Turmoil In Allergy Market Continues As Merck Ends ALK Partnership
Executive Summary
Merck & Co has returned all US marketing rights to ALK-Abello’s sublingual allergy tablets to the Danish company, casting a pall over the sector that has this year been dismayed by late-stage failures of new products and delays in drug development.
Developing the market for new allergy vaccines is proving difficult and has claimed another casualty, the US marketing partnership between Merck & Co. Inc. and Denmark’s ALK-Abello A/S, with the US Big Pharma returning all rights to ALK’s sublingual allergy immunotherapy tablets (SLIT) in North America.
The discontinuation followed a review of Merck’s strategic priorities and, after a six-month transition period, the rights to the SLIT products will revert to ALK, at no cost to the Danish company. ALK’s shares on the Copenhagen stock exchange dropped by 18% on the news, to DKK 960 ($142), on July 27, the day the ending of the partnership was announced.
ALK said the decision was unexpected; it was apparently based by Merck on a prioritization of resources. That said, the writings been on the wall for some time, with US sales by Merck of ALK’s two allergy vaccines, the grass pollen immunotherapy Grastek and the ragweed immunotherapy, Ragwitek tablets, not taking off as well as expected.
The two products were launched by Merck in the US in 2014, but have only had “modest sales”. Sales figures have not been revealed by Merck, but ALK reported first-quarter income from SLIT tablets in North America of DKK 49m ($7.2m), and most of that – DKK 34m – was a milestone payment for the submission of a marketing application. The remainder was sales royalties, R&D services and product supply. In contrast, ALK’s North American sales of allergen extracts for “shots” and diagnostics amounted to DKK 112m, up 22%, in the 2016 first quarter.
ALK will now review its US strategy that could include finding an alternative partner or marketing the products itself in the US, a market to which ALK says it remains “fully committed.” The company already employs around 200 people in the US and Canada, it told Scrip.
Going alone could well be an attractive opportunity for ALK, and a chance for the company to build up a highly profitable business, although not quite on a scale as previously hoped, remarked Jefferies analysts in a July 27 note.
ALK already has several licensees in other territories for its SLIT products, including Torii Pharmaceutical Co. Ltd. in Japan, Abbott Laboratories Inc. in Russia and Southeast Asia, and Seqirus in Australia and New Zealand, and so is also familiar with that sort of arrangement.
But the turmoil comes at an awkward time for ALK. A new president and CEO, Carsten Hellmann, was appointed in May, but he doesn’t start work until he completes the divestment of Sanofi’s animal health business Merial, where he is CEO, to Boehringer Ingelheim GMBH, sometime before Jan 1, 2017. In the meantime, ALK chairman Steen Riisgaard is acting CEO.
Other allergy vaccine companies could benefit from the disruption. Stallergenes Greer PLC (Stallergenes SA) has a range of marketed and investigational sublingual products in its portfolio; it already markets a grass pollen allergy SLIT tablet Oralair in the US, and a ragweed product, Stagr SAIL SLIT, is in Phase III studies in the country, both for allergic rhinitis. In addition, a house dust mite SLIT product, Stagr 320, is in Phase III studies in the US and EU for allergic rhinitis, and is in Phase II for allergic asthma.
Disappointing Few Months
The ending of the US partnership adds to a disappointing few months for the allergy vaccine sector that has seen the high-profile failure of Circassia Pharmaceuticals PLC’s potential cat allergy product in Phase III (Also see "Circassia's Harris Deeply Frustrated By Phase III Cat Allergy Flop" - Scrip, 20 Jun, 2016.). A year-long delay to Allergy Therapeutics PLC's submission of a US marketing application for its grass pollen allergy product has also been reported (Also see "Gloom Is Overblown: Allergy Vaccine Sector Is Poised To Globalize" - Scrip, 14 Jul, 2016.).
There also appears to be no quick way of changing the practise of US allergists from compounding their own allergy "shots" that are administered numerous times to allergy sufferers, to one where they write prescriptions for regulator-approved and standardized products.
That’s recognized by ALK, which said in its July 27 statement that success in the US is “likely to follow the path seen in Europe, where slow early adoption has now given way to sustained growth.”
Two factors are key to success in the US allergy vaccine market, according to ALK; approval of products for all three respiratory allergens - grass and ragweed pollen, and house dust mites (HDMs) - and approval in the additional indication, allergic asthma. ALK’s HDM product, that is marketed in Europe as Acarizax, has been submitted for FDA approval by Merck, and the Danish company will have increased involvement in that process. Merck will also complete and pay for an ongoing clinical study, thought to be a pediatric development program for Ragwitek.