With Siliq approval, can Amgen and AZ's trash become Valeant's treasure?

The FDA answered some big questions for Valeant with its approval of plaque psoriasis med Siliq. But the market still has a major one: Will the Canadian drugmaker price its new med at a discount to reflect its safety challenges?

U.S. regulators green-lighted the med late Wednesday, following a unanimous July recommendation from an advisory panel. And importantly, the FDA didn’t establish a causal relationship between the med and suicide ideation that cropped up in trials.

But Siliq still comes with major red flags that are likely to limit its use, analysts say. The same safety worries that frightened Amgen into bailing out of the med and apparently helped trigger AstraZeneca's decision to out-license it to Valeant could well scare off the doctors and patients Siliq will need to attract.

The FDA has slapped the product with a black-box warning, its most serious, noting that Siliq patients have “completed suicides.” The drug will also be saddled with a risk-management (REMS) program that “appears onerous,” Evercore ISI analyst Umer Raffat wrote in a Wednesday note to clients.

The REMS plan includes ETASU (Elements To Assure Safe Use) measures: Physicians and pharmacies will have to be certified to prescribe and dispense the med and patients will have to sign informed consent agreements before taking it.

But it could have been worse, Raffat pointed out. “The components are not the most stringent ones that were discussed at the AdCom,” he said.

And just how much the REMS program holds Siliq back may depend on the as-yet-unannounced price. After all, it’ll be going up against Novartis’ Cosentyx and Eli Lilly’s Taltz, neither of which is burdened with serious safety warnings. New rivals are also coming up the pipelines of other Big Pharma competitors, including Johnson & Johnson.

“It will be interesting to see if Valeant comes in at a discount to other biologics in psoriasis—and if so, how much,” Raffat said. Wells Fargo's David Maris added in his own note to clients that the psoriasis landscape "is likely to become only more competitive in coming years, providing patients, physicians, and payers a robust, effective, and safe armamentarium from which to choose."

The potential for regulatory restrictions was enough to scare off brodalumab co-developer Amgen, which walked on partner AstraZeneca after uncovering the suicide signal in clinical trial data. Apparently squeamish itself, AZ later outlicensed the med to Valeant—something it’s done a lot of recently—and it netted a $130 milestone payment with Siliq’s approval.

As Maris notes, their fears were not unfounded. In a recent doc survey he conducted, more than 50% of respondents said they would use Siliq in the fourth-line setting, later than fourth-line or not at all. That means, of course, that patients would have to try three other drug regimens before moving on to Siliq—and those up-front barriers would substantially reduce Siliq's patient population.

Despite the hurdles, Valeant says it's confident Siliq can offer a top-line boost at a time when it desperately needs one. Amid pricing backlash, a fraud scandal and debt-default worries, sales in some of Valeant’s key franchises nosedived last year, making the new psoriasis drug’s role all the more critical.

"We think that there is an opportunity to show significantly better efficacy with our product for patients and, once again, a very durable opportunity," company CEO Joseph Papa told investors at the J.P. Morgan Healthcare Conference.