Vectura’s shares (LSE:VEC) took a hit on October 25 after its partner Novartis (NYSE:NVS; SIX:NOVN) said it’d delay regulatory filings of two of their respiratory drugs: NVA237 and QVA149.
The stock tumbled 20% that day and has been under selling pressure since then. It’s trading now at 52-week lows.
On the one hand, NVA237 (also named Seebri Breezhaler) will require additional data in the US hence delaying not only its NDA submission, but also affecting QVA149’s. On the other hand, on Sept 28, Novartis announced it had submitted a Marketing Authorisation Application (MAA) for NVA237 to the European Medicines Agency (EMA) triggering a $5m milestone payment under the 2005 deal. The QVA149 submission remains on track in Europe and the rest of the world. European launch is expected in 2013.
Novartis wasn’t more specific about the additional clinical data, but some analysts pointed to problems with the dose response which could need up to two years to be cleared. It’s not strange that the stock plunged since competition in the COPD arena is fierce as you will see in this report.
Vectura is a publicly traded pharmaceutical company that develops inhaled treatments for respiratory diseases. It’s headquartered in Chippenham, England.
Vectura has a wide portfolio that includes marketed and development products. Most of them are partnered with major pharmaceutical companies. It also features a clinical pipeline in mid to advanced stages of development and a proprietary portfolio of inhaler devices for the administration of dry powder.
Vectura’s most advanced drugs in development are:
- NVA237 is a long-acting inhaled formulation of the muscarinic ACh antagonist bronchodilator (LAMA) glycopyrronium bromide, for chronic obstructive pulmonary disease (COPD). This drug is being developed by Novartis under license from Vectura and Sosei. It has reported results from three phase III over the last few months:
GLOW1 was a pivotal double-blind 26-week phase III trial that tested 50 microg once daily of NVA237 in approximately 800 patients. In April 2011, the company reported that it had met the primary endpoint by demonstrating superior bronchodilatation measured by FEV1 over placebo at 12 weeks. (p<0.001). Further data were presented at the European Respiratory Meeting. It demonstrated an improvement in lung function of 108ml in FEV1 over placebo and showed a rapid onset of action.
GLOW2 was a 52-week double-blind, placebo-controlled, parallel-group study involving 1,066 patients to assess the efficacy, safety and tolerability of NVA237 in patients with COPD. In June 2011, Vectura reported that once-daily NVA237 50 microg significantly improved lung function in patients with moderate-to-severe COPD relative to placebo (p<0.001), with similar efficacy to open-label tiotropium 18 microg. Tiotropium is a once-daily LAMA indicated for the treatment of COPD.
GLOW3: data from this study were presented at the European Respiratory Society congress in Amsterdam in September. It evaluated the effects of 50 microg of NVA-237 given once a day on exercise endurance in 108 moderate-to-severe COPD patients. The study met its primary endpoint by showing a significant 21% improvement in exercise endurance versus placebo at the end of the study (day 21), with a significant 10% increase from day 1.
The incidence of adverse events was similar through all arms in all trials.
- QVA149 is also being developed by Novartis under license from Vectura and Sosei. It is a combination of NVA237 and indacaterol, a long-acting b2 agonist (LABA) for the treatment of COPD. In May 2010, a phase III, randomized, double-blind, parallel-group study beganin patients with severe or very severe COPD (expected n=1,998). The primary endpoint is to assess the superiority of QVA-149 over NVA-237 as measured by exacerbations. Secondary endpoints will include time to first exacerbation, safety and tolerability. The beginning of this phase III trial triggered a milestone payment of $7.5M from Novartis to each company. This drug is currently being tested in six phase III trials in over 5,000 patients.
Previous phase II trials: in September 2009, data from two randomized, double-blind, placebo-controlled, multicenter, phase II studies were presented. The first trial aimed at determining the effect of QVA149 vs indacaterol alone or placebo. The primary endpoint was change from baseline in FEV1 at 24hs post-dose after 7 days of treatment. 135 moderate to severe COPD patients received QVA-149 (300 microg of indacaterol plus 50 microg of glycopyrronium bromide) or 300 or 600 microg of indacaterol. At day 7, the mean improvements in trough FEV1 between QVA-149 and placebo, QVA-149 and indacaterol (300 microg) and QVA-149 and indacaterol (600 microg) were 226, 123 and 117 ml. All results were statistically significant (p<0.001).
The other placebo-controlled trial evaluated the safety and tolerability of 3 doses of QVA149 (600/100, 300/100 and 150/100) and QAB149 (300µg) in 255 patients during 14 days of treatment. In this study, QVA149 had no significant effect on change in 24 hour mean heart rate from baseline to Day 14, there was no clinically relevant effect on QTc interval at 1, 7, or 14 days. QVA149 was well tolerated with overall adverse event rates similar to placebo.
The rest of the pipeline features clinical products in phase II or pre-clinical for several indications such as asthma, cystic fibrosis, Parkinson’s disease or lung transplant rejection. These programs are available for out-licensing after a successful proof-of-concept.
Vectura has a number of products in the market as a result of its collaborations with major pharmaceutical companies.
- Advate for Haemophilia A is marketed worldwide by Baxter. Vectura receives royalties on sales that amounted to £10M in the period of 2010/2011. This was up 4% with respect to the previous period of 2009/2010. It contributes to 75% of the royalties generated in the year. Vectura received less than 1% on sales of $1.8bn in 2010.
- Other products licensed to Baxter that generate revenues for Vectura are Extraneal for surgical adhesions and Adept for peritoneal dialysis. Their royalties have been declining in the past few quarters and they are not expected to rise in the coming years according to the company’s last annual report. Asmasal and Asmabel for asthma, marketed by Recipharm in the UK, France and Ireland, probably supposed negligible revenues for Vectura as sales are not even described in its annual report.
- Key milestones.
o NVA237: After the MAA filing in Europe on Sept 28 2011, European launch is on track for 2012. Additional Phase III data will be will be presented at a respiratory conference in 1H 2012. Regulatory filing for US approval was expected by the end of 2011, but after the recent news, its commercial launch probably won’t happen until 2014.
o QVA149: Phase III data will be presented at a respiratory conference in 2H 2012. Novartis’ Indacaterol received US approval in July 2011 for the once-daily 75 microg dose. European launch is expected in 2013. The US regulatory filing was expected in 2012, but again, after the delay, it won’t be in the US market until 2015.
-Financials and fundamentals
The latest financial report for the six months ended on September 30 2011 shows a profit of £2.6m for the first time as a result of lower costs. It ended the period with £80m in its coffers. Revenues were £21.1m, lower than the last year’s same period of £26.3m
According to its annual report for the year ended 31 March 2011, Vectura ended the year with a positive EBITDA of £0.5m. Revenues totalled almost £43m, up 7% from 2009/2010. However, this represents a growth decrease as previous years’ revenues increased 29% in 2010 and 24% in 2009. It burns cash at an approximate rate of £10m per quarter. Net cash inflow from operating activities was £10.8m in 2011 compared to (£3.8m) in 2010.
Vectura presents a healthy balance sheet: it shows a Current ratio of 3.42 and a Debt to Equity ratio of almost 0.20 which indicates the company is able to pay off its short and long term liabilities without problems.
In regard to its fundamentals, Vectura seems to be overvalued, with a P/B of 128.41 and a P/S of 496.
Click here for a more detailed table on Vectura’s annual revenues. Source: Company preliminary results for the year ended 31st March 2011.
COPD market and competitive landscape.
COPD’s market represents a substantial commercial opportunity. Approximately 64m people were affected by COPD worldwide in 2004 and it will become the third cause of death in 2030 according to the World Health Organization. In 2010 the NHLBI identified 12m individuals in the USA with COPD and 12m more that could remain undiagnosed.
According to several sources (MarketResearch and Decision Resources), this market is set to grow at a 4.6% rate to 2019 when it will be worth over $13bn in the world’s main markets. This increase comes as a result of better diagnosis and the increasing age of the population. The COPD market was worth $8.4bn in 2009.
The COPD market is becoming more and more crowded, with four drugs that have blockbuster status and seven more with sales over $100m. This is a summary of the four blockbusters.
GSK’s Advair (an ICS/LABA combo of fluticasone/salmeterol) sales grew in 2010 to £5.1bn ($7,5bn) up 25% from 2008, whereas Boehringer Ingelheim’s Spiriva (tiotropium) had revenues to the tune of $4bn in 2010, which represents a 50% increase from 2008. These top-selling drugs will face generic competition in the coming years. The US patent of the active substances in the combination Advair (also branded as Seretide in the EU) expired in 2010 although various patents of its delivery device are in force until 2016. On the other hand, the first patent for Spiriva currently expires in March 2014.
Symbicort reported sales of $2.7bn in 2010, which is a year-on-year increase of 20% on 2009. Pulmicort is indicated for the treatment of COPD only in certain countries in Europe and South America. AstraZeneca focuses on Symbicort for that indication. Sales of pulmicort are in a downtrend for both the ashtma and rhinitis franchises. It reported sales of $872m for the former and $227m for the latter.
There are a number of compounds in development that could impact dramatically the COPD arena. In particular, there are seven drugs or combination of drugs in Phase III or pre-registration. See this table for a detailed description.
Other interesting LAMAs currently in development besides Spiriva and NVA237 are Almirall/Forest/Kyorin’s twice-daily Aclidinium bromide (both NDA and MAA were accepted in August and July and regulatory decisions are expected by mid -2012) and GSK’s umeclidinium in ongoing Phase III with results expected in mid-2012
Other products that are expected to garner market share are the new LABA/LAMA combinations that are currently in development. According to Datamonitor, the first combination to reach the market will make $1.9bn by 2019. Vectura’s LABA/LAMA combo is expected to be well received by physicians worldwide since it is a first-in-class once-daily drug that could be perceived as more convenient than current treatments hence securing patient compliance. However, other combinations are currently under development and may make its market penetration difficult once they hit the market. The more developed LABA/LAMA combinations are:
- GSK and Theravance’s umeclidinium/vilanterol combo administered once-daily is currently undergoing several phase III trials with data expected as early as 2012.
- Boehringer Ingelheim’s Olodaterol/tiotropium once-daily bronchodilator combination is waiting to start phase III trials during September 2011 according to clinicaltrials.gov. Assuming it will take at least two years to complete them, they drug would be ready for commercial launch in 2014, if not later. BI still has to complete the safety phase III trial designed to address the FDA’s concerns about Respimat inhaler device. Completion date is December 2013
- Almirall Prodesfarma’s LAS-40464 is a twice-daily, inhaled combination of the LAMA aclidinium bromide and the LABA formoterol. Phase III clinical trials commenced on November 16, 2011.
- Pearl Therapeutics’ PT003 is a combination of glycopirrolate and formoterol given twice daily. After recently reporting successful phase IIb results, Pearl Therapeutics intends to conduct four additional phase II studies that will report results in mid 2012. Once these studies are completed, they will meet with the FDA to discuss how to proceed with phase III trials. Interestingly, it was named one of the 15 most promising biotech companies in 2011 by Fierce Biotech.
A slightly different approach to LABA/LAMA combinations are MABAs. A MABA is a bifunctional molecule with both b2 agonist and muscarinic antagonist activity, all in one molecule. At present, there are only a few companies developing MABAs in relatively early stages. The most advanced is GSK/Theravance’s GSK961081 that has recently completed Phase IIb trials with no results reported yet.
The same approach than Advair, are inhaled corticosteroid (ICS)/LABA combinations such as GSK/Theravance’s Relovair (once-daily fluticasone fluorate and vilanterol) which is being developed for asthma and COPD in large Phase III trials.
Also, Almirall’s LAS-410171 is composed of albediterol (LAS-100977) and an undisclosed corticosteroid given once-daily which is undergoing phase IIa trials for asthma and COPD. On its side, Novartis’ QMF-149 is a combo of corticosteroid mometasone and LABA indacaterol. Following a revision of the filing expectations, Novartis planned to file for COPD in the ex-US regions and asthma in the EU by 2015.
In addition, there are proposed triple combinations ICS/LABA/LAMA such as salmeterol/fluticasone plus tiotropium that have been tested in a few trials.
Vectura has 26 patents granted at the US Patent Trademark Office, most of them related to inhaler devices and methods of producing particles for use in dry powder formulations. The first one was filed in 1994 and due to expire in 2014.
A search for international applications at the World Intellectual Property Office (WIPO) returns 98 results. Most patents are related to the same field than the US patents. The first one is a British patent with priority date of Oct 26 1993.
According to the company’s website, Vectura has more than 110 families of granted patents and applications. Its strategy is to out-license rights for the development of its non-pulmonary products for which it has succeeded with Baxter so far.
It is clear that Vectura main value drivers are its two compounds in clinical development NVA237 and QVA149. I’d be more optimistic on the prospects of the latter to have the potential to become a first-in-class drug and more importantly, a first-to-market drug and capture a considerable portion of the COPD market. However, we need to have more information on the timeframe of the additional trials requested by the FDA in order to have a better estimate on when it’ll reach the market. As I´ve stated previously, competition is fierce in this multi-billion market
It is positive that Vectura’s products are being developed in collaboration with major pharmaceutical companies. For instance, recent deals with Sandoz/Novartis for the development and marketing of the generic drug VR315 in the rest of the world or a deal with GSK to license Vectura’s dry powder drug formulation patents, reinforce my view that Vectura is a company that large pharmaceutical corporations are taking into consideration when it comes to develop innovative drugs in the COPD arena and could be a takeover candidate.
- NVA237 performs significantly better than placebo. It has more selectivity for M3 receptors versus M2 receptors and a faster onset of action than tiotropium. However it shows a similar efficacy profile to that of tiotropium.
- Generic versions of LAMAs and other bronchodilators may reach the market in the coming years making it difficult for new branded drugs to compete unless they have clear advantages that make doctors lean towards prescribing them. In any case, there are some uncertainties in terms of generic regulatory guidance in the US with regards to pulmonary drugs that may postpone their market penetration.
Overall, there is a current opinion that it would be an advantage to combine several drugs with different mechanisms of action that improve patient compliance and simplify treatment regimes as much as possible while being effective. Here is where I see Vectura/Sosei/Novartis’ QVA149 as a drug with a good commercial potential and well situated among its competitors.
 Van Noord JA et al. QVA149 demonstrates superior bronchodilation compared with indacaterol or placebo in patiens with chronic obstructive pulmonary disease. Thorax 2010; 65: 1086-91
 Guy F Joos. Potential for long-acting muscarinic antagonists in chronic obstructive pulmonary disease. Expert Opin Investig. Drugs 2010. 19 (2): 257-264.
 Blockade of M1 and M3 receptors diminishes bronchoconstriction whereas inhibition of M2 receptors attenuates feedback inhibition of acetylcholine which may reduce bronchodilatation.
 Vogelmeier C. et al. NVA237, a long-acting muscarinic antagonist as an emerging therapy for chronic obstructive pulmonary disease. Ther Adv Respir Dis 2011; 5 (3): 163-173.