Buried within Bristol-Myers Squibb’s announcement last month that it had received Food and Drug Administration approval for a new multiple sclerosis drug was a statement that the company planned to put off commercializing the new product in the interests of patients, employees and customers due to the Covid-19 pandemic.
Numerous drugmakers have announced plans to ground sales staff and suspend some clinical trials during the pandemic. But in recent reports, investment bank analysts have also delved into the question of how the pandemic will affect overall demand for the companies’ products in the short, medium and long term. The picture that they and interviewed experts have painted is a complex one, with some companies positioned to weather the plague mostly unscathed and others more likely to suffer what one of the analysts, SVB Leerink’s Geoffrey Porges, called “demand erosion.”
An interviewed expert, Brett Larson, principal at health consultancy firm Kx Advisors, believes the negative financial effect on public pharma companies would not be immediately apparent in the first-quarter earnings companies are planning to announce in the coming weeks. That, he said, is because widespread shelter-in-place orders only came in effect in mid-to-late March.
“I don’t think we’re in a position with earnings coming from pharma companies where we’re going to see immediate dips,” Larson said, in a phone interview.
However, he added, that some clues could emerge from their guidance for subsequent quarters, and indeed it may be reasonable for them to suspend guidance altogether, at least for the second quarter.
The broader consideration of which companies may experience that
“demand erosion” that Leerink analyst Porges described is their product mix. A key dimension that his report examined was company product portfolios’ mix of drugs considered discretionary versus necessary for life-threatening conditions. By that measure, of the companies the report looked at, those with the most medically necessary products were Vertex Pharmaceuticals, Alexion Pharmaceuticals and Gilead Sciences; those with the most discretionary products were Amgen, Regeneron Pharmaceuticals and GlaxoSmithKline.
Still, everything may not neatly fall along these lines of necessary and discretionary. For instance, Eduardo Schur, global practice leader for life sciences at management consulting firm Guidehouse, points to the dermatology sector, a discretionary segment of the broader life science market. Citing prescription data from IQVIA, Schur pointed out that dermatology had actually seen year-over-year growth, even for acne drugs.
It’s possible that people had obtained prescriptions via telemedicine or by calling their physicians, he said. Schur in fact believes that Covid-19 will have a bigger negative impact on devices than on pharma.
“In general, pharma is going to pan out well,” Schur said, in a phone interview. “Medical devices are going to have much more difficulty because a lot of the procedures in the medical device world are elective.”
Other than mix of products, a possibly even more important dimension outlined in the SVB Leerink report and another, more recent, report by RBC Capital Markets analyst Brian Abrahams, is where drugs are in their life cycles.
As Abrahams put it, launches of newer drugs – such as Intercept Pharmaceuticals’ obeticholic acid for nonalcoholic steatohepatitis and Karyopharm Therapeutics’ Xpovio (selinexor) in multiple myeloma – are likely to be delayed in the short term. Meanwhile, those with well-established portfolios of essential medicines, such as Vertex and Gilead should continue to perform well, Abrahams wrote.
Porges’ report echoed Abrahams’, noting that 73% of Gilead’s product mix comprises mature products, compared with 54% for Vertex. Gilead also stands to benefit from Covid-19, given its development program in the disease, Abrahams wrote.
The problem for younger products is that in many cases patients still need to go to the doctor’s office to get a prescription, which stay-at-home orders, as well as concerns about protecting patients’ and healthcare workers’ safety, have made challenging. That, in turn, makes new therapy starts and switches to new therapies less likely, said Pratap Khedkar, managing principal for pharmaceuticals at the consulting firm ZS Associates.
“You can begin to see a pretty serious hit, especially if you are relatively new as a product and trying to get all these people for the first time,” Khedkar said in a phone interview.
As illustrated by the aforementioned example of BMS delaying the launch of its multiple sclerosis drug due to Covid-19, even large companies are having difficulty launching new products.
However, those with drugs that fall into the life-saving category will still be able to get onto the market.
“If you have a pure disease-modifying drug for a life-threatening condition without other therapies available, that product will still launch,” Larson said.
While launches may occur, even life-saving drugs could have challenges.
“Every time you need a new prescription filled for newly diagnosed patients, those are the volumes where you’re going to see the greatest decline,” Schur said. “Even in oncology, we’re seeing some reduction if you have to go to the physician’s office for treatment.”
Another way to ease rolling out of new products is through virtual launches. In a call with investment bank analysts Friday about the FDA approval of the breast cancer drug Tukysa (tucatinib), Seattle Genetics CEO Clay Siegall said that the company would initially launch the drug through virtual outreach and communication channels.
Virtual launches are nothing new for drug companies, and Khedkar said companies are using many of the same tools they have before, including emails and video conferencing. The difference with the pandemic is that while reps can’t personally visit physician offices, they can take advantage of existing relationships, and doctors not working in emergency or intensive care units may now have more time to view webinars than they did before the pandemic. At the same time, there is a risk that drugmakers could go overboard.
“The digital content from pharma has jumped several-fold and has created some backlash,” Khedkar said.
Telemedicine offers another way to get drugs to patients who might otherwise have to visit the doctor’s office. However, while telemedicine would mitigate the difficulties initiating new therapies, changes to existing prescriptions are more likely to occur through telemedicine than new prescriptions, Schur said. But Larson of Kx Advisors said that could create issues in the long term.
“If it’s a product the physician has experience with that’s oral and easily delivered to patients, then it seems like a reasonable immediate-use case for telemedicine,” he said. “But if it is something that needs to be administered in a physician office setting, with a patient education aspect, it’s going to be less likely.”
Indeed, the SVB Leerink report also highlighted companies’ mixes of products that are oral or self-administered versus given in a doctor’s office.
By that measure, Gilead and Vertex again came out on top, with respectively 96% and 100% of their drugs being oral. Others, like AbbVie and Allergan – the former of which is in the process of acquiring the latter – GlaxoSmithKline and, to a lesser extent, Novartis and Sanofi, also derive a majority of their sales from oral and self-administered drugs. On the other end of the spectrum are companies like Alexion, Regeneron and Amgen, whose products are mostly given in clinical settings. In addition, part of Gilead’s 4% of office-administered medicines in the SVB Leerink report presumably includes the CAR-T cell therapy Yescarta (axicabtagene ciloleucel), whose complicated administration will likely result in it having slow uptake, according to the RBC report.
“It’s not just that patients are staying at home,” Khedkar said. “Appointments are being postponed because the office or the hospital has said, cancel everything not essential.”
In other words, biopharma companies will face different challenges amid the Covid-19 pandemic that depend in large part on issues like the maturity and flexibility of their product portfolios, but tools like telemedicine and virtual launches may be able to mitigate some of those challenges.
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