With Bristol/AstraZeneca In Driver’s Seat, GLP-1 Race Takes A Turn

Bristol-Myers and AstraZeneca’s acquisition of Amylin as part of a 50-50 collaboration brings a big new player into the fast-growing GLP-1 class, which is emerging as a key component of treatment in the large, but highly competitive Type 2 diabetes market.

Bristol-Myers Squibb Co.’s deal to acquire Amylin Pharmaceuticals Inc., then sell 50% of the asset to AstraZeneca PLC, raises the stakes in the diabetes drug market, particularly the increasingly competitive market for glucagen-like peptide-1 agonist therapies.

The acquisition of Amylin puts the launch of its newest GLP-1, Bydureon (exenatide extended-release), in the hands of two experienced and deep-pocketed partners, which already have a track record working together in diabetes [See Deal]. Chief rival Novo Nordisk AS will need to dig in its heels that much harder to maintain the market leadership of its first-in-class GLP-1 Victoza’s (liraglutide). Other drug makers are looking to launch GLP-1s as well, and may find being late to market more daunting.

The multi-billion dollar promise of GLP-1s is a key driver behind the acquisition, announced late on June 29. The GLP-1 class worldwide is one of the fastest-growing emerging therapeutic areas, with sales expected to increase from $1.7 billion in 2011 to $7 billion by 2020, according to the market research firm Decision Resources. Underscoring the potential, Victoza sales passed $1 billion in 2011, the drug’s second full year on the market. That kind of blockbuster trajectory isn’t often seen in today’s cost-conscious drug market.

Under the deal for Amylin, the companies will share equally in economics stemming from the acquisition, including profits and expenses, but Bristol is the official buyer [See Deal]. It is paying $7 billion as a cash tender offer to Amylin, including the purchase price of $5.3 billion, or $31 a share. The total price also includes assumption of $1.7 billion in net debt and a contractual obligation to Amylin’s former partner Eli Lilly & Co. AstraZeneca will then pay Bristol-Myers $3.4 billion in cash for 50% ownership of most of Amylin’s assets (Bristol will own the physical assets, which largely consist of a state-of-the-art manufacturing plant in Ohio) [See Deal]. The U.K. company will also have an option to buy for an additional $135 million rights to equal governance over the asset—a step it is all but certain to undertake.

This three-step process, the companies said, is the most efficient way of concluding the tie-up because it positions the seller to deal with one buyer, rather than a joint buyer, and, separately, allows the partners to flesh out the details of their own agreement later.

This three-step process, the companies said, is the quickest and most efficient way of concluding the tie-up because it positions the seller to deal with one buyer, an easier proposition than facing a joint buyer, and, separately, allows the partners, after the acquisition is finalized, to flesh out the details of their own agreement.

The handsome purchase price values Amylin at about seven times the company’s expected 2012 sales, according to Bernstein Research analyst Timothy Anderson. The $31 per share price is a 10% premium to Amylin’s stock close as of June 29, but more than a 100% premium to the biotech’s share price as of March 27, the day before news reports surfaced of Bristol’s initial bid for the company at $22 a share (Also see "Weeks After Bydureon Launch, Amylin Looks Like A Takeout Target" - Pink Sheet, 28 Mar, 2012.). That valuation seems roughly in line with the high end of analysts’ expectations for an Amylin take-out, based on a discounted cash flow analysis that has the exenatide franchise peaking in 2020 at nearly $2 billion.

Also key to the deal is Bristol’s and AstraZeneca’s broader ambition to be a major player in diabetes. Indeed, the partners’ determination to crack the market is evident from the unusual deal structure. Collaborative efforts to buy an asset and share ownership are extremely rare in pharma. They are complex and require tremendous “good faith,” in the words of one banker. But they could prove to be a creative way to plunge into large, resource-intensive markets, particularly those directed at primary care doctors, and an alternative to scaling back or even exiting from an important therapeutic area.

Making the complex deal easier is the partners’ familiarity with each other, based on their ongoing collaboration, begun in 2007 and built around two diabetes compounds Bristol developed in house. The new deal confirms their commitment, even as they struggle to find a groove in the vast, but competitive Type 2 diabetes market. Sales of Onglyza (saxagliptin), an oral dipeptidyl peptidase-4 inhibitor, and Kombiglyze (saxagliptin/metformin), totaled $473 million in 2011. While most would not extol the commercial performance of Onglyza, approved in 2009, Bristol executives argue that Kombiglyze, which entered the U.S. market in 2011, is having an “excellent launch.”

Regardless, the drugs have an uphill battle to make headway against market leader Merck & Co. Inc.Januvia (sitagliptin) franchise, which, along with the Janumet combination of sitagliptin and metformin, generated revenues of nearly $5 billion in 2011. The collaboration is also gearing up to launch a potential first-in-class sodium glucose co-transporter type 2 (SGLT-2) dapagliflozin (Forxiga). Although it faced a regulatory setback in the U.S. in January 2012, when FDA issued a complete response letter demanding new trials, the EU’s CHMP in April 2012 recommended it for approval (Also see "AstraZeneca/BMS's Dapagliflozin Needs European Epidemiological Study, But Headed For Strong Label" - Pink Sheet, 23 Apr, 2012.).

Amylin acquisition will give the alliance the critical mass it needs with payers and doctors, Bristol’s Elliott Sigal says.

The Amylin acquisition will give the alliance the critical mass it needs with payers and doctors, said Elliott Sigal, Bristol’s president of R&D, chief scientific officer and interim head of business development, in an interview. The deal brings two marketed GLP-1s into the partners’ portfolio: twice-daily Byetta (exenatide) and the once-weekly Bydureon (Also see "$7 Billion Amylin Buyout Boosts BMS, AZ Diabetes Partnership" - Pink Sheet, 30 Jun, 2012.). It also allows the companies to leverage costs associated with integrating Amylin operations into the larger alliance. And it offers financial advantages in the form of a better tax rate for Amylin products than the biotech could obtain on its own, and net operating losses, stemming from Amylin’s debts and contractual obligations, which Bristol intends to apply against the gain it will make on the proceeds of the AstraZeneca portion of the deal.

The companies expect the deal to be slightly accretive beginning in 2014, with more meaningful benefits accruing later in the decade, Bristol’s CFO Charles Bancroft said.

Although the companies on separate analyst calls July 2 were not specific on where savings would come from, Bancroft estimated they would total about 30% over time, beginning in 2013. Initially at least, cutting the combined sales forces is likely not on the table, as Bydureon is in launch mode and the three companies focus on complementary, rather than overlapping, doctor groups.

At $7 Billion, A Hefty Premium

Whether or not exenatide will be worth the hefty pay-out remains to be seen. Bristol and AstraZeneca believe their success will depend on their ability to build the global market, penetrate a drug that is now sold primarily through specialty channels into primary care, and execute on new formulations and devices for exenatide. The product profiles of several competing GLP-1s, still in development at Big Pharma rivals, also will be important factors.

“Given what is likely to be a substantially more competitive category going forward, without knowing how market shares will shake out across the different products it is difficult to say whether Bristol/AstraZeneca overpaid for Amylin – many investors will likely feel that indeed the aggregate purchase price of $7 billion is high,” said Anderson in a June 29 research note.

Bristol/AstraZeneca believe they will be well positioned to maximize the launch of Bydureon across different physician groups and geographies. And with the addition of two GLP-1s, they are positioning the collaboration as being at the forefront of the diabetes drug market as the first to offer a portfolio of all three “modern medicines”: GLP-1s, DPP-4s and SGLT-2s.

“We see significant opportunity for growth of GLP-1s,” said Giovanni Caforio, Bristol’s president of U.S. pharmaceuticals, in an interview. “GLP-1s today represent only 6% of the diabetes market and in the last few years, endocrinologists have been the main prescribers. We see significant opportunity for growth and for a product that will be prescribed by primary care docs.”

Bydureon has captured the spotlight recently, and is the main driver of Amylin’s valuation, while Byetta’s share of the GLP-1 market continues to drop. But Byetta’s recent approvals in the U.S. and Europe (FDA approval in Nov. 2011 and EU authorization in March) for use with insulin glargine (Lantus), could be an under-recognized opportunity for the short-acting formulation of exenatide. Still, the partners don’t market insulin or have a publicly known deal for one with a supplier, and that could pose challenges as rival drug makers look to develop GLP-1s in fixed-dose combinations with insulin.

Bristol/AZ Put Some Muscle Into It

Bristol and AstraZeneca will add boots on the ground to support the Bydureon launch. Each currently has about 600 reps dedicated to diabetes, according to Caforio. Amylin launched Bydureon in the U.S. earlier this year with a diabetes sales team of about 650, months after terminating a long-standing deal with Lilly. Though that collaboration was fruitful and led to the development of Byetta and Bydureon, it fell apart after Lilly announced in May 2011 that it had inked a separate diabetes deal with Boehringer Ingelheim GMBH, which Amylin viewed as a conflict of interest (Also see "Amylin, Lilly End Exenatide Tie-Up, Marking End To Litigation" - Pink Sheet, 8 Nov, 2011.).

The multiple forces will be complementary, he added. While Amylin’s team has built excellent relationships with endocrinologists, Bristol and AstraZeneca are stronger in primary care. And the infusion of sales reps will put the commercial team behind Bydureon more in line with Novo Nordisk’s diabetes sales force, which the company has previously said is about 2,000 reps in the U.S. Bydureon was approved in Europe last year and in the U.S. in January (Also see "Amylin’s Bydureon Approval: How Does It Sit With Novo Nordisk?" - Pink Sheet, 6 Feb, 2012.).

Bydureon will need all the support it can get. As the first once-weekly GLP-1 to reach commercialization, it has a dosing and convenience benefit over Victoza (once-daily administration) and will have a first-to-market advantage over other long-acting GLP-1s in development. But the drug is not without its failings, which leaves open the door for Victoza to continue its leadership reign and room for new entrants. The data underlying its pivotal clinical trials was mixed.

Moreover, Bydureon is administered through a cumbersome delivery device and has to be reconstituted before administration. To simplify the process, Amylin has been developing a dual-chamber pen formulation, expected to be filed for regulatory approval in 2013. A weekly suspension formulation that could be used in auto-injectors is expected to enter Phase III clinical trials later this year, and a potential monthly suspension formulation is in Phase II trials.

Analysts differ on exactly how much of a drawback Bydureon’s current proposition is for patients, but clearly, a better formulation would be a positive. “The prospects for Bydureon would be significantly decreased if the only formulation available would be this cumbersome reconstituted syringe,” Decision Resources analyst Donny Wong, said in an interview. Decision Resources forecasts that Victoza will remain the market leader in the GLP-1 class, with Victoza generating peak sales of $2.5 billion by 2022, compared to peak sales of just under $2 billion for Bydureon.

A Two-Drug Field, But Only For Now

While safety and efficacy are by far the most important factors to physicians, patients and payers, on efficacy, so far, Victoza stands on top. In a critical head-to-head clinical trial, DURATION-6, intended by sponsors Amylin and its then-partner Lilly to demonstrate the superiority of Bydureon to Victoza, once-weekly Bydureon turned out to be inferior to once-daily Victoza on reduction of hemoglobin A1C. Bydureon did, however, have an improved gastrointestinal side effect profile with lower rates of nausea, vomiting and diarrhea, but there were no differences in drop-out rates (Also see "Failed Head-To-Head Study Clouds Bydureon's Commercial Future" - Pink Sheet, 3 Mar, 2011.).

Even Amylin admits that the additional tolerability of Bydureon and the convenience it offers of once-weekly dosing alone won’t convince payers to pay a premium – they want to see improved compliance. Here Amylin insists Bydureon has an edge – but compliance studies have not been done and Amylin has said there are no current plans to do them near-term.

Most important, however, Amylin has an ongoing outcomes study, EXSCEL, designed to investigate the potential for Bydureon to reduce cardiovascular events relative to standard of care in Type 2 diabetics, with results expected in 2016. A positive result would fit well with the collaboration’s interest in moving “beyond the control of glucose-only for diabetes patients whose major set of risk factors lead[s] to a significant cardiovascular event rate and death,” said Sigal on the analysts’ call.

Novo Nordisk and Bristol/AstraZeneca won’t have the field to themselves for long. Lilly and Sanofi – two of the world’s leading diabetes drug providers – and GlaxoSmithKline PLC are among the drug manufacturers with GLP-1s far along in the pipeline (see chart).

Sanofi and GSK are both on track to file their GLP-1 candidates in the U.S. by the end of the year. Sanofi’s Lyxumia (lixisenatide), partnered with Zealand Pharma AS, is administered once daily and has already been filed in Europe. GSK’s albiglutide is administered once weekly and is delivered in an easier-to-use pen device with a fine gauge needle. However, neither Lyxumia nor albiglutide have demonstrated the kind of efficacy that might oust Victoza from its leadership position. Albiglutide was shown to be non-inferior to preprandial insulin in an open-label Harmony 6 clinical trial but failed to demonstrate non-inferiority against Victoza in an 841-patient trial called Harmony 7 (Also see "GSK Airs Phase III Data For Weekly GLP-1 Albiglutide, Plans To File By Year-End" - Pink Sheet, 3 Apr, 2012.).

The Phase III clinical program for Lyxumia is testing the drug in nine clinical trials, comparing the GLP-1 to placebo, various oral anti-diabetic drugs and insulin. In one Phase III trial, GetGoal-F1, comparing Lyxumia to placebo, the drug resulted in statistically significant differences in HbA1C and weight loss, but the differences weren’t as significant as those seen in the Phase III pivotal trial for Victoza. The real potential market opportunity for Lyxumia is in a fixed-dose combination with Sanofi’s market-leading long-acting insulin Lantus.

Lilly’s dulaglutide is a once-weekly administered GLP-1, which the company is currently studying in five Phase III clinical trials. Four of the studies are expected to read out later this year, and the final study in early 2013, with a filing date targeted for later that year. Lilly recently highlighted data from a Phase II study, however, showing dulaglutide was non-inferior to placebo on systolic blood pressure in diabetics and had a positive effect on heart rate (Also see "Diabetes Leaders Lilly, Sanofi Give A Glimpse Of GLP-1 Strategy" - Pink Sheet, 13 Jun, 2012.). Lilly’s clinical trial program does include a head-to-head study against Victoza.

Novo Nordisk, meanwhile, is working on its own longer-acting GLP-1, semalutide with Phase III studies scheduled to start in 2013, as well as its own fixed-dose combination of Victoza with its long-acting insulin hopeful Degludec. The long-acting insulin, which Novo Nordisk is calling Tresibo, is pending at FDA but the agency recently extended its review of the product by three months to Oct. 29 to review additional data.

Given that Bristol/AstraZeneca don’t market insulin, and the market is tied up by diabetes rivals, it’s not clear how the company might compete if fixed-dose combinations of insulin and GLP-1s eventually hit the market. On the analysts’ call Bristol’s Sigal expressed interest in combining the short-acting Byetta with short-acting insulin, but didn’t otherwise expand, and AstraZeneca executives were firm in saying their current priority is the pre-insulin patients.

With the acquisition of Amylin, Bristol and AstraZeneca have added an important new drug to their arsenal, one that could greatly increase their position in the diabetes market. Now they need to execute.

Join The Party: A Closer Look At The Crowded GLP-1 Field
Drug Manufacturer	Drug Name	Development Stage	Differentiating Factors
Amylin Pharmaceuticals	Byetta (exenatide)	Marketed	Twice-daily administration
	Bydureon (exenatide extended release)	Marketed	Once-weekly administration
	Exenatide monthly	Phase II	Once-monthly administration
Novo Nordisk AS	Victoza (liraglutide)	Marketed	Once-daily administration
	Liraglutide/ degludec (basal insulin)	Phase III	Fixed-dose combination
	Semaglutide	Phase III start planned in 2013	Once-weekly administration
	NN9924	Phase I	Oral administration
	NN9926	Phase I	Oral administration
Eli Lilly & Co./ Boehringer Ingelheim GMBH	Dulaglutide	Phase III	Once-weekly administration
GlaxoSmithKline PLC/ Human Genome Sciences Inc.	Albiglutide	Phase III	Once-weekly administration and fine gauge needle
Intarcia Therapeutics Inc.	ITCA-650	Phase III	Once-yearly administration of exenatide using miniature osmotic pump technology
Sanofi/ Zealand Pharma AS	Lyxumia (lixisenatide)	Registration	Once-daily administration
	Lyxumia/ Lantus (insulin glargine)	Phase III	Fixed-dose combination
Sources: Company reports, interviews