Welcome to Molecular Ideas, and thank you for sharing your time with us. Today, we discuss how approved drugs can fail on the market through a case examination of the inhalable insulin product, Exubera®, and its contemporary successor, Afrezza®. We also take a closer look at the new, worst-performing drug of all time (Hint: it was approved in 2021).
Our Discussion at a Glance
We list five key criteria for what defines a product-based market failure in the life sciences - which all center on a failure to sufficiently validate technologies (especially with stakeholders).
Failure in the life sciences is expensive - especially if you don't fail fast. The inhalable insulin drug Exubera® cost Pfizer and Nektar $2.8 billion dollars and the infamy of 'worst drug launch ever'.
Aduhelm®, by Biogen and Eisai, is racing to the bottom as it missed its first quarter earning projections by orders of magnitude.
Even the worst executions of good ideas deserve redemption - and even in the life sciences, some get them.
You Know What They Say...
Those who fail to learn from history are doomed to repeat it. When each new drug costs several billion dollars to develop (including the cost of failures) and at least a decade to develop, each failure becomes prohibitively expensive for small, innovative companies.
That said, the cost of failed drugs in development is miniscule compared to that of an approved drug's squandered market potential. To get through the rigorous gauntlet of regulatory approvals, only to fail to meet market expectations is damning for innovators.
If you have ever been asked in an interview 'what was the worst drug launch of all time?', you've had only one of two answers:
You could throw the question back at your interviewer and ask them 'by what metric?', referring to sales, patients treated, market share captured, or effect on company stock price - but you better have an answer for all of those.
You could list off one of several approved drugs that flopped before failing to realize a fraction of their projected potential.
Of the latter, none were quite as publicly poor as the inhalable insulin drug, Exubera® - until 2020 gave us Aduhelm® (aducanumab-avwa).
Like we've said before, you can never underestimate the power of bad news.
What Causes a Market Failure for Pharmaceuticals?
Strictly speaking, a 'market failure' occurs when supply fails to meet demand. We're going to take a more draconian approach - when does an approved drug have to be pulled from the market?
Obviously, there are numerous circumstances that may not have to do with the product itself. Fraudulent activity, poor partnerships, or competitor countermoves could all prevent a product from reaching its full potential. For the sake of argument though, we're going to restrict our discussion here to failures in the product itself.
Misalignment to a customer's (patient's and/or practitioner's) expectations.
Failure to obtain (sufficient) reimbursement coverage from payors.
Underwhelming clinical efficacy OR unexpectedly pronounced side effects in the field (outside of clinical trials).
Technical confusion about how, when, or why to use - typically resulting from narrow marketing efforts.
Bad press (which spreads like a plague and is just as detrimental to a product's health).
Preventing these issues stems from having an informed strategy. Information comes from market research, well-negotiated partnerships, advertising (including pre-launch 'disease awareness' campaigns) - in other words, a lot of money.
Image Source: Unsplash
When one or more of these issues do arise, the market recoils from a new product. Sales drop and companies consider pulling the product. What's worse, is that the market generally deems the venture as a 'bad idea'. Equity analysts and trade journalists have a long memory for what has gone wrong, since the past is often the best indicator of potential results.
While some products deserve to be pulled, this can be a misnomer. Bad ideas are ones that shouldn't succeed - the types of failed drugs that we're discussing here had a chance to change lives. Making a molecular pathway, product, or platform a pariah can stifle innovation. This contaminates the space for those who come after and limits patient access to drugs that may be applicable for their unique medical situation.
Breathe Deep: The Case for Inhalable Insulin
Pfizer took a loss of $2.8 billion on Exubera® (and only $661 million of it was in inventory). The question, with the benefit of hindsight, is why.
Exubera® Logo
Inhalable insulin took the idea of putting two relatively well proven technologies together to add value to patient's lives. The market was attractive from a patient, cost, and pricing perspective. Plus, the patient need was there. Low costs of production, frequent use, and chronic need made the insulin market competitive, but lucrative. Reimbursement, funding and awareness was inspiring action in the form of better (continuous) blood glucose monitors, testing strips, and other diagnostic solutions.
With that in mind, there are three ways to distinguish yourself in the diabetes space:
Product Usage (i.e., Route of Administration) Accessibility
Price
Insulin Usage & Blood Glucose Testing Integration
Exubera® attempted to solve the first two. Let's get some context into the market it entered.
Do You Have Diabetes?
Diabetes is a complex, chronic metabolic condition that primarily prevents the body from leveraging blood sugar to power your body's functions. Too much sugar in the bloodstream can have deleterious - and even lethal - effects on the body's organs.
Blood glucose levels and their relation to diabetes | Image Source: Shutterstock
Which statistic is more surprising: the fact that 34.2 million US adults have diabetes, or that one in five of those adults don't know they have it? According to the CDC, an additional 88 million US adults have pre-diabetes, which indicates unusually high risk for developing one of the three types of diabetes (mostly Type II). There are three types of diabetes that can develop, as shown below:
While tragic, the prevalence of this condition is a major asset for the industry - they have a large, vocal patient population to leverage for improving solutions. Those with needle phobias still struggle with treatments. Despite the evolution of products, patients are still waiting for improvements.
Dollars, Not Sense
The metabolic key to managing this disease is the hormone insulin. While first used 100 years ago in January of 1922 to treat Type I diabetes, insulin became an accessible standard of care thanks to Eli Lilly's biosynthetic analog ('recombinant') human insulin under the name Humulin®. Instead of extracting it from the pancreases of pigs and cattle cadavers, we now had insulin that could be produced at low cost in E. coli bacteria.
Timeline for Notable Insulin Innovations | Data Source: Mayo Clinic
There are multiple types of insulin that vary based on how quickly they work (such as rapid-acting, long-acting, and intermediate). These are critical for modulating blood sugar levels over the course of the day, and each patient likely needs several injections per day.
For nearly two decades since the approval of Humulin®, the pricing of recombinant insulin remained relatively stable. However, the contemporary price of insulin is not a trivial matter. While measured most frequently in cents per dose, the pricing schema has evolved over the last four decades to account for inflation and increasing public reimbursement of insulin under Medicare and Medicaid. The assumption that patients can afford this thanks to insurance has enabled the industry to justify charging higher prices on decades-old technology.
Data Source: American Diabetes Association Talk by Dr. Irl Hirsch
The drastic price increase seen between 2005 and 2015 has continued, if not slightly leveled off with a high of $0.34 per dose on average in 2019. This translates to a US market value over $20 billion per year with a respectable 3.4% CAGR.
It's worth pointing out that many struggle with affording their medication, especially those who are uninsured and/or close to the Federal Poverty Level. The most commonly used forms of insulin cost 10 times more in the United States than in any other developed country.
Data Source: RAND Corporation (nonprofit global policy think tank)
While certain industry leaders, like Eli Lilly, have taken steps to reduce the cost of their products, price still matters.
Enter: Exubera®
What if you could inhale your insulin instead of inject it? That was the question posed by the innovative biotechnology company, Nektar Therapeutics (NASDAQ: NKTR) and Pfizer in 2007.
The concept was simple - create a powdered form of insulin that could be administered via an inhaler. You could take two proven technologies and make millions of patient's lives better in the process. The system would be self-contained, and needle-free.
At the outset, it seemed like a match made in heaven. Exubera® had been approved a year earlier (2006) by the FDA. The brand name was easy-to-pronounce, inspiring, and conveyed a message of hope befitting the chronic disease. Pfizer had developed the science using its rigorous and exacting standards. Nekar was built on a culture of innovation, using proprietary platforms to develop new therapeutics that it would then sell to major pharmaceutical companies. The deal only cost Pfizer $135 million and Nektar saw a 5% climb in its stock price almost immediately.
And then, Exubera® launched.
Exit, Stage Left
Anyone notice a problem?
Off the bat, it isn't hard to recognize that Exubera® failed to align with consumer expectations. Setting aside the cultural connotations (it's hard to be taken seriously when you bring something that looks like bong with you to your team meeting), the device was bulky and difficult for patients to manage.
Then there was cost. Despite attractive entry packages, Exubera® was reported to cost approximately $5 per day with no tangible clinical improvement over traditional injections costing $2-$3 per day. Payors became hesitant to reimburse it, despite knowing that innovation was needed in the field. Given the already strained economics of insulin costs, the topic became a hotbed for debate.
What's more, the science turned out to be shakier than expected in the field. As part of the FDA's approval of Exubera®, several large studies over 5-7 years would need to be conducted. These were meant to validate, among other endpoints, whether there was risk of decreased lung function with prolonged product use. It only took a year for Pfizer to find a potentially increased chance of lung cancer in former smokers when compared to the control group. While the sample size was small, the product met the third criteria for market failure: changes in efficacy and safety in the field.
Believe it or not, some physicians objected to the use of Exubera® based on the possibility of dosing errors when compared to needles.
Despite having a good idea, we've already hit four of our five criteria for creating a product-based market failure in the life sciences. That can only sum up to our fifth criterion: a lot of bad news.
$2.8 billion dollars later, you could say that Exubera® was an expensive - if not noble - failed experiment.
Breathing New Life into Inhalable Insulin: Afrezza®
As we will chat about more next week, even poorly executed ideas can deserve redemption.
The pharmaceutical company MannKind specializes in drugs that treat conditions of, and/or can be distributed through the lungs. Aiming to solve the challenges that plagued its predecessor, the company focused on a simple, discrete device for inhalable insulin. That became the product Afrezza®, which was approved in 2014 by the FDA.
Afrezza® Device | Data Source: Afrezza.com
The look and feel of the device is similar to certain e-cigarette products, and met the market on the upswing of the vaping trend led by Juul and other companies. The product has performed well financially, contributing $9.8 million in Q3 of 2021. While some analysts remain skeptical, the product has already begun to walk the long road back from infamy for a critical concept in drug development.
A Spiritual Successor: Aduhelm®
We spoke briefly about the rocky rise to fame and slow descent into infamy of Aduhelm® (aducanumab-avwa) in our post about how the FDA partners with drug development companies to navigate the review and approval processes.
Alzheimer's Drugs: A Seemingly Sisyphean Science
Here's a quick recap: Aduhelm® (aducanumab-avwa) is the latest (and until its approval, last) major drug aimed at treating Alzheimer's disease. It is a monoclonal antibody that directly targets the beta-amyloid protein, which has been shown to build up in the brain cells (neurons) of people with Alzheimer's disease. This protein is a part of the brain's normal cells, but becomes dislodged and forms plaques when Alzheimer's disease arises. By targeting the protein with this antibody, it is hoped that you can cause the immune system to clear it, thereby reducing the plaques and staving off neural degeneration.
Beta-amyloid is one of several biomarkers that is currently linked to Alzheimer's disease, and it's most promising. That said, there's still a lot we don't know about the underlying science of Alzheimer's that we need to uncover before a cure - or at least a symptom-alleviating treatment - is found.
Image Source: Shutterstock
Alzheimer's has been one of the trickiest medical challenges pursued by big pharma in the past two decades. Roche has advanced several compounds into late-stage clinical trials, only for them to fail to meet efficacy endpoints; Eli Lilly threw its hat in the ring with similar results for solanezumab and Merck shuttered its trial for verubecestat in 2017. Other major players like Bayer, GlaxoSmithKline (GSK), and Pfizer also tried and folded in their Alzheimer's efforts last two decades.
All told, these companies (and many others) have invested over $600 billion into Alzheimer's and dementia treatments. That accounts for 146 unsuccessful attempts to solve for a problem affecting over six million Americans alone and costs nearly $300 billion to treat every year.
Hope on the Horizon
Suffice to say, there is a major market need for treating - or even staving off - the progression of Alzheimer's disease. The market was ready.
Aduhelm® (aducanumab-avwa) represents a partnership between the last two big pharma companies invested in this space - Biogen (NASDAQ:BIIB) and Eisai (OTCMKTS: ESALY). Their partnership began in 2014 and expanded over the last seven years to include development of new drugs and co-promotion in multiple complex markets.
Clinical trials stalled due to efficacy concerns. They were discontinued and then restarted under FDA supervision following an odd company reversal in analysis of the clinical data. As the drug came closer to approval, impassioned pleas from patients and patient advocacy groups crescendoed into a frenzy that split the FDA review panel. The efficacy was still under par for what was to be considered 'standard' for approved drugs; patients and their families who have been waiting over twenty years were willing to take their chances.
You Missed the Target...by an Order of Magnitude
First impressions are important. While market penetration tends to grow as more distribution channels form, private and public payor coverage increases, and awareness multiplies, a drug's first quarter or year of launch sets the tone for future growth potential.
The FDA approved Aduhelm® (aducanumab-avwa) on June 7th, 2021. Sales projections for its first full quarter on the market were expected to be $16 million - a paltry start, but fair given the negative press around the drug's efficacy and conflict within the FDA.
In reality, Aduhelm®'s sales totaled approximately $300,000. Just three-hundred thousand dollars. That's -53x, or two orders of magnitude off-target.
The company is framing it as a 'delay in uptake'; equity analyst predictions for 2022 sales range from $200 million to $1 billion. As of January 11th, the Centers for Medicare and Medicaid Services (CMS) stated that they will cover and reimburse the drug only for senior patients in randomized clinical trials. It's a nice nod to the middle ground, where patients can be screened and additional clinical evidence can be generated.
With that in mind, someone is bound to be right.
So What's Next?
They say the road to Hell is paved with good intentions. I'd like to think that the road out of Hell is paved with them as well.
The diabetes market continues to evolve with progressive iterations by industry incumbents and creative disruptors alike (including BigFoot Biomedical, which has created a cloud-integrated ecosystem of diabetes management tools).
The odyssey for new Alzheimer's drugs isn't over yet. In addition to an influx of new funding following the approval of Aduhelm®, Biogen and Eisai are partnering on development of two new drugs: BAN2401 and elenbecestat.
Of course, Exubera® and Aduhelm® are not the only pharmaceuticals that failed to live up to investor and analyst expectations. Next week, we're going to look at five life science ideas (including pharmaceuticals, medical devices, and diagnostics) that failed - and may deserve a shot at redemption.
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