2006 kinase drug performance

With the release of OSI's 4Q and year-end financial statements, the sales results for all 12 kinase-targeting drugs are finally available for the year 2006.

And what a year it was.

Kinase-modulating therapies (KDs, or kinase drugs) generated $8.5B in revenue in 2006, with 53% growth over 2005. Both figures are especially impressive given the fact that five of the drugs have been on the market only since December, 2005, with ex-US approvals for these and others still growing.

A subset of these drugs with anti-angiogenesis effects totaled $4.6B, with 80% year over year growth. Drugs specifically targeting VEGF as cancer therapies totaled $2.1B, representing an 88% growth rate.

A quick glance at the 4th quarter indicates $2.5B in KD sales, equating to an annualized $10B. Assuming a simple organic growth rate of 20%, we're looking at $12B in sales, prior to expanded approvals and new product introductions.

New KD introductions could include, at a minimum, Tykerb (GSK), Torisel (WYE), Arxxant (Lilly), and potentially Tasignia (NVS). (Tykerb and Tasignia could cannibalize some existing sales.)

All told, we might see KDs contributing nearing $15B in annual sales in '07, with greater growth still to come.

Tarceva: running in place?

One other note from the DNA earnings numbers: Tarceva sales grew 27% year over year and 7% sequentially (total: $107M). Very bad news for OSI. DNA is more motivated to push Avastin for solid tumors, so Tarceva is probably undermarketed by something between $500M and $1B.

I wonder if OSI can buy back their product from Genentech, perhaps financed by a big pharma sugar daddy like NVS. If you slap DNA's P/E on Tarceva, the price would be something like $21B (versus OSI's valuation of $1.9B) so I can't imagine this happening soon. Unfortunately, OSI's current valuation doesn't really argue for an acquisition by DNA, and that doesn't even take into account the potential anti-trust concerns of such a merger.

Tarceva in the news

Pricing to rise slightly.

The news that DNA is raising Tarceva pricing is interesting given that about a month ago, Genentech (DNA) announced a cap on per patient costs for Avastin, especially since both medicines are anti-angiogenic solid tumor fighters (though targeting different genes.)

There's probably 2 reasons for the difference:

1) Avastin is a monoclonal antibody, and much more expensive to produce.
2) Avastin is wholly owned by DNA, while Tarceva is partnered with OSI. OSI probably doesn't need to send the same social message that DNA does, and therefore is not as interested in capping costs. Or, OSI wants to raise prices to increase Tarceva's profile within DNA (and hence profitability).

(It's pretty clear that DNA is pushing Avastin harder than Tarceva. I'll illustrate this in a future post. Tarceva may be the better product in the long run, strictly due to patient compliance costs in consuming a small molecule (pill) versus weekly injections (Avastin.)

It's still hard to accept why OSI and DNA are both partners and competitors in this space and wonder how long this will last - with either DNA buying OSI, OSI buying out of the DNA agreement.

OSI has small molecules in development that could/would supplant Avastin, but they're years away


Somewhat related: NICE (UK health cost/benefit agency) just determined that Tarceva is not cost effective, and is therefore not available in England as part of NHS (public) medical care. Tarceva is, however, covered by the NHS in Scotland.

The decision isn't final, though.

This brings up a deep moral question. I guess I shouldn't be shocked that Britain has coldly run the numbers on Tarceva, and are willing (and able) to tell people who could benefit from Tarceva that the government doesn't find their additional time on this Earth, or improved quality of life to be a good investment.

Story: NICE gives thumbs down to Tarceva