Genentech's Lucentis Receives Approval and Pricing

Increasing Lucidity in the AMD Market

U.S. biotech Genentech, a subsidiary of Roche (Switzerland), has announced U.S. FDA approval of the company's age-related macular degeneration (AMD) candidate Lucentis (ranibizumab injection) 0.5mg, a derivative of its blockbuster cancer treatment Avastin (bevacizumab). The approval follows a priority review, and the company has indicated that it has already commenced shipping to wholesalers. Roche will not be involved in the marketing of the drug, with Swiss rival Novartis instead holding exclusive international rights.

The approval has long been considered a "shoo-in" for Genentech, on the back of highly impressive Phase III ANCHOR and MARINA data for Lucentis, which showed that 95% of patients maintained their vision, and up to 40% improved their vision by at least three lines. The drug's product label (available via the Genentech website) includes full prescribing and trial information.

The primary risk to the approval of Lucentis was always its side-effects profile, but there has been little practical evidence of problems thus far. The FDA has noted that there is a "theoretical risk" of arterial thrombotic events (ATEs) in anti-VEGF inhibitors - the class of drugs to which Lucentis and its rival Macugen (pegaptanib sodium injection; Pfizer (U.S.) belong. However, the actual risk of ATEs stood at less than 4% in studies so far, with conjunctival haemorrhage presenting the most common adverse event. As expected, Genentech will conduct post-marketing surveillance (PMS) of the drug, primarily to study ATEs, and will include a cohort SAILOR follow-up study in patients for 12 months.

Pricing Innovation

Part of the motivation for the PMS studies will also be to fine-tune the dosing of the drug, which has not yet been fully established. During its press call, Genentech noted that Lucentis dosing will primarily be tailored to the patient, and it is therefore difficult to assess what average annual patient costs will be. Still, recommendations stipulate an intravitreal injection once a month, and if these are not feasible, this can be reduced to one injection every three months, after four initial monthly injections.

Genentech has confirmed that pricing will stand at US$1,950 per dose - equivalent to annual costs of around U$23,400 - and this represents a 96% pricing premium over Macugen, although it falls in-line with (albeit at the higher end of) analyst estimations of US$1,500-2,000 (and well below some of the scenarios of US$4,000 per dose put forward by some media outlets and pressure groups). Genentech expects average annual costs of US$9,750-13,650 per patient, on the basis of an average of 5-7 doses per year. For reference, previous Pfizer-sponsored cost-effectiveness analysis shows that Macugen had an average cost per vision year of US$20,662, compared to US$26,073 for Visudyne; the average cost per quality-adjusted life year (QALY) was US$19,803 for Macugen, and US$20,131 for Visudyne.

This premium clearly recognises the significant innovation offered by Lucentis - not only over Macugen and Visudyne (verteporfin; Novartis (Switzerland)), but also over the unregulated, off-label practice of injecting Avastin. Naturally, small doses of Avastin are much cheaper, but while most attention has been focused on the "unfairness" of pricing Lucentis this way, it fails to recognise that while Avastin is successful against cancer, it is a drug that can kill, and was not clinically developed for AMD. Lucentis is a "smaller" drug specifically designed to concentrate its impact on the eye, and is cleared from the body in days rather than weeks, as is the case with Avastin.

Outlook and Implications

In an AMD market that is gradually shifting beyond the US$1 billion barrier, Lucentis is the strongest candidate. Its estimated sales reach just under US$100 million in 2006, before moving up to US$500 million by 2008. However, significant concerns remain over reimbursement for the drug on Medicare, given its high cost, and this issue accounted for a substantial portion of the question-and-answer session during the conference call. Genentech maintained that it expects around 85% of insured patients to be covered, and has set up a programme to widen access for the rest.

While there is considerable potential for the AMD market to swell and accommodate the arrival of Lucentis without hitting Visudyne and Macugen too hard, it is clear that Novartis and Pfizer will need to manoeuvre their position in the market, and will probably lose significant share. Re-pricing their products may be an option, and the price of Visudyne has already been reduced from US$1,350, to reflect changes in reimbursement. QLT has forecast 2006 sales of Visudyne at US$370-400 million, compared to US$484 million in 2005, while Macugen is likely to fare better on the back of Pfizer's marketing muscle; sales stood at US$185 million in 2005, and US$51 million in the first quarter of 2006.