Novartis gives up on Xiidra's EU approval, endangering payoff from $3.4B Takeda buyout

Novartis last year bought Shire’s dry eye drug Xiidra from Takeda to beef up its ophthalmic offerings and reap blockbuster sales along the way. But now, the $3 billion-plus buy doesn't look so appealing.

Novartis has voluntarily withdrawn an application for Xiidra in Europe after regulators there raised “major objections” that “cannot be resolved within the available time frame,” according to a letter from the company posted Friday by the European Medicines Agency.

That doesn't necessarily mean Novartis has entirely given up on Xiidra in Europe; in a statement, the company said it is committed to evaluate next steps. “We will determine the best route forward following further internal assessment,” it said.

But it does chart a more difficult path for Xiidra growth. When Novartis bought the drug for $3.4 billion up front, it boasted of Xiidra’s $400 million in 2018 sales and its “blockbuster potential” down the road. Without an EU nod, the Swiss drugmaker will have to try even harder to make the investment worthwhile.

Before Novartis admitted defeat, drug reviewers at the European agency’s Committee for Medicinal Products for Human Use had expressed doubts about Xiidra’s clinical profile.

Specifically, the agency concluded that Xiidra hadn't proven effective across different symptoms of dry eye disease. “Although some effect was seen in the reduction of eye dryness, the improvement was not considered clinically significant,” the EMA said.

Xiidra had been aiming for an approval in serious dry eye patients who couldn’t find relief with artificial tears, but the EMA worried that pinpointing those patients would be difficult. What’s more, the agency took issue with the fact that Xiidra was pitted against placebo in its clinical trial, rather than an active comparator. The lack of long-term data for a chronic disease as eye dryness also played a part.

“[B]ecause effectiveness was not proven, the benefits of Xiidra did not outweigh its risks,” the EMA said.

RELATED: Takeda sells Shire’s Xiidra, transfers 400 staffers to Novartis in $3.4B deal

Xiidra nabbed its FDA go-ahead in dry eye disease in July 2016, while still under Shire's roof. It became part of Takeda through their $59 billion megamerger.

But the Japanese pharma immediately sold Xiidra to Novartis in a $5.3 billion deal, including up to $1.9 billion in milestone payments, noting the drug doesn’t fall within the therapeutic areas it's focusing on these days. Thus Xiidra's EU setback could not only hit Novartis' sales, but discount its milestone payments to Takeda.

Xiidra can take heart in the fact that its archrival, Restasis by AbbVie’s newly acquired Allergan, isn't approved in Europe, either. Back in 2018, Allergan pulled its EU application for Restasis—or what would have been called Restaysis in Europe—in moderate dry eye disease. At the time, CHMP was ready to reject the med because it wasn't satisfied with its supporting data.

In 2019, Restasis sold $1.14 billion in the U.S., down from $1.20 billion the previous year.

In addition to Xiidra, Novartis also has ECF843, a recombinant human lubricin it got from U.S. firm Lubris, in a phase 2 clinical trial in dry eye disease.