A $5 Billion Cholesterol Bet May Be an Overreach

(Bloomberg Opinion) -- Novartis AG appears ready to put a premium on convenience.

Bloomberg News reported early Tuesday that the Swiss pharmaceutical giant is conducting due diligence on Medicines Co., a New Jersey-based biotechnology company with a promising drug called inclisiran that can substantially lower so-called bad cholesterol with just two annual treatments. Its principal rivals, Amgen Inc.'s Repatha, and Sanofi and Regeneron Pharmaceutical Inc.’s Praluent, require biweekly or monthly injections. 

Buying Medicines Co. wouldn’t be a megadeal, but it won’t come cheap. The company’s share price had already more than tripled this year as it released promising data, and a 20% boost prompted by deal speculation Tuesday pushed its market value well above $5 billion. If the price gets too high or the unnamed others reportedly also interested in the company start a bidding war, Novartis should be ready to walk away. Despite its promise, inclisiran also has its potential limits, and its sales potential is still highly uncertain. Approval isn’t expected until next year.

A $5 Billion Cholesterol Bet May Be an Overreach

Inclisiran’s predecessors Repatha and Praluent launched with much fanfare in 2015, and the assumption was that they would take on blockbuster status. Insurers balked at the high price of the drugs and the potentially massive market of patients with high cholesterol who might want it, and threw up barriers to access. As a result, the medicines got off to a slow sales start and continue to struggle. Both companies hoped that large outcomes trials proving that the drugs could prevent events such as heart attacks and strokes would turn things around and boost sales. The benefit wasn’t as significant as some hoped, and major sales acceleration never arrived. 

After a series of big price cuts, the drugs now cost under $6,000, less than half their list price at launch. The two drugs are expected to combine for around $940 million in sales this year; analysts once expected the two to have surpassed that on their own by now. 

A $5 Billion Cholesterol Bet May Be an Overreach

Inclirisan works in a different way and looks like a more effective drug, able to lower cholesterol at a similar rate without nearly as many jabs of the needle. That’s better for patients, and physicians are likely to prefer it because that could translate to fewer missed doses and potentially better overall results. Patients and physicians don't get to choose on their own, though: Price-conscious health plans, insurers, and pharmacy benefit managers are the real decision-makers.

These groups are pretty comfortable limiting the use of more expensive next-generation cholesterol drugs to a relatively small population. That reality and the ever-decreasing price of Praluent and Repatha suggests that inclisiran may have trouble pricing at much of a premium.  

The drug’s convenience and impact may finally expand this market to a broader group of Americans, especially if its owner is willing to compromise on cost at launch or an outcomes trial due in a few years reveals a positive surprise. It’s entirely possible, however, that it ends up with just a corner of a market that never gets all that big. 

Under the stewardship of a big company like Novartis, which has managed to navigate a slow launch and resistant market pretty well for its own heart drug Entresto, inclirisan is likely to deliver at least respectable sales some day. The company should be cautious if the price gets to a point where respectable won’t be nearly enough. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

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