Regeneron and partner Sanofi recently snagged an FDA nod for Libtayo in the large and lucrative indication of newly diagnosed non-small cell lung cancer (NSCLC). And one analyst is already asking the companies to discount the drug’s price to stay relevant in the heated immunotherapy competition.
Why? Because at least three China-made PD-1 inhibitors are slated to play the pricing card, and Libtayo is already playing from behind in the lung cancer field, Bernstein analyst Ronny Gal said in an open letter to Regeneron CEO Len Schleifer, M.D., Ph.D., on Thursday.
Once a foreign PD-1 latecomer adopts that strategy, its developer could frame the choice as “data-led” products—Merck & Co.’s first-place Keytruda and Bristol Myers Squibb’s Opdivo—versus its own “fairly priced” newcomer, Gal noted. That would squeeze sixth-to-market Libtayo’s standing room and relegate the drug to a “secondary consideration,” he said.
And with the market soon to expand to 10 players, a pricing fight seems inevitable. “If it will not be you, it will be someone else,” Gal said.
Regeneron declined to comment on Gal’s suggestion.
The China-made drugs have all signed U.S. partners. BeiGene and Novartis are running with tislelizumab. Innovent Biologics and Eli Lilly have Tyvyt (sintilimab). And Junshi Biosciences and Coherus BioSciences are moving up with toripalimab.
Coherus, already known as a biosimilar developer, has been explicit about its plan to provide a low-cost option. While the two Big Pharma players haven’t made their intentions clear, Gal interprets their past statements, vague as they were, to mean they’re planning a cost-based strategy. And at least in China, the three native developers have been pricing their drugs below Keytruda and Opdivo.
The three Chinese PD-1s are looking at U.S. launches from 2022 to 2024, with BeiGene and Novartis the front-runner with two filings in previously treated NSCLC and esophageal cancer expected this year. So, the time window for Regeneron to act is very narrow.
Regeneron risks being marginalized if another player beats it to pricing leadership. “You could be in a position where a respectable oncology company (Lilly, Novartis) takes the first step and changes the debate from ‘who has better data on patients with CV comorbidities’ to ‘is all this data really worth the higher price,’ recasting the choice as between their PD-1 drug and Keytruda/Opdivo,” Gal wrote.
Clinical data don’t work alone
Taking a price-discounting path doesn’t mean Libtayo is an inferior drug, Gal stressed. Instead, he views the drug’s clinical data as a “comparable profile” to Keytruda. But using a standard commercial approach of piling on data simply won’t cut it for a late entrant like Libatyo, he said.
In the phase 3 Empower-Lung1 trial, Libtayo reduced the risk of death by 43% over chemotherapy in newly diagnosed NSCLC patients with PD-L1 expression at 50% or higher. The analysis excluded certain patients whom Regeneron and Sanofi said had unconfirmed PD-L1 data thanks to a diagnostic test problem. The risk reduction fell to 32% if those trial participants were counted. In the same type of PD-L1-high population, Keytruda historically posted death risk reductions in the ballpark of 38% or 31%.
The message from Merck has been that physicians appreciate the overall package of data Keytruda has accrued, which gives them a strong level of confidence in prescribing the drug, even assuming some economic incentives from newer rivals.
But Gal doubted that “the distinction between oncology drugs within the same class is as dramatic as some believe.” Therefore, a new, lower-cost entrant wouldn't be excluded simply because physicians have known an alternative for longer. That’s the message Gal received from interviewing a dozen practice leaders.
A more cost-sensitive market
Cancer drug pricing wasn’t much of a problem in the past; oncologists decided which drug to prescribe based on clinical data and were generally insensitive to costs. Some even leaned toward more expensive products.
“This is gradually changing,” Gal said. The PD-1 market is increasingly saturated with somewhat minor clinical differentiation among the products, and the cost-sensitive portion of the market is growing, he noted.
First, physicians’ broader attitudes toward pricing have changed. They now lean more toward liberal notions of healthcare and tend to be far less trusting of the drug industry, Gal noted. And the public discussion around high drug prices is increasingly shifting oncologists’ focus on costs.
What’s more, Gal mentioned three important segments where financial incentives could drive them to prefer low-cost products: absolute price buyers, such as the Department of Veterans Affairs and regional integrated delivery networks; community oncology practices, where the buy-and-bill model means practices make more money when drugmakers offer their products below the average sales price, aka, the reimbursement price; and institutions in the federal government’s 340B drug pricing program.
The buy-and-bill system at community practices has created a business model where prices gradually decline, Gal noted. But the profits these practices have been collecting from selling Amgen’s Neulasta and Roche’s cancer troika—Rituxan, Avastin and Herceptin—and their biosimilars will bottom out in the next few years. At that point, they may reach out to lower-cost PD-1s to fill the gap, Gal explained.
Cost-based purchasing isn’t the dominant force in the market, Gal acknowledged. Still, a gradual discounting strategy could net Libtayo at least 10% market share across the large immuno-oncology indications such as NSCLC, kidney cancer and melanoma—and add $2 billion in U.S. sales, Gal figures. The alternative? Irrelevance for Libtayo over the next few years, he said.
Beyond the dollars
The benefits of slashing Libtayo’s price don’t just lie in greater market penetration but would create what Gal called an “intangible brand halo” for Regeneron from an environmental, social and corporate governance perspective.
Currently, no existing PD-1/L1 developer has gone after pricing, so disrupting that unwritten rule would be an unwelcome move in the industry, Gal acknowledged. But he suggested that adopting the strategy would actually do the industry a favor, because rising drug prices have motivated the U.S. government to intervene.
“The best thing you can do for the industry is to demonstrate that market forces work,” Gal wrote in his note. “This is an opportunity for Regeneron to truly lead in pharma as the company has historically led biotech.”