Shire's drug price gambit unlikely to boost share
BOSTON (Reuters) - Shire will price its experimental Gaucher disease drug velaglucerase at a 15 percent discount to Genzyme Corp's market-leading drug Cerezyme, but analysts doubt it will do much break Genzyme's monopoly on the $1.2 billion (780 million pound) Gaucher market.
Shire (SHP.L), which is based in Britain, hopes to take advantage of a manufacturing crisis at Cambridge, Massachusetts-based Genzyme that caused a shortage of Cerezyme and Fabrazyme, the company's treatment for Fabry disease.
Gaucher and Fabry are rare, hereditary disorders caused by an enzyme deficiency that can lead to critical organ damage and death.
The U.S. Food and Drug Administration is set to rule by February 28 on whether to approve velaglucerase, which will be sold under the brand name Vpriv. A Gaucher drug under development by Israel-based Protalix Biotherapeutics Inc (PLX.A) and Pfizer Inc (PFE.N) is expected to be approved by the end of the year.
If Vpriv wins approval, Shire could launch the drug within weeks.
"What we are trying to do here is provide a very, very effective treatment -- at least comparable to Cerezyme -- in a cost-effective way," said Angus Russell, Shire's chief executive officer, on a call with reporters on Friday.
But some investors are skeptical that the discount will persuade doctors to switch -- at least not in droves.
"If a doctor has been successful with a product they tend to go with what they know, despite supply disruptions, unless there is a compelling reason to switch," said one portfolio manager who owns about 500,000 Genzyme shares and 300,000 Shire shares, but declined to be identified because he is only allowed to speak publicly about his top 10 holdings. "I don't think a 15 percent discount is all that compelling."
A discount of around 25 percent would be what it would take to get physicians to switch, said Eun Yang, an analyst at Jefferies & Co.
Cerezyme is one of the most expensive drugs in the world, costing $200,000 on average a year. Genzyme controls almost the entire market.
Genzyme GENZ.O, which faces a likely proxy battle this year from dissident investor Carl Icahn, is racing to fix its problems and shake up top management.
Henri Termeer, the company's chief executive, told analysts on a recent conference call that 85 percent of patients who were taking Cerezyme prior to the manufacturing crisis are back on the drug. That is in line with Shire's estimate that it has 10 percent of the market in the United States and about 5 percent in Europe.
The question is whether Shire can continue to gain share. The company is optimistic that it can, and says the discount will help.
"We've done pricing research with physicians, patients and payors," said Sylvie Gregoire, Shire's president of Human Genetic Therapies, in an interview. "We found that for patients and physicians pricing does matter."
Shire also plans to help U.S. patients cover their portion of the drug's cost. Co-pays -- the amount not covered by insurance -- can rise as high as $5,000 a year, Gregoire said. Shire will cover most of those costs this year, and will cap patient co-pays next year at $500.
Genzyme declined to say whether it will reduce the price of Cerezyme. It said it evaluates its pricing on an ongoing basis and will continue to do so.
"We welcome meaningful contribution to the treatment of Gaucher," said Lori Gorski, a spokeswoman for Genzyme, in a statement. "This is a discussion for physicians and patients to have together, about a yet-to-be approved, new entry to the Gaucher space, that cannot offer the 20 years of proven safety and efficacy that comes with Cerezyme."
The wild card is Protalix's drug, Uplyso. Analysts expect it to be priced at a 20 percent to 25 percent discount to Cerezyme. Some expect it to take about a 15 percent market share. Others think Protalix will have to be discount its price even more to make a dent.
"I think in terms of efficacy and safety most people view Genzyme and Shire's products as very similar," said Karen Andersen, a Morningstar analyst. "But with Protalix's product there is still some doubt as to whether it works as well."
(Additional reporting by Ben Hirschler in London. Editing by Robert MacMillan)