Should Allergan plc Ordinary Shares Worry About Shire PLC (ADR) Win With Dry Eye Drug?

Should Allergan Worry About Shire's Win With Dry Eye Drug?

Shire’s dry eye disease drug, lifitegrast, may pose significant competition to Allergan’s Restasis

By Hadia Taqi on Jul 13, 2016 at 10:05 am EST

Shire PLC (ADR) (NASDAQ:SHPG) gained almost 5% on Tuesday after the Dublin-based biotech won an approval for its closely followed dry-eye disease treatment Xiidra (lifitegrast) from the Food and Drug Administration (FDA). The drug has had a shaky regulatory history, having been rejected by the US regulators back in October, who asked for an additional study and better product quality. Shire re-submitted the required data in January and received an approval slightly earlier than its July 22 FDA decision deadline.

"As Shire's first FDA-approved medicine in ophthalmics, this significant milestone advances our goal of becoming the global leader in this category, where there are unmet patient needs. We have a robust ophthalmics pipeline, and we look forward to leveraging Xiidra as our entree into the space as we continue to develop additional innovative eye care treatment options," said Shire CEO Flemming Ornskov in a press release.

Approximately 16 million adults in the US suffer from dry-eye disease. Xiidra has been approved with a particularly favorable label, which covers both, the signs (such as corneal straining or abrasions on the cornea) and symptoms of the condition which include what the patient feels, measured by “Eye dryness score” scale as well as eye dryness, stinging and discomfort. This makes Xiidra the first FDA-approved prescription eye drop that can be used to treat both, the signs and symptoms of dry-eye disease. According to Evercore ISI analyst Umer Raffat, the label “reads favorably for lifitegrast’s perception in the marketplace” as it enters into competition with rival treatment Restasis from Allergan PLC (NYSE:AGN).

Restasis, in comparison, is only indicated for tear production and yet rakes in more than $1 billion every year. Merrill Lynch analysts Graham Perry and Sachin Jain also pointed out in a Tuesday research report that Xiidra’s label shows benefit from as early as 14-weeks on patient symptoms, whereas Allergan’s Restasis can take several months to show an effect, which leads to a high level of patient discontinuation. The adverse events profile listed on Xiidra’s label is also not particularly worrying. The most common AEs include instillation site irritation, bad taste and reduced visual acuity/blurred vision on administration, none of which are “listed as warnings and do not appear serious in the context of the unmet medical need of dry eye,” as per Merrill Lynch analysts.

The research firm’s analysts expect Xiidra to pull in $1.6 billion in peak annual sales – a conservative estimate that assumes only 3-4% penetration into the addressable 7-10 million dry-eye population and in-line pricing with Restasis. “We note there is an in-situ patient population of c0.5m patients who have tried and failed Restasis (either due to lack of effect or ocular burning side effect) that could be easy for Shire to access initially as these patients have already been diagnosed as needing treatment but failing to benefit from Restasis,” Merrill Lynch's report said.

At the same time, Evercore’s Mr. Raffat believes Xiidra’s label can allow the drug to be priced at a premium to Restasis. This can increase the drug’s sales potential considerably. However, Mr. Raffat contends that even if Xiidra grabs some 30% of Restasis' volume, Allergan can compensate for almost 10-15% through a series of price hikes. Bernstein analyst Ronny Gal said in a Tuesday note to clients that he expects Xiidra to rake in roughly $2 billion in sales, with Restasis sales expected to taper off from $1.3 billion to some $900 million by 2020. “The key point regarding the competitive matchup is that it will likely be a stable oligopoly,” he wrote, noting that though Xiidra has a favorable label, Allergan “enjoys the power of incumbency,” including sales, contracts, and an established patient population. Restasis has been approved in the US since as far back as December 2002.

comments powered by Disqus