Profit on $475,000 Novartis cancer drug could be a while coming

Novartis`s new gene-modifying cancer therapy`s $475,000-per-patient sticker price has drawn fire from advocate groups calling for cheaper drugs, but analysts said the Swiss drugmaker could initially struggle to break even.

In a first for gene therapy in the United States, regulators approved Kymriah on Wednesday for patients up to 25 years of age who have relapsed or not been helped by previous treatment for B-cell acute lymphoblastic leukemia (ALL).

While patient groups hailed the potent immunotherapy as a potential cancer game-changer, the Swiss drugmaker was also criticised for setting a price that places Kymriah among the most-expensive drugs ever. It trails only a couple of gene therapies for ulta-rare diseases.

Since taxpayers have chipped in more than $200 million over the years for related research -- much early work on the drug was done at the University of Pennsylvania -- Novartis should have used more restraint, the Patients for Affordable Drugs lobby group said.

"We believe it is excessive," said David Mitchell, a cancer patient who founded the group. "Novartis should not get credit for bringing a $475,000 drug to market and claiming they could have charged people a lot more."

Novartis estimates that only 600 ALL patients a year would be eligible for Kymriah, making the initial pool for the treatment relatively scarce and worth less than $300 million.

The company is also targeting the several thousand people a year who have relapsed or refractory diffuse large B-cell lymphoma (DLBCL) diagnosed, but it will not file Kymriah for that group until later this year.BREAK-EVEN POINT?

Success with those patients is key to Novartis turning Kymriah into the $1 billion-a-year blockbuster drug the Swiss company predicts it will eventually become, but analysts say it is anyone`s guess when it will start covering its costs.

"It is not clear what the break-even point for profitability is, as this is a very capital intensive endeavour," said Bernstein analyst Tim Anderson, adding that Novartis is likely to cut the price of Kymriah for DLBCL patients.

On Thursday Novartis said that its cost of goods per Kymriah treatment is confidential commercial information, but analysts estimate it could be as high as $200,000.

The process is complex. Doctors remove T cells from each cancer victim and ship the material to its factory in Morris Plains, New Jersey. After re-engineering them to attack cancer, frozen cells are returned a couple weeks later for reinfusion into patients.

Additionally, Novartis partner Oxford BioMedica, which supplies a key ingredient, may be due $100 million over the next three years, plus royalties on sales.

Furthermore, competition is on the horizon. Gilead Sciences this week announced an $11.9 billion deal to buy Kite Pharma to gain access to a similar drug, while Bluebird Bio and Juno Therapeutics are all working on their own CAR-T therapies.

While Kymriah`s price tag will grab headlines, it pales in comparison with some other gene therapy treatments.

For instance, UniQure`s Glybera, for a very rare blood disorder, runs at about $1 million per patient. Meanwhile, GlaxoSmithKline’s Strimvelis, for so-called “bubble boy” disease, comes in at about $700,000 per patient. OUTCOME PRICING

Novartis points out that some groups think the company could actually have charged more for Kymriah.

British health authorities, for instance, had said that up to $650,000 might have been justified if the treatment added years to children`s lives.

Novartis plans to charge insurers and payers only when the drug proves to be effective one month into treatment, a so-called "outcome-based" pricing scheme that puts some of the risk of the drug on its manufacturer.

Even so, analysts hardly expect that to shield Novartis from criticism.

"Expect turbulent public discussions on drug pricing, demonstrating that the road to hell is paved with good intentions," said Bruno Bulic of equity research firm Baader Helvea.

Bulic forecasts that Kymriah will start adding to Novartis`s bottom line only after 2019, when it is expected to be given to more patient groups.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)