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Obesity Indication Report - Update
February 23, 2007
DRUGS IN DEVELOPMENT
Qnexa is a combination of low doses of phentermine and topiramate (an anti-epileptic drug), in Phase II development. The doses of the components have not been revealed. While in the past a company official said the dose of topiramate was lower than what was tested by Johnson and Johnson (JNJ dropped development of the drug for obesity due to its side effects and had tested doses as low as 64 mg), they recently told us that it was lower than the 192 mg dose tested by JNJ. Officials have also said variable things about the dose of phentermine used, most recently that it is lower than the 60+ mg that experts may use when treating obesity with phentermine alone. In Phase II testing performed at a single medical center, Qnexa showed relatively impressive 24-week intention to treat results, with weight loss of 10.6%, compared to 6% for topiramate, 5% for phentermine, and 2% for placebo. Given that the dose of topiramate may be between the 96 mg and 192 mg doses most commonly tested in other studies, the results for the individual components appear within reason, giving us greater confidence in the study. For example, a meta-analysis of topiramate studies found that the 192 mg dose produced placebo subtracted weight loss of 6.5%, with 96 mg generally showing weight loss that was 1.75% less (so 4.75%). Of note, Qnexa also reduced waist circumference by 6.2 cm (Acomplia had about a 3-3.5 cm reduction at a similar time frame in the RIO NA and EU studies). Regarding metabolic factors, the triglyceride reduction seen in the Qnexa study appears larger than that seen for Acomplia, but for high-density lipoprotein cholesterol (HDL-C), the company has only stated that no changes were seen (Acomplia increases HDL-C modestly).
One concern with Qnexa is the multiple potential side effects seen with topiramate, which include metabolic acidosis (caused by loss of bicarbonate in the urine), glaucoma (though this is usually seen within the first month of treatment), kidney stones, and psychiatric disturbances. However, we currently do not think these would be severe or frequent enough to interfere with the drug’s approval, particularly given the great need for more effective obesity drugs. There is also a high incidence of paresthesias, though these are more of a nuisance side effect and in studies does not commonly lead to discontinuation. Cognitive defects can also be a problem, but at least theoretically may be countered somewhat by the phentermine component of Qnexa (the Phase II study was difficult to interpret in this regard, due to a high rate of memory problems in the placebo group). Additional information is needed about why more patients on Qnexa had increased urinary frequency, and it needs to be verified that fluid loss did not contribute to the weight loss. Finally, a carcinogenicity study of phentermine, which was originally approved before such studies were required, will be running at the same time as the Phase III program, and the company should announce results of other preclinical toxicity studies at its next earnings call at the beginning of March.
Overall, we are encouraged by the weight loss seen with Qnexa, though this needs to be replicated in a larger and multi-center trial, and it will be important to see more metabolic data, especially Qnexa's effect on diabetes. Vivus needs to complete development of the once-daily formulation of Qnexa, and anticipates beginning Phase III testing with this formulation in mid 2007.
Contrave is a combination of the antidepressant bupropion and naltrexone, an opioid receptor antagonist used to treat drug dependency and alcoholism. Orexigen believes naltrexone acts synergistically with bupropion at certain sites in the brain. In a 24 week Phase II/III trial reporting results for completers, bupropion with a high dose of naltrexone led to a weight reduction of 7.52%, bupropion with a middle dose of naltrexone 7%, and placebo 1.03%. The top dose group had a high rate of side effects, and the company noted that the middle dose group had the best combination of efficacy and safety. Doses were not specified, but in other trials the company is testing or has tested bupropion at doses of 300 mg to 400 mg/day and naltrexone middle to high doses of 32 mg to 50 mg/day. The results for Contrave are about 1.2 to 2.7 times those seen with bupropion 300 mg to 400 mg alone in other studies. While we do have questions about the efficacy, since naltrexone alone has not shown much benefit in clinical trials, the results were consistent with an earlier proof-of-concept study and it is possible that naltrexone does enhance the effect of bupropion without independently resulting in weight loss.
Excalia is a combination of the antidepressant bupropion and the anti-epileptic zonisamide. While the exact doses have not been specified, the company has noted that in other testing, a combination of bupropion SR 300 mg/day and zonisamide 400 mg/day has been effective for weight loss, and they were trying to achieve greater efficacy and fewer side effects by adjusting the doses and titration. In a 24-week Phase IIa trial reporting results for completers, Orexigen’s combination led to a 9.2% reduction in body weight, compared to 6.6% for zonisamide, 3.4% for bupropion, and 0.4% for placebo. (For comparison, the bupropion weight loss was consistent with other studies. There is only 1 other placebo controlled trial we know of utilizing zonisamide. In doses up to 600 mg taken for 16 weeks, patients lost 5% of their body weight relative to placebo. The results should be higher for 24 weeks.) While the Excalia weight loss was relatively impressive relative to current options, about a third of patients discontinued early due to adverse events. The company states they are implementing a strategy to deal with this, but without knowing the specifics, we are relatively cautious about the drug because of the possibility that there will have to be dose compromises that lead to lower efficacy. On the other hand, if the side effects could be ameliorated by changing the titration of the drug, we would be more positive.
New Cannabinoid Inhibitors
There are several other drugs in development that act along the same pathway as Sanofi-Aventis's Acomplia. These include CP-945,598 (Pfizer - PFE) in Phase III, MK-0364 (Merck - MRK) in Phase III, and the Acomplia back-up SR 147778 (Sanofi-Aventis - SNY) in Phase II. Data on these drugs is sparse, and there is no data to date that any of these have greater efficacy than Acomplia.
POTENTIAL FOR GENERIC COMPETITION
A major challenge facing the combination drugs (Qnexa, Contrave, and Excalia) is whether patients will be able to use the individual components, which will be approved generics, instead. The combination would be more convenient, and the exact dosages are unlikely to be available, but given the cost savings, we think that off-label use of the generics for this indication will likely be reimbursed. Pending more information on the specific doses of the drugs used, we are estimating that generic usage will cut potential usage of these drugs by 40%.
TREND TOWARD COMBINATION TREATMENT
While the efficacy results for the new combination drugs are not as great as patients or physicians would like, they are better than existing options, particularly for Qnexa and Excalia, and if the results hold up in larger studies, they will demonstrate the power of combination treatment, which we think is likely one long-term trend in the obesity market. Amylin, for example, has initiated a trial combining pramlintide (Symlin) and leptin, and has talked about a possible triple combination with its version of PYY3-36. Since the fenfluramine-phentermine (fen-phen) combination was so popular (fenfluramine was subsequently taken off the market because it damaged heart valves), another potential future combination is Lorcaserin (Arena – ARNA), designed to be a safer version of fenfluramine, with phentermine. However, we think physicians and patients are likely to be hesitant to try the combination before it is tested in a clinical trial.
REIMBURSEMENT ISSUES AND OUTCOMES
Reimbursement is a market factor in addition to weight loss and safety, as noted in our Obesity Indication Report. In the US, insurers tend to view obesity as a cosmetic issue rather than a health problem that deserves reimbursement. Part of the reason is the lack of good outcomes studies. Sanofi’s drug Acomplia is likely to be the next new obesity drug on the US market, and its efforts to tackle the reimbursement issue will affect the drugs that follow. Sanofi hopes to change the focus of obesity treatment to abdominal obesity, cardiovascular risk factor reduction, and the benefits of even just moderate weight loss. While we think it will be difficult to get specific language in their initial label indication about treating risk factors (especially since changes in risk factors do not necessarily translate into changes in outcomes, as shown by the negative outcomes study for the HDL cholesterol raising drug Torcetrapib), we think their focus along with the growing appreciation of the link between obesity, insulin resistance/diabetes, and lipid abnormalities will start to influence at least some payors. However, it is likely that more documentation of benefits on clinical outcomes will be needed in order to sway the vast majority of payors.
The situation is a bit different in Europe, depending on the country. England already reimburses obesity drugs, and we think is likely to add Acomplia to that list. France has decided to reimburse Acomplia for obese patients with uncontrolled diabetes. In Germany, Sanofi is challenging a decision not to reimburse the drug.
Of note, both the approved drug Meridia (Abbott – ABT and Eisai) and Acomplia have ongoing clinical outcomes studies. Results from the Meridia study (SCOUT) are expected in 2009. Those from Acomplia’s clinical outcomes study (CRESCENDO) are not expected prior to 2010, but Acomplia also has two atherosclerosis studies (STRADIVARIUS and AUDITOR) whose results should come out between 2008 and 2009. All of the Acomplia studies are evaluating patients with abdominal obesity and other risk factors. While we think results from the atherosclerosis studies could further bolster reimbursement, unless there are very striking results, the clinical outcomes study may be necessary to be fully convincing. The outcomes for the trials are difficult to predict, since there is little good data on weight loss and outcomes, and the risk factor reductions with these drugs are modest.
If the outcomes trials for both Meridia and Acomplia are positive, we think that would open the door for reimbursement of other obesity drugs, as well. However, if for example, the Acomplia studies are positive and the Meridia one not, it could mean that other drugs will need their own outcomes studies to secure reimbursement, unless they show changes comparable to Acomplia in cardiovascular risk factors.
We should note, too, that pharmacoeconomic studies may help support reimbursement, though in the US, we think these would need to show actual reduction in the utilization of resources, rather than just predictions based on a reduction in risk factors. Vivus, for one, has announced plans to do such studies in their Phase III program, looking particularly at Qnexa's ability to eliminate the need for other medications.
MARKET OUTLOOK Acomplia will have a first to market advantage over other drugs subsequently entering the market, and the results of the above studies, if positive, would give it a further boost. While a positive outcome for the SCOUT study would be a boost for Meridia (which only has US sales around $50 million, partly due to concerns over its side effect of raising blood pressure) and provide justification for reimbursement, its composition of matter patent expires late in 2007. In addition, since Acomplia does not have the blood pressure side effects of Meridia, we think physicians would still prefer Acomplia over Meridia or its generics, unless Acomplia’s atherosclerosis and outcomes studies show no benefit at all.
As indicated above, Sanofi would like to focus Acomplia’s marketing on the reduction of abdominal obesity and its concomitant metabolic risk factors (such as insulin resistance and dyslipidemia), and is already sponsoring physician education programs geared towards this. Acomplia has shown modest improvement in glucose control in diabetics (reduction in A1C of 0.5% to 0.7%), and we think this will help it expand the weight loss market. There is some evidence that Acomplia’s effect on risk factors goes beyond the weight loss alone, though it is still unclear whether and to what degree this will be born out in comparison to other drugs in the pipeline. Acomplia’s effect on triglycerides was not greater than that seen thus far with Lorcaserin and was less than that seen with Qnexa; however, from the current evidence, neither of these latter two drugs have Acomplia’s effect of raising HDL cholesterol. Lorcaserin and Qnexa do not yet have data in diabetics, though one study estimated that in general, a 5 kg weight loss in 1 year should reduce A1C by 0.4%.
While we have some concern that Qnexa does not raise HDL, given its greater effect on weight (as well as waist circumference, an indicator of abdominal obesity), we think that it will eventually take the lead over Acomplia. Pending more data on the other new combination drugs and Phase III data for Lorcaserin, we are projecting that Contrave and Lorcaserin will take share below Qnexa and the cannabinoid inhibitors, with Excalia following (pending information on resolution of the side effect issue). Lorcaserin has potential upside if it is studied in combination with phentermine and shows good results, or if off-label use of the combination becomes popular despite a lack of data. We have projected limited share for the cannabinoid inhibitors other than Acomplia, since they have not yet shown a superior profile.
We also have relatively small projections for Amylin’s injectable obesity drugs currently, but if a combination of those drugs is more effective (and shows good benefits for risk factors), there is a great deal of potential upside for them (especially if they are formulated for weekly or less frequent injections).
Finally, we are also projecting that the introduction of all of these new drugs into the market will greatly expand the overall usage of long-term obesity drugs.
REVENUE MODELS
NEW MODELS
Qnexa - Vivus (VVUS)
Vivus has said that the Phase III trials for Qnexa only need to follow patients for up to one year (most likely since the components are already approved drugs: two years has been the standard, though the FDA has a draft guidance open for comment that now recommends one year). We project peak US revenue of $759.7 million, with peak worldwide revenue of $1.3 billion. Qnexa may need its own outcomes studies, depending on the results for Meridia and Acomplia. Threats are if it does not show a good effect on glucose control in diabetics, if Excalia overcomes tolerability issues, if Lorcaserin is thought to be safe and works well in combination with phentermine, or if Amylin comes up with a very effective combination of injectable drugs that be administered weekly or less.
Contrave - Orexigen
Since Contrave is a combination of approved drugs, we are estimating that the long-term Phase III studies will only need to be up to one year long, as for Qnexa. We project peak US revenue of $388.3 million, with peak worldwide revenue of $690.6 million.
Excalia - Orexigen
For Excalia, we are also estimating Phase III studies up to one year long, and project peak US revenue of $302.1 million, with peak worldwide revenue of $537.2 million. There is potentially a large upside for Excalia, if a new treatment regimen is able to maintain efficacy and reduce side effects seen in Phase II.
CP-945,598 - Pfizer (PFE)
For CP-945,598, pending further data and differentiation from Acomplia, we project peak US revenue of $250.6 million and peak worldwide revenue of $447.5.
MK-0364 - Merck (MRK)
Similarly, for MK-0364, pending further data and differentiation from Acomplia, we also project peak US revenue of $229.3 million and peak worldwide revenue of $416.4.
SR 147778 - Sanofi-Aventis (SNY)
And for SR 147778, pending further data and differentiation from Acomplia, we project peak US revenue of $258.6 million and peak worldwide revenue of $460.1.
UPDATES TO EXISTING MODELS
Acomplia - Sanofi-Aventis (SNY)
The addition of the new combination drugs, as well as competition from new cannibinoid inhibitors, is likely to erode Acomplia’s share and limits its growth potential. Our new peak US revenue is $577.6 million, down from $747.3 million. On the other hand, we are now projecting slightly higher European revenues, based on strong initial performance and reimbursement trends, so new peak worldwide revenue is $1.2 billion, up from $1.0 billion.
Lorcaserin, as Acomplia, will fall under increased competitive pressure, though not as much as Acomplia will from other cannabinoid inhibitors. Our reduction is also moderated due to the potential for combination treatment (as with the formerly popular phen-fen combination, noted above). Our new peak US revenues are $612.2 million, down from $661.8. Peak worldwide revenues are similar at $1.1 billion. Given the greater safety scrutiny needed for Lorcaserin (to rule out an effect on heart valves), the company has indicated that it is unlikely that the new FDA draft guidance recommending one rather than two year studies would affect their submission timeline.
Alizyme has still not found a partner for Cetilistat, and while this drug has fewer side effects than Xenical, which is also a lipase inhibitor, we would still like to see longer term trials before having more confidence in the drug. Our peak US and worldwide revenues are $211.5 million and $372.7 million, down from $284.3 million and 469.9 million.
Pramlintide Combo - Amylin (AMLN)
It is likely that Pramlintide will be formulated in combination with Amylin’s AC164594, AC162352 , or both. As a result, we have combined our revenue models for the Amylin drugs into one model. Since this is an injectable drug, and hence less convenient for patients, we are leaving our estimates conservative pending more data showing superior efficacy. Our peak US and worldwide revenues are $279.9 million and $491.5 million.