The US Food and Drug Administration (FDA) recently approved Zolgensma, Novartis’ one-dose gene therapy for the treatment of paediatric patients (less than two years of age) suffering from spinal muscular atrophy (SMA), a rare but life-threatening disease. Zolgensma was acquired by Novartis as a part of the $8.7 billion acquisition of AveXis last year.
Being one of the earliest gene therapies in the market, Zolgensma is unprecedented in many aspects. In our latest blog, we look at the market for this drug, including pricing considerations and its future potential.
First gene therapy for SMA
SMA is a highly debilitating genetic disease that primarily affects children. It destroys the motor nerves in the spinal cord which control muscle movement in the body. As a result, the muscles degenerate progressively, with the most severe form of the disorder typically killing infants before they turn two. SMA is estimated to occur in ~1 in 10,000 live births in the US, with an estimated 10,000–25,000 patients currently living with the condition in the country. The disease presents in four types – Type I (Werdnig‐Hoffmann disease), II, III (Kugelberg Welander syndrome) and IV (adult form). Type I is the most severe and common form, accounting for ~60% of total SMA patients (as per incidence) with the onset at age 0-6 months and a majority of infants dying before the age of two.
There is only one other approved treatment for SMA, Spinraza (approved in December 2016), marketed by Biogen; however, Zolgensma is the first gene therapy in this space. Gene therapy is the hottest class of emerging treatment options today, with the potential to permanently cure a disease in one shot.
World’s most expensive drug
Novartis is pricing Zolgensma at $2.125 million, making it the world’s costliest drug, while the rival, Spinraza, costs $750,000 in the first year and $375,000 annually thereafter, for life. While Zolgensma’s extraordinary price tag will outrage drug pricing critics, a comparative analysis makes it look more reasonable.
As it is a one-time treatment, Zolgensma becomes more economical than Spinraza after five years, Spinraza being a life-time treatment – for instance, a decade-long treatment on Spinraza would translate to $4.125 million. And Zolgensma saves patients from multiple spinal infusions of Spinraza every year. Zolgensma is also economical when compared to the cumulative life-time costs associated with homecare, ventilators and repeat hospitalisations, which characterise SMA. It is, perhaps, this assessment that led the price watchdogs at the US Institute for Clinical and Economic Review to give a green light to the price tag.
The debilitating nature of SMA and a shortage of treatment options promise blockbuster sales potential for Zolgensma (over $1 billion annually). Spinraza (launched in 2017) achieved this milestone within two years – generating sales of $1.7 billion in 2018 and $518 million in Q1 2019 – a strong supporting indicator for Zolgensma’s potential. In a scenario where Zolgensma is able to cure the disease, the peak sales will easily surpass the current market expectations of $2–2.5 billion.
To date, Novartis has a treatment record of just five years of clinical trials – which while successful, does not validate a cure. The market is also likely to watch keenly the side-effects profile, especially the conclusion on the two deaths in the phase II trial (STR1VE) – the most recent reported in April 2019.
An unconventional payment model
The Zolgensma price is obviously too high to be affordable. However, paucity of treatment options for SMA is likely to make it difficult for insurers to say no to the drug. This backdrop brings forth another historic facet of this approval. Novartis and insurers are contemplating newer pricing models for Zolgensma, especially outcomes-based instalment payments. This model – $425,000 per year for five years – will distribute the cost of the treatment, which would also increase its attractiveness compared with Spinraza. This is likely to herald a new paradigm on the drug pricing front, which has become necessary to curtail the burden on the healthcare system. More drugs in the future are likely to approach the market with this model.
Test for the commercial success of gene therapies
Unconventional treatment therapies, such as cell and gene therapies, are increasingly becoming popular research frontiers in the hope of finding cures for life-threatening diseases. Since the space is still in its infancy, the uptake of the initial drugs and their commercial success will pave the way for future research. The cell and gene therapies (from Novartis and Gilead) that have made it to market so far have been underwhelming, despite ground-breaking clinical efficacy, which makes Zolgensma all the more crucial.
Life Sciences intelligence and insights
At The Smart Cube, our Financial Services experts regularly analyse developments in the Life Sciences sector, including forecasting and modelling market and pricing trends. Recently for Zolgensma, we developed sales estimates using an epidemiology-based forecasting technique, factoring in the US and Europe (where approval is pending), and built an NPV model to value the drug.
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