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Pfizer's slow Inflectra sales highlight roadblocks to biosimilar uptakes

Pfizer Inc.'s biosimilar version of Johnson & Johnson's blockbuster autoimmune treatment Remicade is struggling to break into the U.S. commercial market, resulting in substantially limited penetration for the product, executives said on the company's second-quarter earnings call.

Though the biosimilar, known as Inflectra, has about 20% of the Veterans Affairs market and a full 100% of Medicare, it has 2.3% total market share when private-sector health insurance plans are factored in, said John Young, group president of Pfizer Essential Health. The company's biosimilar revenue was $121 million globally in the quarter, with $23 million of that coming from the U.S. Inflectra is the company's only approved biosimilar in the company's home market.

This is because of Remicade's long-term contracts with different health plans, Chairman and CEO Ian Read said.

J&J has a strong incentive to protect Remicade sales: The drug brought in $1.53 billion in the second quarter. "There are exclusive provisions that are in place by the originators that make penetration difficult regardless of price," Read said. The biosimilar was launched in October 2016 at a 15% discount to Remicade's listed price, which does not factor in undisclosed deals made with payers for either medicine. Remicade's wholesale acquisition cost is $1,167.82 per unit, according to a report from the Institute for Clinical and Economic Review, a U.S. drug price watchdog.

So far the company has limited Remicade sales erosion to about 5% in the second quarter, Morgan Stanley analyst David Lewis said in an Aug. 1 note following a meeting with J&J Chairman and CEO Alex Gorsky. Besides the exclusive contracting with payers, in which discounts depend on volume, J&J's defense strategy includes discounts to treatment centers and a sales package bundling Remicade with other drugs.

In combination, these moves raise the economic stakes for any pharmacy benefit manager who encourages biosimilar adoption, Lewis said, adding that while these measures are unlikely to prevent biosimilar uptake in the long term, they buy the company time to develop pipeline assets that can compete.

Researchers have previously pointed to a "rebate trap," suggesting that payer models did not incentivize biosimilar switches. For biologic drugs, pharmaceutical companies have given pharmacy benefit managers rebates for up to 50% of the drug's listed cost.

No M&A until tax reform; cancer stakes raised after AstraZeneca

Over the next five years, Pfizer expects to bring between 25 and 40 drugs to the approval stage, 15 of which it projects to be blockbuster drugs, or those reaching $1 billion in annual revenue, Read said. Of those with blockbuster potential, half could reach it by 2020, he said.

Still, analysts hovered around questions of acquisitions and whether AstraZeneca's recent major setback in the immuno-oncology space had changed Pfizer's own strategy.

Read shut down the possibility of a deal in the short term, saying that while uncertainty around tax reform loomed, the company would hold off.

"I believe we need to see tax reform, or the absence of tax reform, to understand what the market values are," he said.

Frank D'Amelio, CFO and executive vice president of business operations, later added the company would like to see several reforms: a territorial tax system, a repatriation holiday, a lower corporate tax rate, and a lower minimum tax altogether.

On new cancer treatments, Read said that AstraZeneca PLC's failed Mystic trial showed that combination immuno-oncology, or IO, may be problematic in the near term.

"Certainly, I think it reinforces the value of PD-L1 franchises and where they stand in the different therapies," he said, referring to a type of targeted therapy that includes AstraZeneca's Imfinzi, the subject of the Mystic trial. The IO field is led by Merck & Co. Inc.'s Keytruda and Bristol-Myers Squibb Co.'s Opdivo, which target PD-1 proteins.

Pfizer is working with Germany-based Merck KGaA to usher another PD-L1 drug to market, avelumab. Despite the head start of other IO players, the company expects that the experimental drug will be the market leader for ovarian cancer and make some headway in the head and neck space, said Mikael Dolsten, Pfizer executive vice president and president of worldwide research & development.