Leo Pharma Aims To Extend Reach Of Dermatology Business With Global Expansion And Picato’s Green Light For Europe

Danish dermatology specialist Leo Pharma is hunting for new pipeline assets after its next major product – Picato gel – got the green light from Europe’s top regulator.

With its leading research product, the actinic keratosis therapy Picato (ingenol mebutate) gel, recommended for approval in Europe Sept. 20 by the European Medicine Agency’s key Committee for Medicinal Products for Human Use, or CHMP, and after a 60% jump in headcount over the past four years, Denmark’s Leo Pharma AS is looking for new collaborations, partnerships and acquisitions to fuel the next stage of its global expansion program.

Leo acquired the rights to Picato from the Australian/U.S. company Peplin Ltd., which it bought for $287.5 million in 2009 (Also see "Skin Tight: Dermatology Specialty Leo Pharma To Buy Peplin for $287.5 Million" - Pink Sheet, 3 Sep, 2009.).

Not many pharmaceutical companies would have chosen 2008-09 to start investing in a major expansion program, including setting up in 11 new markets including the U.S – but the start of the financial downturn coincided with the decision by dermatology specialist Leo Pharma to break out of its northern European homeland.

Back in 2008, Leo Pharma was financially strong and focused on its pharmaceutical business. But future growth opportunities looked limited, recalled President and CEO Gitte Aabo in an interview this summer.

The Danish company, based in Ballerup, just outside Denmark’s capital, Copenhagen, previously conducted much of its international business through a network of distributors. This restricted contact with health care professionals and patients at a time when it wanted to improve its relationship with patients, Aabo noted.

Painful Adjustment

Leo Pharma thus decided to prune its network of distributors and to set up its own affiliates, a strategy that was not painless: revenue growth has stayed strong, averaging 13% annually, but profits have fallen in the past several years.

“The profit decline reflects the huge investment Leo has made,” Aabo explained. In 2011, Leo’s sales rose by 9% to reach DKK 8,021 million ($1.4 billion), but pretax profits declined by 6.4% to DKK 996 million ($173 million). However, in the same year, Leo Pharma’s headcount increased by 700 employees.

Nor was the strategy without risks.

But Leo Pharma has more benign shareholders than most companies – it is wholly owned by a private independent institution, the Leo Foundation, whose main purpose is to support Leo Pharma and to re-invest profits back in to the company, and is able to take a long-term view of the company's strategy. “The ownership structure has allowed us to pursue our long-term quest to become a global company,” Aabo confirmed.

That said, there also is increasing competitive pressure in the dermatology sector to contend with.

Big pharma companies like GlaxoSmithKline PLC and growing specialty companies like Valeant Pharmaceuticals International Inc. are taking an increasing interest in dermatology. GSK bought the private dermatology company Stiefel for $3.6 billion in 2009 ( (Also see "GlaxoSmithKline Buys Back Into Dermatology With $2.9 Billion Stiefel Deal" - Pink Sheet, 20 Apr, 2009.). In July 2011, Valeant bought Sanofi’s Dermik Laboratories for $425 million to boost its North American topical care business (Also see "Valeant Adds To Dermatology Business By Acquiring Sanofi's Dermik For $425 Million" - Pink Sheet, 11 Jul, 2011.).

And there is the possibility that major biotech companies with products indicated for moderate to severe forms of psoriasis, like Amgen Inc. with Enbrel (etanercept), Abbott Laboratories Inc. with Humira (adalimumab) and Johnson & Johnson with Remicade (infliximab), or the large number of companies researching novel approaches to psoriasis, will move onto Leo Pharma’s turf, the treatment of milder forms of psoriasis (Also see "Psoriasis Market Snapshot: An Area Drug Makers Are Itching To Get Into" - Pink Sheet, 23 Jul, 2012.).

Regaining Rights To Its Products

Over the past three to four years, Leo steadily has regained the rights to its products from distributors and partners in markets around the world, including U.S. rights, which it took back from Warner Chilcott PLC for a hefty $1 billion in September 2009 (Also see "LEO Pharma Pays $1 Billion To Get Its Psoriasis Drugs Back From Warner Chilcott" - Pink Sheet, 23 Sep, 2009.). Early in 2012, it regained certain product rights in Germany and Italy.

Leo Pharma has set up subsidiaries in Mexico, the U.S., Brazil, China and South Korea, and since July 2012 has split the world into five regions for management purposes: the U.S., the top five EU countries plus Canada and Australia, Asia; Latin America, Middle East and Africa (LAMEA); and several European countries and Russia (ZOE).

“Our own affiliates are outperforming our previous partners by up to a factor of 10, which in itself justifies the global expansion,” Aabo reported. She attributed the improved performance to employee focus: “We are completely focused on dermatology,” she noted.

“It takes time to build a team and establish a reputation among dermatology opinion leaders, but the process has been helped by the quality of the people we have been able to recruit, particularly in the U.S.,” the Leo executive noted. The company now has around 240 people based in the U.S. headquarters in Parsippany, N.J., and the U.S. now represents around 20% of Leo’s sales. “It’s our ambition to take this figure to around 40% of sales, the country’s share of the global market.”

Mild To Moderate Psoriasis

Leo Pharma's leading product currently is the topical psoriasis therapy, Taclonex/Dovobet (calcipotriene/calcipotriol plus betamethasone), which is used in mild to moderate psoriasis, with more severe cases being treated with TNF inhibitors like etanercept and adalimumab. “In some ways the systemic therapies have helped Leo in that they have contributed to raising awareness of the disease,” Aabo noted.

Over the next several years, Leo Pharma is aiming to build on Picato, which it launched in the U.S. in the first half of 2012, by entering new markets and by obtaining new pipeline products by collaborating with other pharmaceutical companies.

Picato also has been approved in Brazil and submitted for approval in Australia and Canada, and is administered as a topical gel for two or three consecutive days, compared with the several weeks or months of treatment required with other marketed actinic keratosis therapies. Picato’s active ingredient ingenol is purified from the Euphorbia peplus plant.

The company is looking actively for other dermatological products that it can license from other companies. It wants to increase the number of products it markets for actinic keratosis, skin infections, atopic dermatitis, acne and orphan skin conditions.

“One of the challenges is to get biotech companies to consider licensing their anti-inflammatory products to Leo just for dermatological indications,” said VP of Corporate Business Development Kristian Lykke Fick. Companies often are reluctant to spin out single indications for their promising products, but Leo is not interested in rheumatoid arthritis, inflammatory bowel disease or multiple sclerosis.

Leo Pharma also might be interested in marketing different types of dermatology products in emerging markets like China, Lykke Fick said.

The company so far only has a small number of collaborators – it licensed a preclinical psoriasis product, VBY-891 from the U.S. company Virobay Inc. earlier this year with an upfront of $7 million and milestone payments of $300 million (Also see "Deals Of The Week: Shire/Janssen, Pfizer/SFJ Pharma, AstraZeneca/IMS Health" - Pink Sheet, 16 Jan, 2012.). It also is interested in diagnostics that can be used during clinical trials and for a personalized approach to therapy.

Leo Pharma also wants to expand the services it provides to patients with skin conditions. “For a teenager to be told at age 16 that their psoriasis is a life-long condition is devastating. We should be doing more to support these patients in their everyday life,” said Aabo. Patients want to know if they can wear make-up, or shave, to be informed about all those things they forget or don’t want to ask doctors. Nurse-run clinics and information on the Internet are important for patients who have to live with their condition for the rest of their lives.