Oncology: Still an Attractive Market?

By Matthew Cook and Sebastien Morisot

In light of the risks and challenges inherent in the development of oncologics, some pharmaceutical and biotechnology manufacturers are beginning to question whether oncology remains an attractive therapeutic area in which to invest limited research, development, and commercialization resources.

The simple answer to this is, yes, oncology remains an area of high unmet need and product revenue potential.

The more complicated answer, however, is that, while oncology remains an attractive area for manufacturers, it is not as wide open as it used to be, and the pathway to success has many obstacles. Both entrenched oncology companies and new players considering an entry into oncology will need increasingly sophisticated strategies to be successful. In this article, we will discuss the substantial risk associated with the development of oncologics and contrast it with the wide range of reasons oncology still represents a sound area of investment. This article will also highlight the critical success factors for maximizing the success of those investments.

Increasing Risk in Development of Oncologics

On the development front, the threshold for determining whether an oncology product has a clinically meaningful effect is being raised, ultimately impacting likelihood of approval. In addition to the previously widely accepted endpoints like response rate or progression-free survival, regulatory agencies increasingly require more robust endpoints, such as overall survival.

Meanwhile, on the commercialization front, manufacturers face fierce competition and prescriber access challenges. The oncology space is becoming increasingly crowded, with more agents targeting the same pathways or molecules today than a decade ago. In parallel, access to oncologists is becoming progressively limited as the site-of-care consolidation trend continues. Economic and operational pressures have made it difficult for smaller oncology practices to operate independently, as hospitals have greater leverage against manufacturers and payers in local markets with provider fragmentation than do office-based practices. The concept of “no-see” physicians (physicians who refuse to see pharmaceutical reps) erects substantial barriers for pharmaceutical sales forces in the hospital setting.

Escalating healthcare spending is adding pressure on government and commercial payers to contain drug costs. While the oncology space is arguably not as tightly managed by payers as other therapeutic areas, utilization management of costly cancer therapeutics has become an increasing priority for US payers, especially with the advent of biologics. Payers (and market access agencies in the EU) will most often restrict high-cost drugs, drugs with limited or no survival benefits, and drugs deemed to be at high risk for widespread off-label use.

Beyond step edits, payers are also looking toward implementing clinical pathways as a way to maintain or improve health outcomes while lowering costs. Clinical pathways are designed to address the limitations of prior authorization and of reduced fee schedules, offering more durable cost containment to payers. These pathways may lead to cost savings by encouraging the use of generics, streamlining treatment choices, and reducing side effects while maintaining outcomes.

The oncology market access landscape is even more challenging in the EU markets. Health technology assessments espoused by the National Institute for Health and Clinical Excellence (NICE) have long made the UK an inhospitable place for novel and expensive oncology agents, and the recent healthcare reform in Germany has greatly restricted pricing upside in this erstwhile free-pricing market. As European governments continue to embrace austerity measures, the affordability of oncology drugs has come into question in most markets.

Why Invest in Oncology?

Investors appear to remain bullish on the oncology space. According to Campbell Alliance’s 2013 Dealmakers’ Intentions Study, oncology remains the therapeutic area where companies said they are most “likely” or are “very likely” to conduct an in-licensing program across all phases of development. Based on an analysis of data from EvaluatePharma, of the total number of deals/transactions that took place in 2011, 2012, and 2013, approximately 10% involved oncology products, compared with neurology at 4% and cardiovascular at 3%.

Despite the risks outlined above, the oncology space remains a source of investment opportunity, owing to the significant unmet need, the high level of research funding, and accelerated regulatory pathways being put in place.

High Revenue Potential

Cancer is the second leading cause of death in the US and Europe (after cardiovascular disease). According to the American Cancer Society, in 2008 the total worldwide economic impact of premature death and disability from cancer was $895 billion. Researchers with Cowen and Company report oncology is the largest global therapeutic area, with worldwide sales of $78 billion in 2012; Cowen anticipates the market to reach $110 billion by 2018.

The projected revenue growth in the oncology space is supported by increasing cancer prevalence, as a result of population growth as well as advances in diagnosis methods and screening programs. As available treatments become more efficacious and lead to longer survival periods, the number of patients progressing to second-, third-, or fourth-line therapies will also contribute to market growth.

Another key driver of revenue growth is the price of oncology therapeutics, especially biologics. Over the past decade, the average price of cancer drugs has risen from around $5,000 per month to $10,000 per month, despite payer mechanisms to drive price compression. Bristol-Myers Squibb’s Yervoy was launched in March 2011 with a cost per year of $120,000 for four doses, while Dendreon’s Provenge debuted in April 2010 at a price of $93,000 for 3 doses.

High Unmet Need

With the exception of a very few tumor types, there is no cure for cancer, making it a very well funded arena. Tumors such as pancreatic cancer, liver cancer, lung cancer, and acute myeloid leukemia (AML) have poor prognosis and low overall survival and, therefore, represent areas of high unmet need. Usually diagnosed at a very advanced stage, these tumor types are traditionally hard to manage, with limited to no curative intent and heavy reliance on quality of life and palliation. Across all tumors, resistance still represents a major issue, fueling the need for novel and more effective approaches.

Meanwhile, conditions associated with cancer or cancer treatments, such as cachexia and pain, affect a large number of patients, many of whom remain under-served by currently available supportive care options. Supportive care agents generally represent lower-risk, moderate-return investment opportunities. The introduction of more targeted therapies with improved safety profiles has reduced the occurrence of serious adverse events such as anemia and febrile neutropenia; however, as regimens continue to incorporate chemotherapy backbones, the need for supportive care options remains for other complications such as cachexia, pain, and fatigue.

Biomarkers Create Opportunities

Improved patient stratification creates new opportunities and avenues for novel, targeted treatments. Biomarkers are typically relied upon to identify patient subsets most likely to benefit from therapy and to predict response to therapy. Genentech’s Zelboraf, for example, is indicated for the treatment of patients with unresectable or metastatic melanoma with BRAF V600E mutation as detected by an FDA-approved test. Bristol-Myers Squibb and Eli Lilly’s Erbitux, meanwhile, was originally developed to target EGFR expression on colorectal cancers. However, activity of this drug in non-EGFR patient populations led to the discovery of KRAS as a prognostic marker.

From a development perspective, utilization of these markers mitigates clinical development program risks, as the use of biomarkers in trial design has the potential to reduce the size, length, and cost of clinical trials and increase the probability of success. While the current drug approval process is designed for specific tumor types, future drug approvals may be supported by genomic analysis and will thus have broad applicability across multiple tumor types.

Adaptive Trial Design Expedites Trials

Adaptive trial design is also being employed to expedite clinical trials, as it allows planned, well-defined changes in design parameters during trial execution based on data from that trial in order to achieve goals of validity, scientific efficiency, and safety. Adaptive clinical trials offer added flexibility, as they can shorten clinical development timelines and require smaller, well characterized, homogeneous patient cohorts. Nonetheless, adaptive trials are not completely devoid of risks and require ongoing dialogue with the regulatory agencies.

To date, no drugs have been approved with adaptive trials. An important example in the oncology space is the I-SPY 2 TRIAL, which is testing women with newly diagnosed locally advanced breast cancer to discover whether adding investigational drugs to standard chemotherapy is more efficacious than standard chemotherapy alone before having surgery. I-SPY 2 is sponsored by the Biomarkers Consortium, a partnership led by the Foundation for the National Institutes of Health (FNIH), which includes the FDA, the National Institutes of Health (NIH), and a large number of partners from major pharmaceutical companies.

Pathways and Orphan Status Accelerate Development

FDA is considering the idea of pathway- or molecule-specific trials rather than indication-specific trials. Effectively, this would allow manufacturers to recruit patients with a specific molecular aberration across multiple tumor types. Regulatory pathways have the potential to facilitate and accelerate product development. Orphan drug status also remains important for very narrow indications in oncology.

Recent oncology drugs approved via orphan pathways include Bayer HealthCare and Onyx Pharmaceuticals’ Nexavar for the treatment of patients with locally recurrent or metastatic, progressive, differentiated thyroid carcinoma; Celgene’s Abraxane for patients with metastatic adenocarcinoma of the pancreas; and Boehringer Ingelheim’s Gilotrif for the first-line treatment of patients with metastatic non-small cell lung cancer.

While FDA is increasing the threshold for oncology products by requiring more robust endpoints, the agency also recognizes the importance of addressing unmet needs in oncology. To incentivize and facilitate the bringing of effective drugs to market faster, FDA introduced the Breakthrough Therapy Designation in July 2012, which could be of particular benefit to oncology products. FDA defines a breakthrough therapy as a drug intended alone or in combination with one or more other drugs to treat a serious or life-threatening disease or condition and for which preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. As of August 2013, about 17% of the breakthrough designations granted by FDA have been in oncology, and 25% of the designations have been granted in hematology.

In November 2013, Genentech’s Gazyva became the first medicine approved with the FDA’s Breakthrough Therapy Designation, indicated in combination with chlorambucil chemotherapy for the treatment of people with previously untreated chronic lymphocytic leukemia (CLL). This was shortly followed by Imbruvica, which is co-marketed by Pharmacyclics and Janssen Biotech to treat patients with mantle cell lymphoma.

Parallel Trials Create Potential for Multiple Indications

The potential for multiple indications with one target, pathway, or platform is a particular advantage of oncology drugs. Today’s blockbuster oncology drugs have had a large number of clinical trials running in parallel. While conducting parallel trials involves risk, doing so increases the chance for approvals in multiple indications. In order to target additional tumor types and patient populations, company-sponsored trials can be supplemented with external collaborations with the NIH, co-operative groups, and other academic institutions. Engaging with cooperative groups and academic institutions is a key to distributing and mitigating clinical program risk.

Oncology Biosimilars Present Opportunity

The industry is starting to see biosimilars for “simple” supportive care molecules, but the biosimilar market has not yet fully materialized in oncology. However, oncology biosimilars could represent significant revenue for companies with the right capabilities. Until this year, the EU5 markets have been driving growth in the biosimilar market. The US market is expected to experience a dramatic increase in biosimilar market size due to the patent expiry of products such as Erbitux, Rituxan, and Neulasta in 2015-2016.

What Does It Take to Be Successful in Oncology?

Clearly Defined Commercial Pathways

It is important to fully understand the commercial pathway for the product, whether it is based on biomarkers and patient stratification, orphan drug designation, or emerging markets. The commercial strategy will then need to be customized to local markets. Different types of local markets require different customer-facing roles and strategies, rather than a national one-size-fits-all approach. For commercial pathways based on orphan drug designation, having a compendia strategy in place becomes critical, especially for products that have a high potential for off-label utilization. Many payers—both government and commercial—will only reimburse such a product if the off-label utilization is recommended in Medicare compendia.

A Compelling Product Value Proposition

With only so much money to allocate and new oncology agents coming to the market all the time, payers need to be judicious in what they choose to cover. Drug manufacturers will need to develop both a clinical and an economic value proposition to ensure pathway inclusion. Manufacturers need to start working with payers early on to form partnerships and gain a better understanding of what payer expectations are as a product is brought to the market. As the industry evolves, a purely product-centric model may no longer be enough. Manufacturers should consider a transition to a patient-centric model focused on the use of diagnostics and genetic testing to ensure a more predictable response to medications.

Biomarkers and Patient Stratification

The clinical bar can be lowered with the use of biomarkers, patient stratification methods, or companion diagnostics. Biomarkers offer the potential to increase the probability of success and to reduce the size, length, and cost of clinical trials by identifying patients most likely to benefit from therapy and predict response to therapy before the hard endpoints are reached.

Well-Defined Endpoints

Rather than just looking at response rate or progression-free survival, FDA will increasingly want to look at overall survival. The data has significantly increased in the past two decades, mostly due to the introduction of targeted therapies. But recent years have introduced few breakthrough treatments, with new products mostly improving upon existing treatment regimens or simply tweaking existing molecules. As a result, it has become much more complicated to demonstrate a significant improvement.

Access to Physicians

In the face of the no-see physician trend, sales forces need to be right-sized and equipped to provide added value beyond pure product information. To gain access to oncologists, reps need to be able to provide their customers with reimbursement support and wrap-around services that can truly help differentiate a product.

A Life Cycle Management Plan

The approach to life cycle management in oncology has to be broadened to focus less on just pure indications and more on other traditional life cycle management options in terms of method of administration, delivery, etc. In oncology, it is important to take advantage of the fact that the products tend to have multiple shots on goal, with different patient populations and different tumor types. This is a factor that should be embedded as part of the development program from the beginning.

A Holistic Approach to Patient Care and Management

Manufacturers can no longer simply make a product and sell it. They need to be thinking about providing services and patient support around the individual products. Potential business opportunities exist throughout the patient journey in oncology, and companies will broaden their focus to improve patient quality of life throughout that journey, from prevention and diagnosis all the way through treatment, supportive services and care, and provider/payer services.

An Emerging Market Strategy

China and India show untapped revenue potential as the growth of the disease population far outpaces the treated population in both countries. China’s oncology market appears poised for growth as the introduction of targeted agents expands the market over the next decade. Challenges still remain with reimbursement of expensive targeted agents by public insurance schemes. In India, meanwhile, conditions look promising on paper, but the country may not be a lucrative market due to reimbursement challenges and poor patent protection.

Conclusion

Although making inroads into the oncology space is difficult and fraught with challenges, a well-conceived development and commercialization plan that embeds clinical and economic factors from an early stage can deliver results. For companies experienced in manufacturing and marketing oncology products as well as new players, oncology truly does remain an attractive market where the rewards—both in terms of revenue potential and the ability to positively impact patient outcomes—have the potential to outweigh the risks.

About the authors

Matthew Cook is Vice President, Campbell Alliance. He can be reached at mailto:mcook@campbellalliance.com. Sebastien Morisot is Senior Consultant, Campbell Alliance. He can be reached at mailto:smorisot@campbellalliance.com.