Stockwatch: GSK's Insurgent Discovery
This article was originally published in Scrip
Last week GlaxoSmithKline Plc (GSK) and partner Theravance, Inc. announced the convincing failure of the long-anticipated SUMMIT study and although the share price of GSK only traded off about 1% on the first trading day after the announcement, the implications appear much further reaching than this minor share price drop would suggest, and not only for GSK.
The placebo- and individual component-controlled SUMMIT study of 16,485 COPD patients used all-cause mortality as the primary endpoint and followed patients for between 15 to 44 months. GSK's hopes were high that the once daily Relvar/Breo Ellipta (vilanterol/fluticasone furoate) combination would show a mortality benefit over placebo for a number of reasons. Firstly the one endpoint that increasingly stringent payers find difficult to argue with, although they are trying, is mortality. Nothing says 'reimburse me' more to a COPD patient's employer than a longer working life. Secondly, Relvar/Breo has market exclusivity, whereas GSK's predecessor product, Advair (salmeterol/fluticasone propionate), is increasing being genericized in developed markets. Finally, Relvar/Breo is a once-daily presentation of a long-acting beta-2 agonist and an inhaled corticosteroid (LABA/ICS) combination whereas Advair is a twice daily LABA/ICS combination. The subtraction of half the daily compliance burden added to a mortality benefit would have been compelling over many years of future exclusivity.
Investment bank analysts were mainly neutral on the study result while GSK was strangely dismissive citing their low expectations for SUMMIT which had become a wasted burn of many tens of millions – possibly close to $100m factoring in the salary, bonus and share options received by the senior managers who signed off on the study – of their investors' money. The analysts from Citibank pointed out that the "costly" SUMMIT study "entirely exposed [Breo] to generic Advair competition". This is because, as the analysts from JP Morgan pointed out, "the Breo SUMMIT result looked numerically worse than the previously reported Advair TORCH study that narrowly missed statistical significance". There was a personal irony here for it was at GSK's predecessor SmithKline Beecham that I was taught never to do a study that would damage the existing sales of a product. Although that was in the context of conducting a carcinogenicity study to cover a new extended dosing indication where one had not previously been required, the SUMMIT study has had a similar effect.
The failure of now two large clinical studies of LABA/ICS combinations to improve cardiovascular outcomes in COPD patients has other wide-ranging and perhaps societal implications. Firstly, it is only the compliance advantage that remains in prescribing Relvar/Breo over Advair in COPD patients and if cross-comparison between the two studies is allowed, there may actually be a numerical mortality disadvantage. Often when companies like Theravance come to the market with a shiny new drug delivery technology that promises to halve the number of administrations, it takes a long time to prove, as GSK probably now has, that the pharmacodynamics of inhaled LABA/ICS delivery, if not the cardiovascular outcome, are actually better with more doses. Unsurprisingly, less is not more. Secondly, governments and payers, ever mindful of the pension time bomb, must have secretly breathed a sigh of relief at the near-term cost-saving of not having to reimburse branded Relvar/Breo, which might have enabled COPD patients to draw their pensions for years longer than had previously been anticipated.
Machiavellian interpretations aside, the failure of SUMMIT only goes to show how difficult it is to beat first generation drugs or drug combinations with formulation or medicinal chemistry alone. I learned this when my investment in Sonus Pharmaceuticals, Inc. was decimated after its reformulated version of cancer drug paclitaxel turned out to be inferior to the basic drug in Phase III.
SUMMIT's failure wasn't the only blow for reformulations last week: separately, recent IPO Tetraphase Pharmaceuticals, Inc. announced the failure of its intravenous improved tetracycline antibiotic eravacycline to be non-inferior to generic oral levofloxacin in the Phase III IGNITE2 study in patients with complicated urinary tract infections (cUTIs). The analysts from Ladenburg Thalmann and Leerink Partners found themselves at a loss to explain the IGNITE2 failure. Had they asked my teenage self 36 years ago when I first started working in a hospital microbiology laboratory, I would have told them that I had just learned that the primary route of excretion for tetracycline antibiotics is not, unlike fluoroquinolones like levofloxacin, in the urine, where ideally you would want an antibiotic to concentrate unchanged in order to treat a cUTI.
In the 2015 film Insurgent, the second of three in the Divergent series, the ruling factions in a post-apocalyptic Chicago seek to eliminate the divergents in their population who don't fit into any of the five factions and are regarded as throw-backs. That is, until it is discovered that divergents are the ultimate evolution and saviors of the factional populations. On a similar theme, investors should be wary of new improved or reformulated drugs as, if last week was anything to go by, they may not be better or as good as, and are more expensive than, the 'throw-back' first generation drugs they are designed to replace. Let's not write off those earlier, cheaper divergent drugs too soon.
Andy Smith is chief investment officer of Mann Bioinvest. Mann Bioinvest is the investment adviser for the Magna BioPharma Income fund which has no position in the stocks mentioned, unless stated above. Dr Smith gives an investment fund manager's view on public life science companies. He has been lead fund manager for four life science–specific funds, including International Biotechnology Trust and the AXA Framlington Biotech Fund, and was awarded the Technology Fund Manager of the year for 2007.