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Expert Financial Analysis and Reporting

Eliquis Could Be A Blockbuster (BMY, $29.46)

Introduction and Purpose of this Report

I believe that the anti-coagulant drug market is poised to become the next blockbuster category in cardiovascular disease following the path of the hypertension and cholesterol drugs. This could mean that sales would reach several billions of dollars arising from several individual blockbuster products. If I am correct, there is a significant commercial potential for three new anti-coagulant drugs that are in the early stages of commercial development.


The first of these new products to reach the US market is Boehrringer Ingleheim’s Pradaxa (dabigatran), which was approved in October of 2010 for the indication of preventing blood clots forming due to atrial fibrillation not stemming from valve damage. The next drug in the development timeline is Johnson & Johnson (JNJ)/ Bayer’s Xarelto (rivaroxaban). It received approval for preventing deep vein thrombosis following knee and hip replacement surgery on July 1, 2011. Pradaxa is not approved for this indication in the US. Xarelto was issued a Complete Response Letter on its first attempt to gain approval in this indication largely due to concerns about potential liver toxicity. Evidently, Johnson & Johnson was able to satisfy the FDA on its concerns.


Xarelto will be the subject of an advisory committee meeting on September 8, 2011 for the additional indication of preventing blood clots forming due to atrial fibrillation not related to valve damage. This is the indication for which Pradaxa is approved. It has a PDUFA date of November 4, 2011. The third drug in development is Bristol-Myers Squibb (BMY)/ Pfizer’s (PFE) Eliquis (apixiban). It recently reported exciting phase III results in atrial fibrillation; it is probably a year or more behind Xarelto.


This report summarizes my views and provides background information on the anti-coagulant drug marketplace. I believe that each of these three drugs has blockbuster sales potential in the billions of dollars. The initial target of great opportunity is to replace warfarin as the standard of care for preventing stokes in the atrial fibrillation setting. I see this as a $6 billion addressable market opportunity in the US and perhaps $15 billion worldwide. There are significant opportunities in addition to this as these drugs are adopted into clinical practice.


The purpose of this report is to make investors aware of the market opportunity. In future reports, I will address how these three new drugs compare and take a stab at sales projections. However, I would caution that at this early stage comparisons are difficult. My basic feeling is that all three drugs are very good products and in this huge anti-coagulant market opportunity that each can be a blockbuster. This is based on historical experience in other huge markets in which several comparable drugs were developed. A prime example is the cholesterol lowering market in which Lipitor, Crestor and Zocor all were multi-billion dollar blockbusters.


Background on Coagulation and Blood Clots

The blood clotting process is essential to life, but excessive clotting is sometimes involved in life threatening conditions. When this occurs, it is necessary to give drugs which reduce the ability of blood to clot. A blood clot is an aggregation of platelets within a blood vessel that is usually caused by: (1) slowing of blood flow, (2) damage to a blood vessel wall that causes the generation of clotting factors, or (3) hypercoagulability which is usually caused by genetic disorders. Abnormal blood clot formation can block or partially block blood flow to tissues (ischemia) and this ischemia can cause tissue damage (infarction).


The most frequent medical problems caused by blood clots are:

  1. 1.The formation of blood clots in the arteries of the heart can cause heart attacks.
  2. 2.Blood clots that break off from vessel walls (usually veins in the legs) can travel through the circulatory system and lodge in smaller vessels of the body; these are called thromboemboli. If they lodge in the brain they can cause strokes and if they lodge in the lungs they can cause pulmonary embolisms which impede the flow of oxygenated blood.
  3. 3.Another major clot related problem stems from atrial fibrillation not caused by valve damage. This is an abnormal rhythm in the atrial chamber of the heart which causes a fluttering effect that results in a slowing of the blood flow. This can cause the formation of blood clots that then travel through the circulatory system into the brain and lungs.


The reasons for clots forming in the arterial system and the venous system are usually different. Arterial clots are often associated with plaque formation; the buildup of cholesterol and other lipids in the vessel wall that can rupture, cause clots to form and lead to ischemic disease such as acute coronary syndrome, stroke and peripheral artery disease. Cardiovascular procedures such as stenting can also damage vessel walls and lead to the formation of clots.


Clots in the veins usually result from the slowing of blood flow such as can occur in immobilized patients following surgery or hospitalization for other diseases. Atrial fibrillation carries a high risk of stroke because it causes stasis or slowing of blood flow in the atrial chamber of the heart.


Older, Currently Used Drugs for Treating Clots

There are a number of older drugs which are the current backbone of therapy to treat or prevent clots. They are:

  1. heparin (unfractionated),
  2. the fractionated low molecular weight heparins (LMWH)
  3. warfarin which is generally referred to by the brand name Coumadin
  4. aspirin and Plavix (clopidrogel)


Heparin is a naturally-occurring anticoagulant produced by mammalian cells that is harvested from the intestines of pigs. It acts by preventing the formation of clots. It does not work directly to break down clots that have already formed; instead, it allows the body's natural clot dissolving mechanisms to work normally to break down clots that have formed. Heparin needs to be given by continual infusion and this means that it is generally used for short term anticoagulation in the hospital setting such as: acute coronary syndrome, atrial fibrillation, deep vein thrombosis and pulmonary embolism, cardiopulmonary bypass for heart surgery, extracorporeal life support and hemofiltration. It requires monitoring to make sure that correct amounts are given.


The low molecular weight heparins (LMWH) are comprised of smaller (fractionated) segments of the heparin molecule. Some of the better known products are Lovenox (enoxaparin) and Fragmin (dalteparin). They can be given subcutaneously and unlike heparin do not require continual monitoring. Because LMWH has more predictable pharmacokinetic and anticoagulant effects, LMWH is recommended over unfractionated heparin for patients with massive pulmonary embolism and for initial treatment of deep vein thrombosis.


Prophylactic treatment of hospitalized medical patients with LMWH and similar anticoagulants results in a significant reduction of risk for symptomatic deep vein thrombosis. Because it can be given subcutaneously and does not require monitoring, LMWH can be used as outpatient treatment in conditions such as deep vein thrombosis or pulmonary embolism unlike heparin. However, the need to give one or two subcutaneous injections per day limits effective utilization in the outpatient setting.


Warfarin or Coumadin (the brand name of the most widely used warfarin product) is the standard of care in treating clots that form from atrial fibrillation. Frequently, patients requiring long term anticoagulation are started on LMWH and then switched to oral warfarin. Warfarin inhibits the synthesis of clotting factors in the clotting cascade that are biologically dependent on vitamin K. It is a difficult drug to use. It requires tight monitoring to titrate to the correct dosage and even after the right dosage is determined, the patient must have blood drawn every two weeks to make sure that the dosage remains correct. It has frequent interactions with food and other drugs. Like LMWH it has a slow onset of action of a day or so.


Aspirin and Plavix (clopidrogel) are oral agents that are the mainstays of managing arterial clots. They are used prophylactically to reduce the risk of heart attacks. These drugs works on different biological targets: aspirin on the COX-1 enzyme and Plavix on P2Y12. Both mechanisms prevent the aggregation of platelets that is necessary to form blood clots.


New Entrants in the Anti-Coagulant Market

Pradaxa, Xarelto and Eliquis work through different mechanisms of action than current products. They interact with proteins in the clotting cascade. The essential cells in the clotting process are platelets which circulate in the blood. Platelets must be activated and aggregate at the site at which a clot is formed. Molecules on the surface of platelets then work in coordination with a second system that involves the actions of multiple proteins circulating in the blood called clotting factors which work together in a process called the clotting cascade.


The essential function of the clotting cascade is to form fibrin, which wraps a mesh between the aggregated platelets to stabilize the clot. There are numerous clotting factors, which have an active and inactive form. (The letter 'a' is used to denote an active form of a factor.) Following activation, a factor will then activate the next factor in the sequence until fibrin is formed. There are multiple interactions in the cascade that are required for coagulation to work properly.


The coagulation cascade takes place at the site where platelets have aggregated. The key steps are as follows:

  1. Tissue factor and factor VIIa activate factor X, forming factor Xa.
  2. Factor Xa is then able to activate factor II (also known as prothrombin) to form factor IIa (thrombin).
  3. Thrombin converts factor I (fibrinogen) to factor Ia (fibrin). Fibrin forms a mesh with the platelets that plugs the break in the vessel wall.
  4. The fibrin mesh is further stabilized by factor XIII, which sews up the clot (much like forming an intricate network of cross-stitched strands of fibrin).
  5. Factor V and factor VIII accelerate the conversion of factor X to factor Xa by factor IXa (this is done by factor VIII) and accelerate the conversion of prothrombin to thrombin as done by factor Xa.


Pradaxa is a direct thrombin inhibitor. Xarelto and Eliquis are Factor Xa inhibitors that work upsteam of thrombin which needs Factor Xa for its formation. Both approaches reduce the amount of thrombin formed and consequently the production of fibrin. There are various and conflicting opinions on which is the better approach. Importantly, all three of these drugs seem to be quite effective and safe. Wall Street analysts are currently parsing clinical data to try to differentiate among the three products, but it will probably be years before the pluses and minuses of these products against each other are sorted out. At this point in time, it looks to me that all three are very good drugs.


Are New Drugs Really Necessary?

Currently used drugs are effective agents. They perform a critical role in cardiovascular medicine, save countless lives each year and are reasonably safe. However, I believe that there is unmet need for new products that can be given orally to extend treatment when the injectable formulations of heparin and LMWH heparin are not practical. There is also a need for new products that are as effective as warfarin, but don’t have all of the dosage and monitoring issues of this very important drug.


One of the major advantages offered by drugs like Pradaxa, Xarelto and Eliquis is that they are just more convenient. Drugs are only effective if patients use them correctly and this is the problem with existing drugs. The need to infuse heparin limits its use to the acute hospital setting. While low molecular weight heparins can be used outside the hospital, one or two injections per day are a difficult regimen for patients to adhere to. Coumadin (warfarin) is just a royal pain in the neck to initially titrate and then maintain at the right dosage. Pradaxa, Xarelto and Eliquis are once or twice a day oral drugs that are as effective as low molecular weight heparin or warfarin but require no significant titration, no monitoring, have few food and drug interactions and have a fast onset of action.


A December 23, 2010 editorial in the New England Journal of Medicine eloquently addressed this issue in regard to Xarelto and Eliquis and came to a firm conclusion that these new drugs are necessary. I quote.


“The oral factor Xa inhibitors (Xarelto and Eliquis) represent a major advance in the prevention and treatment of thromboembolic disease. …… The potential impact of these oral, highly specific, fixed-dose drugs that do not require routine monitoring will no doubt be substantial. Currently, millions of people worldwide are relegated to receiving no therapy or therapy that has been proven to be ineffective, because they lack access to the monitoring expertise needed to safely and effectively administer warfarin. It is conceivable that the oral factor Xa inhibitors, as compared with warfarin, will prove to be safer in clinical practice because they are administered in fixed doses, do not interfere with diet, and have fewer interactions with other drugs

Alternatives to warfarin have been long awaited. The oral factor Xa inhibitors show great promise. The reversibility of the drugs' effects and the ability to measure the anticoagulant effect in specific situations will continue to be highly desirable features and will help to allay physicians' concerns. If these novel, breakthrough, oral anticoagulant drugs prove to be effective across the broad spectrum of patients in routine care and are conscientiously priced, the worldwide impact will be huge.”

Strokes Caused by Atrial Fibrillation is the First Major Market

The first major commercial opportunity for the new oral anticoagulants is in preventing stokes caused by atrial fibrillation. As was previously noted Pradaxa was approved for this indication in October of 2010. Xarelto in this indication will be discussed at an advisory committee meeting on September 8, 2011 and the PDUFA date is November 4, 2011. Eliquis is a year or so behind Xarelto


It is estimated that atrial fibrillation not due to valve damage affects 2.3 million Americans. In atrial fibrillation, blood clots form because of the fibrillation (fluttering) in the left atrium that causes stagnation and slowing of blood flow that is conducive to forming blood clots. Fragments from the clots can dislodge and travel to the brain causing stokes or to the lungs causing pulmonary embolism. Strokes caused by atrial fibrillation account for about 15% of all strokes and they tend to be more severe than other types of strokes. The mortality rate at 30 days is about 25%


This is huge market opportunity for the new anticoagulants. The US addressable market is 2.3 million patients receiving therapy for 365 days at an estimated price of $7.00 per day for the new drugs or nearly $6 billion per year. Pradaxa and Xarelto sell at a price of around $6.75 per day.


Warfarin has been the standard of care in atrial fibrillation for 50 years. Aspirin can be given but is not very effective and is used only in low risk patients. When used correctly, warfarin is a very effective drug, but the problem is that it is a very difficult drug to use. It has a very narrow therapeutic window of risk to benefit. If dosed too high, it can cause major bleeding events and as a result it is usually dosed at and often below its lowest effective dose. Blood monitoring on a two week basis is usually required to determine if the drug is being properly dosed. In addition, the drug is subject to numerous drug and food interactions that can alter the amount of drug being delivered.


In the dabigatran NDA presentation to the FDA, Boehringer Ingleheim presented data that indicated that only 54% of eligible patients actually receive warfarin; 30% are given aspirin, 6% other therapies and 10% receive no therapy. Also cited was a study which indicated that in patients receiving warfarin that went on to have a stroke, only 18% were receiving an adequate dose of warfarin. This underlines the problem with warfarin.


Use of Anti-Coagulants to Prevent Clot Venous Clot Formation Following Hip and Knee Replacement Surgery

Xarelto was approved on July 1, 2011 for preventing the formation of blood clots in patients who have undergone hip and knee replacement surgery. Pradaxa is not approved in the US for this indication. There are about 300,000 hip and 800,000 knee replacements each year in the US. Patients stay in the hospital about three days following surgery, a period in which they are lying in bed and mobility is limited. While lying in bed, blood flow in the deep veins of the legs is slowed. This can give rise to blood clots. The danger posed by these clots is that they can break loose and travel through the veins into the atrial chamber of the heart where they are then pumped into the lungs impeding the flow of oxygenated blood.


This is a relatively small market opportunity. I estimate that Xarelto is priced at about $6.75 per day and the duration of therapy is 12 days for knee replacement and 35 days for hip. This means that the US addressable market for knee is $40 million and for hips $75 million.


Without prophylaxis, it is estimated that 57% of hip and 85% of hip replacement patients develop deep vein thrombosis. This does not mean that they will go on to develop pulmonary embolisms, but physicians much guard against the possibility. The most frequently used anticoagulant is low molecular weight heparin used continually or followed by warfarin. Both drugs are effective, but the problem is compliance.


The patient is discharged from the hospital after three days meaning that most of the anticoagulant therapy occurs outside the hospital and that is the problem. Low molecular weight heparin requires one to two subcutaneous injections per day which is a difficult regimen to adhere to. Warfarin is a very difficult drug to control. As a result, compliance to anticoagulation therapy outside the hospital is very difficult and many patients aren’t in compliance. This is a major problem because most clot formation takes place after the patient has left the hospital.


Other Indications for Anti-coagulants

Beyond the two indications for use that I have discussed, there are many other large potential opportunities for oral anticoagulants. For example, Xarelto is doing large studies comparing the effect of adding Xarelto to aspirin and Plavix in acute coronary syndrome. Phase II results were encouraging. Xarelto is also being studied in treating symptomatic deep vein thrombosis as opposed to the prophylaxis indication that was just granted. Over time, these agents will be investigated over the whole range of diseases in which blood clot formation plays a role and is likely to greatly expand the opportunity.


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