BioPharma Puts Skin in Atopic Dermatitis Game: Strategy/Transaction Insights

Atopic dermatitis – set to outpace psoriasis as the largest dermatology market? Atopic dermatitis (AD), historically a market with few approved drugs and dominated by low priced generic treatments, is expected to undergo a revolution as a result of recent events:

  • Launch of Pfizer’s branded topical PDE-4 inhibitor Eucrisa (crisaborole) in late 2016 – first branded entry in years and the driving force for Pfizer’s $5B acquisition of Anacor

  • FDA’s March 2017 approval of Regeneron/Sanofi’s anti-IL-4R-alpha mAb Dupixent (dupilumab) – the first high-priced biologic in AD which sets a new standard in the space with an announced annual list price of ~$37,000

  • High profile acquisitions in the AD space in 2016 (Leo Pharma purchase of AstraZeneca’s monoclonal antibody tralokinumab; Novartis’ acquisition of Ziarco including its lead oral atopic dermatitis drug ZPL389) – competition will increase as new therapies try to grab a piece of this large and expanding market

Despite the need for innovation within this market, it remains to be seen how payors will react to the entry of multiple premium-priced therapies. As Atopic dermatitis (AD) affects ~2% of the adult population and >10% of pediatrics, sales of AD therapies have the potential to reach or surpass its fellow inflammatory dermatologic condition, Psoriasis. While both are chronic inflammatory skin diseases, medications that have changed the management of Psoriasis (e.g. systemic disease-modifying anti-rheumatics, DMARDs, like methotrexate and anti-TNFa monoclonal antibodies) have had little impact on the treatment of AD. With few novel therapies entering the space beyond topical calcineurin inhibitors (whose use is limited by application site reactions and black box warnings) significant unmet needs remain to address this condition, particularly the burning and itching that negatively impacts patients’ quality of life.

In contrast to AD, Psoriasis has long been an area of biopharma interest, which has translated into a market that is currently estimated in excess of $10B. While the commercial market has long been dominated by biologics (e.g. mAbs targeting TNF and more recently anti-IL-12/23 and anti-IL-17) the recent launch of novel oral therapies (e.g. the oral PDE-4 inhibitor Otezla (apremilast) from Celgene) has added another important commercial player to the mix. While only priced at a modest discount to biologic therapies (>$20,000 per year as compared to >$30,000 for anti-TNFs and anti- IL-17s), Otezla quickly reached > $1B in 2016 in just its second full year of sales as it offered a non-invasive therapeutic option after patients have failed generic DMARDs.Keenly aware of such dynamics, the payor reaction to Dupixent may determine whether AD is able to move past psoriasis as the highest value dermatology market.  To date public reaction to Dupixent’s price (one which surprised many analysts), has been mixed, with medical directors balancing the weight of a truly innovative medicine versus the cost of covering the medication for the AD large population.The reaction to subsequent drug launches may be just as informative to the future of the AD landscape. If Celgene continues to pursue a label expansion of Otezla (which has completed Phase 2 studies in AD) there will be another product with a cost in excess of $20K per year.  Further, subsequent pricing strategy of branded oral agents (e.g. Novartis’ ZPL-389) that are tackling AD as their first NDA, could be the bellwether that likely dictates long term trajectory of the market. However, as with the reaction to dupilumab the willingness of payors to provide access to such high-priced therapies will likely be dependent on the totality of the clinical data