Inside Takeda's Drug-Drought Trap
More evidence suggests a disproportionately greater risk of bladder cancer from Takeda Pharmaceuticals' Actos than with other oral diabetic medications. Yet Japan's largest pharmaceutical company has even more to worry about than likely cancer litigation, as patent protection on its top-selling drug is set to expire in just over a year.
After an eight-month review of adverse events data, the FDA announced on June 15 that Takeda's (TKPHF) diabetes drug Actos can raise the risk of bladder cancer if used for more than 12 months. Going forward, Takeda will have to add a package warning to that effect. This follows on the heels of European nations taking steps to ban the drug outright: on June 9, France and Germany suspended all sales of Actos and its combination drugs, citing -- among other evidence -- a study published in the April 2011 issue of Diabetes Care linking Actos to a higher rate of bladder malignancies than seen among users of more than 15 other popular diabetes medications.
Actos (pioglitazone), introduced more than a decade ago, is Takeda's top-selling drug, accounting for 27 percent of its $17.6 billion in aggregate sales for the year ended March 31. In the all-important U.S. market, the drug delivered $3.8 billion (21.6% of net sales) to company coffers last year.
Litigation from affected diabetics is to be expected, although a direct link between Actos use and bladder cancer hasn't been definitively established. Consequently, the company has little to fear monetarily. Management does, however, need to worry about another ticking clock: Aug. 17, 2012, is when Watson Pharmaceuticals (WPI), Mylan (MYL) and Ranbaxy Labs (RBXLF) will launch the first wave of generic competitors to branded Actos in the U.S.
Actos sales received a big boost last year after health organizations worldwide called for the withdrawal of its principal competitor -- GlaxoSmithKline's (GSK) troubled Avandia (rosiglitizone) -- due to an increased risk of fatal heart attacks and strokes. In the U.S. alone, Avandia sales plummeted from $2.2 billion in 2006 to just $407.9 million in 2009 (in September 2010, the European Medicines Agency suspended marketing for all Avandia-containing products; come November 2011, the drug will no longer be available for sale at U.S. pharmacies, either).
A similar loss of Actos revenue in the U.S. would negatively weigh on Takeda's top-line growth and earnings in coming years. The company is still reeling from the prior loss of market exclusivity for its top-selling heartburn and peptic ulcer medication Prevacid (lansoprazole) back in November 2009. U.S. sales subsequently plummeted from $2.1 billion in 2008 to $531 million last year; 2011 sales are expected to fall further to about $118 million.
Although Takeda has a promising pipeline of products across disease spectrums, from oncology to cardiovascular and metabolic health, the company has stumbled the past few years to find successor products to both Prevacid and Actos:
- Alogliptin (SYR-322), similar in class to Merck's (MRK) blockbuster DPP4-inhibitor Januvia (sitagliptin), lowers blood glucose by inhibiting the pancreatic hormone glucagon. Though available in its home market since 2010, U.S. marketing approval has stalled, pending outcome of additional cardiovascular safety trials.
- Hematide (peginesatide), co-developed with Affymax (AFFX), is a red blood cell stimulator, one in a class known as an erythropoiesis-stimulating agent (ESA). In late-stage development, Hematide is being tested in clinical trials for the treatment of anemia associated with chronic renal failure. If approved, the once-monthly dosed ESA could generate several billion in U.S. sales; however, growing concerns that the ESA class, including Amgen's (AMGN) best-selling Aranesp could accelerate tumor growth or increase risk of blood clots in certain patient types has dampened enthusiasm somewhat for the overall product class. Additionally, Takeda still faces the risk of a lawsuit from Johnson & Johnson (JNJ), as an arbitrator ruled last year that JNJ's anemia drug Procrit had exclusivity over critical manufacturing patents necessary to make Hematide.
- Takeda received a "complete response letter" -- i.e., a rejection -- from the FDA on January 31 for its weight-loss drug Contrave (naltrexone/bupropion). Specifically, the letter stated that "before your application can be approved, you must conduct a randomized, double-blind, placebo-controlled trial of sufficient size and duration to demonstrate that the risk of major adverse cardiovascular events in overweight and obese subjects treated with Contrave does not adversely affect the drug's benefit-risk profile."
Using this robust balance sheet, the company announced last month it would buy privately held Nycomed for a reported $13.6 billion. The purchase offers Takeda quick access to a potential blockbuster lung-disease drug, Daxas (roflumilast), recently approved in the United States for chronic obstructive pulmonary disease.
As some 80 percent of pharmaceutical revenue for Takeda originated in Japan and North America last year, the acquisition fits in with management's previously announced 2011-2013 "mid-range plan" to offset flagging sales of maturing products through global expansion. According to marketing consultancy firm IHS Global Insight, the Nycomed deal could offer immediate benefits:
- The immediate financial contribution will reshape the company with more than a 30% increase in annual revenue and 40% increase in operating income excluding special factors from business acquisition.
- Countries such as Russia, India, and Brazil in particular were highlighted in Takeda's mid-range plan as areas to strengthen its commercial presence; hence Nycomed's infrastructure and business expertise will strengthen its EU operating base, expand the company's global footprint from 28 to 70 countries, and open access in emerging markets for Takeda's innovative products.
On balance, however, the bold move by Takeda to buy its way out of an impending sales and earnings falloff makes more sense than doing nothing -- especially given the latest round of bad news for its best-selling drug Actos.
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