Teva: No Reason To "Panic" When It Comes To Ajovy Access

Discussions with payers for market access for the migraine drug will continue through November and into December. The level of rebating in the category will be around 25%, management forecast.

Much of the discussion during Teva Pharmaceutical Industries Ltd.' third quarter earnings call Nov. 1 revolved around expectations for the launch of its migraine therapy Ajovy (fremanezumab-vfrm), the big new potential growth driver on Teva's specialty side of the business.

Ajovy was approved in September for the treatment of migraine as one of three new recently-approved CGRP inhibitors, along with Amgen Inc./ Novartis AG' Aimovig (erenumab-aooe) and Eli Lilly & Co.'s Emgality (galcanezumab-gnlm). (Also see "Is Quarterly Dosing For Teva's Ajovy Enough To Differentiate It From Other CGRP Inhibitors?" - Scrip, 17 Sep, 2018.) Despite the big opportunity for effective new treatments in migraine, the competitive dynamics in the market mean the launch isn't a slam dunk.

Teva got a disappointing piece of news in October, when Express Scripts Holding Co.. announced it would exclude Ajovy from its national formulary in favor of the two rival drugs. (Also see "Teva Stands By Migraine Strategy After Ajovy Misses Boat On Express Scripts Deal" - Scrip, 17 Oct, 2018.) Express Scripts covers 30% of commercially insured patients in the US, and half of those lives are under plans that fall under the preferred national formulary, so the impact is big.

During the quarterly call, Teva's Head of North America-Commercial Brendan O'Grady tried to reassure investors.

"I wouldn't think that there's any reason for panic about how this class evolves and I would expect that you will see not everybody on every formulary everywhere," he said. "Some of the large national plans or PBMs may select two of the three, some may select three of the three. We think that although from a population level that these products are all very similar, at an individual [level] … there may be preferences, and we should probably wait for this market to form before we rush to judgment."

Market access discussions with payers for 2019 started in September and will continue into December, O'Grady said. Teva is still in discussions with the major players, both national and large regional, he added. The expectation is that rebating will evolve at a level that is north of 25%, he said.

The big difference for Ajovy versus the competition is that it is available in a quarterly dose of three consecutive injections, as well as monthly doses, which could be a convenience advantage. Since the launch Sept. 24, about 20% of the prescriptions for Ajovy are for the quarterly dose, Teva said.

Teva is counting on Ajovy and another new specialty drug Austedo (deutetrabenazine) for tardive dyskinesia and chorea associated with Huntington's disease to help offset the lower sales of Copaxone, which began facing the first stiff generic competition in October 2017. (Also see "Surprise! Mylan's Copaxone Generic Sets Teva Up For A Struggle" - Scrip, 4 Oct, 2017.) That's when Mylan NV's generic version of the 40 mg version was approved by FDA; the 40 mg version is dosed three times a week rather than every day, and Teva had successfully converted the majority of patients to the newer dose.

Sales of Copaxone in North America declined 43% in the third quarter to $463m due to the generic competition. Teva has managed to hang onto 77% volume share of the 40 mg Copaxone, despite the availability now of two generics, but it has had to offer steep discounts on the price.

Sliding sales of Copaxone and continued pricing pressure in US generics has put Teva in a precarious financial position, along with a mountain of debt it collected. Generic products continued to decline in the third quarter, with revenues down 25% in North America to $922m.

It's been one year since CEO Kare Schultz took over the helm to drive a turnaround. (Also see "Teva CEO Schultz Walks Smack Into A Rough Financial Situation" - Scrip, 2 Nov, 2017.) His big priority this last year has been implementing a sweeping cost cutting plan and delivering on his promise to pay down on the debt balance that was nearly $35bn a year ago. The debt balance as of Sept. 30, 2018 was $29.5bn.

As for the cost savings program, Teva has reduced spending by $1.8bn including headwinds from currency. That's ahead of the target of $1.5bn in spending reductions the company had set for 2018. The target for 2019 is a $3bn spending reduction. Teva has cut more than 9,000 employees since the start of the restructuring, but will continue further reductions through 2019. The plan calls for a total reduction in employees of 14,000.

Despite some progress on the turnaround plan, the near-term prospects for Teva remain challenging.

Bernstein research analyst Ronny Gal, in a same-day note, said, "We have a credible CEO, hopes in fasinumab and debt paydown cycle to argue for the stock. However, generic challenges are not resolved, Treanda is at-risk and valuation is still pretty sharp at 5.5%-7% [free cash flow] yield. We expect Teva to come back to range but are cautious on the business going forward."