Immunology is a hot space for all the large pharma because it is one of the largest (if not the largest) therapeutic areas – and therefore a great product can move the needle for them.
This is particularly important for big pharma because so many of them are facing massive loss of exclusivity on many of their drugs starting in 2025 – except $ABBV is who actually undergoing Humira biosimilar erosion right now.
So far we had earnings reports from Abbvie, Johnson and Johnson, Novartis, and UCB. Many prints have been confirmatory of my view and I expect some continuation of the same trend for some product / class within immunology and some rapid changes coming up – albeit it is on FDA’s hands. I discuss them below
SKYRIZI IS POISED TO BE THE NEXT HUMIRA
IL-23 is growing massively – driven by Skyrizi of Abbvie. Skyrizi beat consensus by ~6% in 2Q while Tremfya (of JNJ) missed consensus expectations.
Based on KOL checks, Skyrizi is growing by quickly capturing share in two major disease categories – psoriasis and crohn’s.
Psoriasis is one of the largest categories in immunology and IL-23 share is growing increasingly with better efficacy profile than IL-17. The agent that is driving IL-23 growth is Skyrizi and it is increasingly becoming first biologic of choice for many physicians over JNJ’s Tremfya and Stelara.
Physicians generally go with IL-23, then switch to IL-17, and then switch to other agents. For IL-23, physicians are using Skyrizi and Tremfya gets hurt here because physicians won’t use another IL-23 agent after IL-23. They move patients over to IL-17 agent where Cosentyx is well placed (but this dynamic is about to change – to be discussed below).
Then why are patients choosing Skyrizi over Tremfya? Better efficacy and convenient profile. Skyrizi treatment is just four 10-second infusion annually. Tremfya? 6 injections a year. And it has lower efficacy.
Physician checks also indicate that younger generation patients are more open to biologics vs. orals than older generations (oral as a preferred option is becoming less important point if efficacy is weak and the injection psychological barrier is coming down with new generation).
Skyrizi is about to replicate their psoriasis success in inflammatory bowel disease. Crohn’s disease is off to an amazing start and UC will also accelerate the growth of the drug.
ABBV is the winner – eating the cake from another immunology powerhouse Johnson and Johnson.
IL-17 SPACE IS RIPE FOR SOME MASSIVE DISRUPTION
After IL-23, psoriasis patients receive IL-17 -> which makes IL-17 another massive class. IL-17 has largely viewed to be a duopoly – Cosentyx (Novartis) is leading with its first-to-market edge and LLY’s Taltz is a fast follower with incrementally stronger data over Cosentyx.
However, things are about to change with Bimekizumab (UCB) approval – the next-gen IL-17. Armed with superiority claim over the de-factor standard of care IL-17 agent Cosentyx, bimekizumab, if UCB can get it approved in the US, will be highly disruptive.
Many investors are thinking “UCB is a small company and therefore they will never beat the rebate game that Novartis and Lilly are playing” – and they are bearish on the launch as a result.
well – ex-US Bimekizumab (brand name Bimzelx) is launching very strong per UCB’s 1H23 financial update. Bimzelx beat consensus by more than 10% -> and already has >35% dynamic share in IL-17 in JPN/EU/Canada – where “rebate game” is even tougher.
Physicians have looked at the data and are choosing what is best for their patients – for a much smaller company like UCB to already down 35% of dynamic share is an impressive performance.
Over time, I expect IL-17 dynamic market share to continue to increase and UCB’s share of the market is expected to converge to dynamic market share – just following the footsteps of what Skyrizi has done – you build new patients over time and combined with long median duration of therapy (patients tend to stay on a therapy for years), revenue inflection takes place – which sellside tends to under-model all the time.
So UCB will eat Novartis’ and Lilly’s lunch. Lilly owns Mounjaro and Taltz is a relatively small product – so it won’t affect them much. But however, Novartis?? Cosentyx is a $5bn product – now entering into hidradenitis suppurativa – potential >$1bn opportunity. Unfortunately, UCB has superior data there as well.
Winner: UCB / Loser: Novartis and Lilly.
I think IL-17 market disruption could be a big thematic play for 2H23 and beyond – a newcomer with superior data can always disrupt the existing market – a story that has played out over and over in drug market because physicians do choose what’s best for their patients.
SOTYKTU – THE ORAL BENEFIT IS NOT STRONG
Sotyktu launch had high expectations – unfortunately, the drug is struggling to generate revenue – only $25M of sales in 2Q23.
BMY is blaming free drug – but when I speak to KOLs, their view is different. I was shocked to find out that physicians are using Sotyktu after IL-23 and IL-17 (yes after biologics) and they are not taking this path because of payors, but because PATIENTS ACTUALLY PREFER SKYRIZI for strong efficacy and convenience.
Physicians tell me they can use Sotyktu before biologics if they want because BMY is giving them away for free right now anyway – but they are actively choosing to put patients on Skyrizi first because patients want them to.
This defeats the whole thesis behind Sotyktu – the oral convenience to capture patients as a step therapy before getting to physicians…is simply not happening.
As a last line therapy, Sotyktu will have a really tough time growing into a $4bn peak sales mega blockbuster than Bristol is telling their investors.
So few patients that are getting Sokytu are those very few patients that have injection phobia. And Sotyktu is now displacing Otezla because.. Sotyktu has better data! Amgen is fighting hard with rebate game… pricing spirals down.
So.. bad for both BMY and AMGN
Data trumps all in therapeutics! (at least most of the time)
*not investment advice. *do your own research
