CSL Looks Beyond Organic Growth To External Innovation

CSL Ltd.'s sales grew 15% in its last fiscal year and are expected to grow about 8% in FY 2018, but the Australia-based company is looking beyond its plasma protein expertise to outside innovation to help boost future revenue.

CSL Ltd. is not a typical biopharmaceutical company, given its plasma collection business and plasma-derived product expertise, but it has the same goal as many of its peers – to bring in more external innovation that augments the company's organic growth.

The Australian specialty pharma firm has an American CEO, Paul Perreault, who is based in Pennsylvania but spends most of his days on the road, traveling to CSL's dozens of office and manufacturing sites around the world. Scrip spoke with Perreault during the J.P. Morgan Healthcare Conference in San Francisco this month to talk about CSL Behring's global strategy.

The company reported $7bn in revenue for fiscal year 2017, which ended on June 30, representing a gain of 15% on a constant currency basis from 2016; its net profit after tax (NPAT) was up 24% year-over-year at $1.3bn. The company's NPAT forecast for fiscal 2018 is $1.48bn to $1.55bn and revenue is expected to rise 8% on a constant currency basis.

"Up until the last couple of years, most of what we've done is organic growth from hard-to-manufacture plasma proteins," Perreault said. "Now we have growth from new product launches and our specialty portfolio."

Its top sellers are Privigen (immune globulin intravenous) and Hizentra (immune globulin subcutaneous) for primary immunodeficiencies, which grew 14.1% year over year in fiscal 2017 to $2.8bn; hemophilia therapies, including the recombinant drugs Idelvion (coagulation factor IX) and Afstyla (antihemophilic factor VIII), which grew rose 4% to $1bn; and specialty medicines, such as Kcentra (human prothrombin complex concentrate) for warfarin reversal and Berinert (human C1 esterase inhibitor) for hereditary angioedema (HAE), which jumped 20% to $1.2bn.

The company's HAE portfolio grew in 2017 following US FDA approval in June for Haegarda (subcutaneous human C1 esterase inhibitor). (Also see "CSL Behring Nears Market With Easier-To-Administer HAE Prophylactic" - Scrip, 23 Mar, 2017.) CSL also sells albumin, for which revenue rose 7% to $840m, and vaccines through its Seqirus vaccine business, which primarily sells flu vaccines and saw revenue rise 23% to $900m in fiscal year 2017.

CSL employs about 21,000 people globally, including 8,500 people alone who work in plasma collection. More than half of CSL's employees are involved in raw materials and manufacturing. The company has about 1,500 people involved in sales and marketing with another 1,400 working in research and development. However, it's R&D operations have grown significantly in recent years. (Also see "Scrip 100: R&D Paths Of Top 50 Pharma" - Scrip, 12 Dec, 2016.)

CSL112 Leads Growing R&D Commitment

The company will soon begin the largest clinical trial in its history – a $500m Phase III study known as AEGIS-II that will enroll 17,000 patients to test CSL112's ability to reduce cardiovascular events in the first 90 days after a heart attack. Patients will receive four infusions of the therapy in the hospital and rehabilitation center as they recover from a heart attack. The Phase IIb study AEGIS-I was able to confirm CSL112's mechanism of action, but it was not large enough to prove the drug's efficacy.

CSL112 is a novel formulation of plasma-derived Apolipoprotein A-I (apoA-I) that works to enhance cholesterol efflux capacity (CEC), the process by which cholesterol is removed from plaque and transported to the liver for elimination from the body.

"Five or six years ago, I might've said we may partner this product. Back then we were only spending $300m per year on R&D. Now, we have grown so much we can afford it," Perreault said, noting that CSL's R&D budget now stands at $800m per year.

The company intends to retain the full economics associated with CSL112, which could address an unmet need in a reasonably large market. It's estimated that of the 800,000 people that have heart attacks in the US each year, one in five will have another cardiovascular event within a year and most of those will occur within the first 90 days.

"Nothing has reduced major adverse cardiac events in that first 90 days," Perreault said. "If we reduce that by even 15% it will be a blockbuster. It could have a great effect for patients, economically and for the company."

But the CEO explained that CSL is looking to further diversify its portfolio beyond plasma-derived medicines, both internally and through partnerships.

Signing Deals, Buying New Modalities

The company signed a deal with Momenta Pharmaceuticals Inc. a year ago that was worth $50m up front and as much as $550m in milestone fees for a global license to develop M230, a recombinant immunomodulator of Fc receptors, which could improve on intravenous immunoglobulin (IVIG). (Also see "Deal Watch: Taking Care Of Business Before J.P. Morgan" - Scrip, 6 Jan, 2017.)

More recently, CSL paid $15m up front in early December to enter into a collaboration agreement with Vitaeris Inc. for the development of clazakizumab in the prevention of solid organ transplant rejection. CSL retained an option to buy Vitaeris, which acquired the interleukin-6 (IL-6) inhibitor from Alder BioPharmaceuticals Inc. in 2016.

The company also paid $91m up front and committed $325m in future payments in August to buy Calimmune Inc., which is developing ex vivo hematopoietic stem cell gene therapies, including preclinical lead drug candidate CAL-H for sickle cell disease and beta-thalassemia. (Also see "Deal Watch: CSL Behring's Calimmune Buy Builds On Its Base & Adds Platform Tech" - Scrip, 28 Aug, 2017.)

Perreault said CSL's in-licensed or acquired therapeutic candidates should improve on the standard of care and provide savings for the health care system. The assets primarily will fall into the company's main therapeutic areas – immunology, hematology and coagulation, and specialty medicines – or adjacent areas, like transplant.

The Calimmune transaction checked a couple of boxes, because the lead product candidate is for rare, hematology indications and it’s a combination cell and gene therapy.

"We're also interested in cell and gene therapy, because that's where everything's going," Perreault said, citing Spark Therapeutics Inc.'s newly approved gene therapy Luxturna (voretigene neparvovec-rzyl), hemophilia gene therapies in development by the likes of BioMarin Pharmaceutical Inc., and novel cell and gene products from Sangamo Therapeutics Inc. (Also see "Spark's Luxturna Approval Ushers In A New Gene Therapy Era" - Scrip, 19 Dec, 2017.)

Protecting Its Hemophilia Franchise

BioMarin and Spark both have gene therapies in development that could give CSL's hemophilia franchise a run for its money. (Also see "Spark Plots Rebound For Hemophilia A Gene Therapy, As Rival BioMarin Surges" - Scrip, 12 Dec, 2017.) The hemophilia space is facing potential upheaval following the entry of longer-acting intravenous clotting factors, such as CSL's Idelvion and Afstyla, and the recent approval of Roche's Hemlibra (emicizumab), a weekly subcutaneous injection for hemophilia A. (Also see "Roche's Hemlibra Priced And Labeled To Beat Competition, Safety Concern" - Scrip, 17 Nov, 2017.)

Patients may be skeptical, as they're loyal to current therapies and wary about new products' safety, but payers are interested in less frequently dosed injectables rather than the current standard of care that requires frequent infusions. (Also see "Competition Coming For Hemophilia Franchises, But Will Patients And Payers Embrace New Drugs?" - Scrip, 15 Mar, 2017.)

Perreault said he has no doubt that gene therapies eventually will be approved as one-time treatments for hemophilia, but he noted that it could take a long time for the products to disrupt the global hemophilia market. He noted that in China, for instance, most patients don't receive treatment and those who do are treated on-demand with older plasma-derived clotting factors rather than prophylactically with recombinant factors.

"We're selling more plasma-derived factors than we ever have," Perreault said. "In a first-world country like the US or in Europe, gene therapies clearly will have an effect on the hemophilia market. It will take a long time elsewhere and there's a lot we can do in that time."

CSL is marketing the benefits of its recombinant factor Idelvion for hemophilia B, which can be dosed with up to three weeks between infusions versus competing longer-acting factors that can be dosed every two weeks, but sometimes need to be dosed once-weekly.

The company continues to ramp up its promotion of both Idelvion and Afstyla, which is given once or twice weekly in hemophilia A, to help make up for the loss of revenue from Bayer AG's recombinant factor VIII Kogenate for hemophilia A. CSL supplied the product as Helixate, but that contract ended, so the company is transitioning patients to Afstyla.

A Propensity For Difficulty

Perreault noted that the difficulty of developing and manufacturing cell and gene therapies is not enough to dissuade CSL. The company believes it can make inroads in those areas, because of its experience manufacturing plasma-based therapies and complex biologics.

"We have experience manufacturing tough stuff," Perreault said.

He noted that raw materials and manufacturing comprise 65% of CSL's costs, because of the company's plasma collection business and its production of complex products. That's why CSL is careful about what it spends on R&D and reviews the pipeline twice each year to determine which products should be accelerated, decelerated or stopped altogether.

"It's not so much how you spend, but what you spend it on," Perreault said. "You have to be thoughtful about where you spend the money."