Biogen Idec at Merrill Lynch Global Pharmaceutical, Biotechnology and Medical Device Conference
Q & A session:
"Question: I have a question about reimbursement in combination therapy. And you warned us not to compare the AFFIRM and SENTINEL trials side-by-side because you had different patient groups and you defined the differences there. But I’m wondering whether the payers might say to you: “Well, we have nothing else, but this data. And as we look at it side-by-side, the improvement of combination therapy over monotherapy, Tysabri alone, is only a few basis points. And until you can show us a study that compares ‘apples to apples’, this is all we have.” And so the question I have is: do you anticipate or are you experiencing any pushback or resistance in the payer community based on those perceptions?
Jim Mullen: All right. Well, it’s a good question. Of course, it’s our job when we are out there talking to the managed markets, the managed payers in the managed markets, to actually make that case strongly. Because as you point out, that’s the case that can be made on the other side. We’re not currently seeing a lot of push-back by the payers to pay, first, or on combination.
But, personally, and this is what I said on Monday, I’m cautious on that, because I don’t think that the payers right now can match up what’s happening on the combination side. Because most people are getting scripts on the current therapies for 3 or 6 months. And the scripts coming through for Tysabri are all being handled manually, some of them as a medical benefit and not a pharmacy benefit. So, I don’t think that the payers have really started to wrestle with this issue or have seen it yet. They have started to talk about it a little bit. I think part of this is going to be dependant on how strong is the two-year data on disability, on the disability endpoint from the SENTINEL trial. I don’t think it will be that difficult if we get that in front of the payers to get them to understand the difference between the patient populations.
And I think that the conversation so far with the payers are, you know are somewhere of .. you know, on monotherapy there’s no doubt that they need to reimburse that. On combination, they don’t like it, but they probably will pay for it. But I’d say, let’s see what the two-year data says, because that will coincide with about the time when they can actually see combination usage.
Q. My question is on the off-treatment group for Tysabri. How many of those people are seen by neurologists as opposed to the primary care physician? And how flexible are your plans in terms of reaching that group? So, do you think that if you see a very strong ramp in Tysabri this year, maybe you can sort of scale back trying to reach those people, to the extent that if the scripts take off much more slowly, you can speed up that effort?
Jim Mullen: Well, that’s an excellent question. How many of them are still seeing their neurologists? I can tell you one thing that we know historically is that if you go in and you ask the neurologist: “What percentage of your patients, if I go through all your records that are sitting right there behind your nurse, are on one of the MS treatments?” And they’ll say: “80%, 90%.” They’ll say something very high. But if you actually pull records, it’s lower than that. And those are still people who may be coming, but less frequently. Some of those people have fallen out.
They are either just being handled by their primary care physician or they are only showing up at the neurologist when they are really having a significant clinical flare. So, how do we track them back in? Well, the first is, I’m not really too worried about, I mean right now we just have to deal with the pent-up demand of the patients that are right there in front of the neurologist. I think that the neurologists are then going to start to pull them back, but I’ll just give you a couple of other ways that the channels work.
One is the National MS Society and all the local chapters. Most MS patients that I have met are members of that or get information from that. So that’s a new information source for them even if they are not going through their neurologist.
The second is that there has actually been a lot of press activity in the last 60 days on MS. So you see a lot of people in the lay press, you know, ABC, NBC, you know, putting out stuff, getting people to ask questions: “Well, there’s something new, should I think about that again?” So, I think there are a couple of other channels out there independent of what we’re doing that are drawing people in. And the third thing I would say is, I don’t know if you’ve seen – where do you live, down here?
Q. In Connecticut.
Jim Mullen: Ok, in Connecticut. So my mother calls me up – this is your standard mother survey, right? – so my mother calls me up and she goes: “Are you hearing this radio advertisement, St. Elizabeth’s Hospital, you know, in Boston?” And they’re sitting there with radio advertisement trying to pull people in to put them on Tysabri.
That has nothing to do with us. I was surprised to hear it, and then I start to see little squibs. There’s a whole bunch of activity now going on with these MS practices, trying to get the awareness up and bring people back into the neurologist’s office. Yes, so, it may take us a little longer to get there, in terms of bringing those folks in. But they’re out there. And there are ways to get at them and in the first place is, a lot of them are still sitting in the neurologists’ practices. They are not coming in for semi-annual visits. They are only coming in when they have a flare.
Q. A question on manufacturing. You just talked about the capacity as being as much as 40,000 patients by the end of this year. Just by some chance, if sales of Tysabri are that strong, how would you think about managing the potential capacity constraints that you would run into?
Jim Mullen: Yeah, um, I went into a fair bit of gory detail on the earnings call on the manufacturing capacity. But it’s really a moving target. And the moving parts are step-wise additions to the license in the current license facility, licensing of the bulk facility at Oceanside, and then improvements to the manufacturing process. So, our capacity, when I gave you the snapshot of 40,000, I said, you know, if we’ve got a projectory going past 40,000, this year ..
So, then starting it at whatever 0 was on November 30th , 40,000 on December 31st, you know, that will start to put some pressure on the supply chain. But, in fact, our capacity is stepping up all through the year. And so, when I talk about capacity, I’m not worried about getting them the first shipment; I’m worried about getting them the 12th shipment. So that, once we’ve got somebody on product, we cannot interrupt the supply chain. So we are always looking well ahead.
So when I talk about 40 [thousand], well that’s kind of the ramp rate we think we can handle in the supply chain this year. But in fact, our supply chain capacity is going to be a lot higher than that by the end of the year. It’s really .. there’s two factors to deal with here. One is just bulk capacity, and of course, what inventory we have sitting behind there. And we’re making more than we need at this point.
So, you know, we’re stockpiling inventory. And the second is just scheduling the fills, because the fills – it’s not a capacity problem, it’s a just a scheduling issue, because you’ve got to schedule it. You’ve got to get the product released. And that’s a fairly long cycle and all that. Ok? Now 40,000 patients would be well north of any launch in this space by a wide mark.
Q. But, to be fair, you did say that there are 100,000 people that are off therapy, granted you’ve got to find those patients. And you also did say that, what is it, 150,000 that are unhappy with their current therapies, so I mean, theoretically, it could happen.
Jim Mullen: Well, it could happen. But there is some natural speed limit of how many you can push through the system in the neurologist’s office. So, you know, I think you have to factor that in to. I mean, obviously, they can handle the 15,000–20,000 newly diagnosed in the U.S. each year without a big problem. But then go try to layer on that 5x that or 2x that of new diagnoses, new product switches that require more handling, so there is a speed limit in the process.
Q. How much of the manufacturing, getting from 40,000 to 70,000 patients in North Carolina, which I think is the max capacity, how much of that requires FDA approval versus just, you know, you fine-tuning the process on your own without regulatory o.k.s?
Jim Mullen: So what I said – and this is true for all 3 of the plants – the configuration are: there are 3 trains. Each train has two bioreactors that are 15,000 liters. And there’s two purifications suites. The initial approval is for one of the trains and one of the purification suites.
All the trains are identical. But you only get, with the FDA, you get approval only for product that you have made in the equipment and validated the process and the equipment. So then you have to go and make material, get it validated, submit the data. Those will be CB30s. And so we will submit the next train this quarter, and the next train after that.
So the whole RTP facility will fairly shortly be completely licensed. That’s one part. And then the Oceanside facility, brand new facility, so that would be the first part it ever got licensed on. We would file for licensure by the end of this year. If it is just a standard approval process, that means it would be somewhere in 2006 that we would have approval for that facility.
Then you have to layer in there process improvements. And we’ve got improvements to the current process which we would anticipate would be minor changes again in a CB30. That would step up the capacity, you know, 25% or so. And then we’ve got a much higher producing process that is at least 2x of the current process.
And that has been run at large scale. We’ve got to do the validations on some of the PKPD [?] work for the FDA and file that process. So that will take somewhat longer.
Q. Some of your target markets for Tysabri are the off-treatment patients or “quitters.” Have you profiled this group much? I mean, how well do we know these patients? Is there a risk that they are a group of refractory patients or chronically non-compliant? Or are there economic issues why they are not on MS drugs?
Jim Mullen: Yep. Well, I think we have profiled them fairly well. Keep in mind on the current therapy: on Avonex we see about 1 ½ per cent per month of the patients are dropping off therapy for a variety of reasons. Some of them are switching, some are just dropping off therapy.
The other products are a little higher than that, at least in our estimation. So, there’s a fair bit of churn in that marketplace. So some amount of patients – we actually know who they are because they are sitting in the database – they were once customers. I think we have a reasonable profile on them. I would say that it’s the usual rule: there’s a chunk of them that are fairly easy to get at, but that last percentage is going to be more difficult.
Now in terms of the reimbursement, we do have Medicare coverage on Avonex and we already have the C-code in Medicare, already. So, it’s supposed to take 6 months and they did it in a month. I don’t really think there is going to be big economic issues.
As a benchmark to that, on Avonex, because we do have a underinsured or uninsured program for folks. That maybe represents 5% or 6% or 7% of the total population are on product at some kind of a discount supported by us. I don’t know a reason why it would necessarily be different for Tysabri.
Q. Can you just review the pricing in the MS marketplace? What is the annual cost of therapy for Tysabri, Avonex, Rebif, Copaxone?
Jim Mullen: I can review it, but, you, I think it would be easier for me to send it to you, because I may not get the numbers exactly right. But I think the Tysabri, if you take the full 13 doses, is $23,200. Rebif, high dose: $17,000, mid-17,000 somewhere, just over 17. Copaxone, Betaseron and Avonex are all right around 14.
Is that right, Elizabeth? Ok. There’re all a little bit different, but there are basically right in that range. They are all right around 14 and a few hundred dollars.
Q. On the quitters, and you said you had a database of patients who have quit therapy, what percentage of the patients who are “quitters” would you say stopped therapy because of the side effects, because they just couldn’t take the nausea, the issues that the other drugs have?
Jim Mullen: I think it is fairly high. I think people get very tired of .. On the interferons, they typically, the typical patient will tolerize to the flu-like symptoms in about 6 months, sometimes less. So that becomes less of an issue. And you have actually the patients who are being successful who will actually report sort a pickup of energy, and things like that.
But there’s still that group that, you know, are getting the flu-like symptoms. And they are just tired of it. And we know that our patients when they start on Avonex — and this is one of the powers of our customer service model – about six months in, they begin to have the question, either they are frustrated with the flu-like symptoms or they are beginning to have the question if this is working at all?
And they have sort of a similar crisis about one year in. And if you’re coming through those, as long as you’re seeing efficacy, they stay on. But there’s a fair frustration rate with the patients in MS.
And I think the one thing that we are starting to hear back from some of the round tables with doctors is, that they underestimated how frustrated the patients are with that side effect, and how much, therefore, there may be pressure to just change products even if they are stable on the product.
And that is a segment of the market we haven’t talked about. We said, we’re not recommending to people, but they are starting to get, at least, questions from patients: “Gees, doc, I hate taking these drugs, should I consider switching?” So, I think it is a big factor.
Q. On pricing, how much have you raised price in the last two years, and how much pricing flexibility do you think you have going forward?
Jim Mullen: Elizabeth, do you know the precise number on the pricing the last few years? It’s in the 20% range, is my recollection.
Q. Over the two years?
Jim Mullen: Yeah. I don’t think there is going to be tons of pricing flexibility as you move into this ASP+6 model starting in 2006. There is a certain dynamic in there that is going to sort of create a downward pressure on how much you can raise your price at any one time. Because .. probably more true in something like oncology, where you never want to put your physicians under water.
If it’s a pharmacy benefit, it’s a little bit a different issue, but you have always got the comparator that all the payers are looking at: “What is the Medicare price? What’s the Federal price? What’s our price?” So I think it gets less flexibility in the future.
Question: You’re talking about Avonex.
Jim Mullen: I’m talking about all products.
Q. But on the Avonex front, I would think that you might have more pressure.
Jim Mullen: Well, we might have more pricing flexibility in that we are the lowest price product right now or tied with the lowest price product in that space.
[End of Q&A]