Global Pharmaceuticals
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Global Pharmaceuticals Survey Series (Part II): Ophthalmology We present the second edition of the Credit Suisse Global Pharmaceuticals Survey November 6, 2013 Series with insights on the eye market. RESEARCH TEAM Key takeaways from our survey of 47 high prescribing optometrists and Vamil Divan, MD ophthalmologists include: (1) growth for AGN’s Restasis is expected to continue in the (212)-538-5394 medium term, with FDA decision on substitutability of generic version critical determinant to [email protected] longer-term, (2) AGN’s Lumigan is poised to maintain branded market leadership in Jason Kantor, PhD glaucoma with low share loss expected, (3) REGN/BAY’s Eylea positive momentum will likely (415) 249-7942 [email protected] continue post upcoming entry in diabetic macular edema, and (4) there is room for pipeline drugs assuming improvements in key characteristics such as dosing profile and efficacy. Ari Jahja (212) 325-0767 [email protected] Conclusions from survey results for key players are the following: European Pharma Team (44)-207-888-0304 AGN: The results underpin our view that Lumigan is poised to maintain market leadership in [email protected] branded prostaglandin market, despite stricter formulary management and competition from Fumiyoshi Sakai generic latanoprost. While meaningful share erosion is likely for Restasis post entry of (81) 3-4550-9737 version, medium-term growth is likely to continue. We remain cautious on pipeline drugs [email protected] DARPin and Ozurdex in DME, which represent optionality in our model. Jeremiah Shepard, PhD (415) 249-7933 REGN/BAY: Eylea [email protected] Key findings support our positive view on , of which growth will accelerate post approval in diabetic macular edema (DME) amid expected stable share in wet age- Ronak H. Shah, Pharm.D., CFA (212) 325-9799 related macular degeneration (wet AMD) . Furthermore, compounding pharmacy issue on [email protected] Avastin will likely have modest impact in the next 12-24 months, with Eylea is still viewed as Jeremy Joseph potential beneficiary. (212) 325-3870 [email protected] ROG/NOV: While Lucentis’ share will likely remain stable and market growth will provide support, long-term trajectory could decelerate post Eylea’s entry to DME. Overall, physicians still anticipate the majority of Lucentis use to be in wet AMD (~57%) indication, followed by the DME and central retinal vein occlusion (CRVO) indications. NOV: Ophthalmology remains a key driver for Novartis (Alcon), representing c.20% of NPV. Our survey highlights support for the Simbrinza launch in glaucoma but also some caution on Jetrea rollout, in line with CS expectations. DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683 US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™ Client-Driven Solutions, Insights and Access Physicians' View and CS View on Key of Topics of Interest Topic Physicians’ View CS View Leading AGN’s Lumigan is poised to maintain Our Lumigan forecasts are slightly higher than Branded market leadership in the prostaglandin Consensus. We expect ex US growth to partially Glaucoma market with low share loss expected in offset pressure in the US. Upcoming generic entry Agents the medium term, despite headwinds of the 0.03% formulation is likely to pose limited from generic competitors and tougher threat. payor environment. Modest growth is still expected for Our forecasts are higher than Consensus in 2014- Restasis Restasis in the medium term, driven by 2015, and are lower from 2016 onwards on Outlook market growth and success of direct-to- assumption of generic entry. While generic entry consumer strategy. However, branded will take time and effort, the FDA seems Restasis will likely face meaningful determined to allow it to happen. erosion even in the absence of human trials, assuming it is deemed substitutable by the FDA and priced at a reasonable discount. Eylea is poised for robust uptake in Eylea growth will likely accelerate post approval in DME. While compounding pharmacy the DME indication. Longer term, we continue to Eylea Growth issue on Avastin usage will likely take believe that Eylea will benefit from increased time to play out, Eylea is also seen as regulation of compounding pharmacies. potential prime beneficiary. On wet AMD, there is clear need for Despite potential long-term opportunity, we assume Pipeline longer duration of effect (less frequent minimum contribution from DARPin (wet AMD, Potential injections) and greater efficacy. phase 2) to our AGN model. Progress of Meanwhile, greater efficacy (IOP bimatoprost sustained release (glaucoma, phase 2) reduction) and cost are greatest areas of will be closely watched given potential to enhance focus in glaucoma. compliance. The authors of this report wish to acknowledge the contribution made by Selvakumar Nallasamy, an employee of CRISIL Global Research and Analytics, a business division of CRISIL Limited. CRISIL Limited is a third-party provider of offshore research services to Credit Suisse. Sources: Company data, Credit Suisse estimates, FactSet, Bloomberg, IMS Health, Wolters Kluwer, regulatory documents, scientific presentations/publications, expert discussions, other publicly-available information 2 CS Estimates Slightly Higher than Consensus on Lumigan; In-line on Eylea and Lucentis AGN’s Lumigan AGN’s Restasis (Sales in $ Million) (Sales in $ Million) $700 $646 $636 $1,200 $632 $629 $621 $614 $601 $1,027 $600 $572 $567 $559 $1,000 $968 $902 $897 $889 $500 $800 $748 $400 $578 $600 $559 $551 $300 $397 $200 $400 $100 $200 $0 $0 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E CS Estimate Consensus CS Estimate Consensus Novartis/Roche’s Lucentis Regeneron/Bayer’s Eylea (Sales in $ Billion) (Sales in $ Billion) $5 $5 $4.4 $4.2 $4.2 $4.2 $4.3 $4.1 $4.1 $4.2 $4.2 $4.1 $4.1 $4.1 $3.9 $3.9 $4 $4 $3.3 $3.2 $3 $3 $2.6 $2.5 $2 $2 $1.7 $1.7 $1 $1 $0 $0 2013E 2014E 2015E 2016E 2017E 2013E 2014E 2015E 2016E 2017E CS Estimate Consensus CS Estimate Consensus Source for Consensus Data: Bloomberg, Evaluate Pharma Sources: Company data, Credit Suisse estimates, FactSet, Bloomberg, IMS Health, Wolters Kluwer, regulatory documents, scientific presentations/publications, expert discussions, other publicly-available information 3 AGN, REGN, Santen Among the Most Leveraged to the Eye Market Share of World Category Ethical Drug NPV – Bubble Size Refers to NPV for the Category 140 120 Thrombogenics 100 80 Santen Regeneron 60 40 Allergan Other20 Companies Novartis Bayer Roche 0 PfizerMerck -5 0 5 10 15 20 25 30 35 Share of Company NPV Accounted for by Category Companyfor by Share Accounted of NPV -20 Novartis Roche Regeneron Allergan Bayer Santen Merck Thrombogenics Pfizer Other Companies Source: Credit Suisse PharmaValues Database Sources: Company data, Credit Suisse estimates, FactSet, Bloomberg, IMS Health, Wolters Kluwer, regulatory documents, scientific presentations/publications, expert discussions, other publicly-available information 4 Portfolio Manager’s Summary Ophthalmology is an attractive market with mid-single digit growth expected through 2016 Global pharma market size is estimated at $18 billion and expected to post 5% CAGR through 2016 Prescription drug growth will be fueled by VEGF inhibitors indicated for wet aged-related macular degeneration and dry eye segment – AGN is the most levered to the dry eye market; REGN/BAY and NOV/ROG most levered to wet AMD Glaucoma is also an important market within ophthalmology and estimated to be ~$5 billion globally – AGN and NOV are the most levered to this market Credit Suisse proprietary survey conducted to assess ophthalmology market dynamics in the US 23 US-based high prescribing optometrists see an average of ~300 patients in an average month 24 US-based high prescribing ophthalmologists see an average of ~550 patients in an average month Key conclusions from our survey include: Allergan’s Restasis growth is expected to continue in medium term; meaningful erosion expected longer-term should substitutable generic versions be approved by FDA Allergan’s Lumigan is poised to maintain market leadership in the branded prostaglandin market with low share loss expected in the medium term, despite headwinds from generic competitors and tougher payor environment Stable market share expected for Alcon/Roche’s Lucentis and Regeneron/Bayer’s Eylea usage in wet AMD There is meaningful room for growth for Regeneron/Bayer’s Eylea in diabetic macular edema, while less so for Allergan’s Ozurdex There is support for Novartis’ Simbrinza uptake in glaucoma, but also some caution on Jetrea rollout Sources: Company data, Credit Suisse estimates, FactSet, Bloomberg, IMS Health, Wolters Kluwer, regulatory documents, scientific presentations/publications, expert discussions, other publicly-available information 5 Views on Dry Eye Products Restasis Growth Is Poised to Continue in the Medium Term Sources: Company data, Credit Suisse estimates, FactSet, Bloomberg, IMS Health, Wolters Kluwer, regulatory documents, scientific presentations/publications, expert discussions, other publicly-available information 6 Optometrists Provide Representative Sample of Allergan’s Targeted Specialty Area for Dry Eye Treatment Survey respondents (n=23) see an average of 289 patients in an average month . Survey respondents see an average of 99 patients with dry eye in a typical month . ~91% of respondents believe that the state of the economy has medium to very significant impact on their practices .