Officially the pharma earnings season has kicked off – we had multiple significant updates this week from JNJ, Roche, Biogen, and Novartis.
Following the earnings update from large cap pharma is VERY important because, like it or not, they drive the change in pharmaceutical and biotech industries through active capital deployment.
They tend to have the best talent and obviously largest capital base to deploy and HOLD the best relationship with key global regulators.
In this post, I want to focus on Roche – they announced earnings on Wednesday.
ROCHE OVERVIEW
Roche has a very strong innovation engine that is backed by gRed (ex-Genentech R&D), pRed (legacy Roche R&D team), and Chugai (Japanese subsidiary) – they have churned out of the most life-saving therapeutics – including Herceptin, Avastin, and Rituxan.
Above mentioned blockbuster drugs have now faced significant revenue erosion due to biosimilar headwind, and Roche is now pushing ahead with new blockbuster drugs – as shown below.
As one of the largest pharmaceutical companies in the world, Roche has one of the best reputations in the industry and that gives them unparalleled access to FDA / EMA – the two most important medicinal regulators in the world.
BACK TO ROCHE EARNINGS
As a highly conservative Swiss mega pharmaceutical company, Roche generally does not move significantly with earnings – they always do great job managing investor expectations and sellside consensus, so that NO ONE is surprised.
However, this quarterly update was different – Roche stock sold off sharply with earnings.
What is notable is that it did not sell off when financial results were released, but when the Roche Pharma CEO (not the Roche group CEO who oversees both diagnostics AND pharma) Bill Anderson started to make comments about development plan for Roche’s Alzhimer’s disease – GANTENERUMAB .
Gantenerumab is a AMYLOID-PLAQUE clearing antibody that is viewed to have the best-in-class profile among various amyloid-plaque clearing drugs that are now approved (Aduhelm/Aducanumab) or in development (LLY’s donenumab).
Recently the pharma world has been in disarray after approval of Aduhelm from Biogen, but this has generated great interest in other drugs in the same class.
Generally, Alzheimer’s disease is perceived as a MASSIVE MARKET with instant blockbuster potential and gantenerumab is generally perceived to have the potential to be the best in class because it is viewed to have very strong potency in amyloid-plaque clearing AND can be delivered subcutaneously (under the skin) rather than intraveneously.
The commercial advantage of having subcutaneous option is enormous in Alzhimer’s disease market because it allows patients to get their dosing at home instead of having to go to infusion center with their caretakers and sit in infusion chair for hours. The treatment burden will be EXTREMELY high for the society with infusion setting.
So, investors had high hopes for some positive announcement from Roche about potential acceleration of development for gantenerumab for two reasons
- Eli Lilly announced that they will file their Alzheimer’s disease drug, donanumab, on accelerated basis – pleasantly surprising investors because that would bring forward launch by 1-2 years.
- Investors were speculating Roche would do the same because FDA already acknowledged amyloid plaque clearing activity of Roche’s gantenerumab in the approval document for aducanumab.
Unfortunately, Roche did NOT mention anything positive, and actually said potentially negative things to investors, including:
“WE DON’T THINK COMPETITIVE SITUATION HAS CHANGED OUTLOOK MUCH FOR GANTENERUMAB”
“WE HAVE PHASE 3 STUDIES THAT ARE ON-GOING AND WHEN COMPLETE IT WILL BE THE LARGEST STUDY ON COMBINED BASIS – THEY WILL READOUT IN 2H22″
“I THINK STORNG COGNITIVE DATA IS REQUIRED – WE ARE NOT TREATING IMAGING, BUT PATIENTS. WE WILL DELIVER BEST DATA PAKCAGE TO PAYORS AND REGULATORS”
“FDA IS NOT CONTENT TO APPROVE DRUGS SOLELY ON IMAGING DATA. ON EVERY PROGRAM WE HAVE PERIOD DIALOGUE WITH FDA/EMA – WE WILL LOOK FOR OPPORTUNITY TO ACCELERATE THE TIME TO BRING THE MEDICINE TO PATIENTS”
“WE HAVE A GREAT SHOT AT BEST DATA PACKAGE IN THE WORLD – IN TERMS OF JEOPARDIZING THAT, THAT’S OFF THE TABLE. WE INTEND TO RUN THE STUDY TO THE FULL COURSE TO THAT PATIENTS AND PHYSICIANS HAVE FULL CONFIDENCE IN MANY YEARS TO COME”
All above statements indicate that gantenerumab development plans REMAINS UNCHANGED while competitors are already moving ahead.
In pharma, being late to market has key disadvantages due to some specific concerns about treating patients – and this is why being first-in-class is so important – late comers have following barriers
- Switching barrier: in medicine, when a drug is working for a patient, you NEVER switch the drugs because patients may do worse on a new drug, doctors can be exposed to litigation if something goes wrong, and patients need to wean off from the drug before switching. Previous therapy should be cleared from the body – it is important to do switching study to put together switching protocol that would be safe for patients and give legal cover to physicians. this issue is particularly more important for chronic therapies – first to second to market drugs could take over the existing patient pool, leaving only incident population for competition when the late comers finally join the table.
- Doctors are already used to managing patients on other drugs: doctors also want to stich to what they know best. This is not because doctors don’t want to learn new things, but because their experience of managing side effect profile for patients is VERY important in delivering optimal care for the patient. By the time late-comer comes to the market, doctors will have experience treating thousands of patients – coming up with their own view on titrating drugs, giving drug holidays, or managing some side effects. This bar is particularly high for high volume therapeutic areas, like Alzheimer’s disease It is not just doctors that would have to re-learn everything for a new drug, but their entire support staff in the clinic or infusion centers.
- Incumbents already have volume advantage to give volume-based discount to payors: this could be anti-competitive, but it is the market.
As noted above, Roche is a highly conservative pharmaceutical company, but it should be noted that Roche holds regular dialogue with the FDA and EMA. My speculation is that (not investment advice) FDA or EMA may have said something to Roche that made Roche make a very different statement than Eli Lilly – another conservative mega pharma, who said they plan to file on accelerated basis.
FDA has been under significant public and political pressure since its controversial approval of Aduhelm – not foreseeing Biogen would price the drug at a VERY HIGH PRICE of $56,000 a year.
Given that Aduhelm is under review with EMA and Roche has very strong relationship with EMA (Europe’s FDA), Roche’s comment could turn out to be meaningful when it comes to predicting approvability of Aducanumab in EU.
I think development in Alzheimer’s disease is very exciting and more important it gives us hope – it is probably one of the most relevant issues for all of us that are in or out of the industry.
Let’s hope for more competition and investment in the development so that we can see replication of explosive innovation that we saw in oncology in Alzheimer’s disease!
What are your thoughts on Roche update or future development to treat Alzheimer’s disease? Please leave in the comment section below!
*not investment advice
