader healthcare context, it seems unlikely that either the private health insurers or the government will tolerate ever-rising prices for much longer. And as a generic company, Teva is surely better positioned than its rivals in the MS field to compete in a market that starts to care about price.
Posted on 23rd April 2011