Astellas and Merck to co-promote Astellas' SGLT-2 inhibitor ipragliflozin in Japan - September 4, 2013

On Monday, Astellas and MSD KK (Merck’s subsidiary in Japan) announced that they entered into a co-promotion agreement in Japan for Astellas' SGLT-2 inhibitor ipragliflozin. As a reminder, Astellas filed ipragliflozin in Japan in March and is awaiting a regulatory decision. Astellas will manufacture and sell ipragliflozin. MSD KK, Astellas, and Kotobuki Pharmaceutical (who collaborated with Astellas on developing ipragliflozin) will co-promote ipragliflozin in Japan. As a reminder, Merck will be developing and marketing Pfizer’s ertugliflozin everywhere in the world globally except Japan, so they have filled this gap, albeit with a very different kind of partnership arrangement.

Merck's decision to partner on ipragliflozin in Japan is an interesting development as companies work to anticipate the impact SGLT-2 inhibitors will have on other anti-diabetic classes and on the diabetes market broadly speaking. Merck's Januvia (sitagliptin) franchise has been very successful in Japan; in the country, DPP-4 inhibitors have a larger market share than sulfonylureas or metformin, and the Januvia franchise accounts for well over half of the DPP-4 inhibitor market. In Merck's 1Q13 call, management warned that it was starting to see year-over-year (YOY) growth slow in Japan due to this high market penetration and in 2Q13 Japan was the only region in which Januvia franchise sales did not grow due to foreign exchange (for more details on Januvia sales in Japan, please see our Merck 2Q13 report at http://www.closeconcerns.com/knowledgebase/r/8ac8afbc). Thus, Merck likely envisions co-promoting ipragliflozin as a way to augment Januvia sales. Indeed, Merck's market research in the EU found that SGLT-2 inhibitors are being used after DPP-4 inhibitors; for more details on Merck’s market research, please see our Merck 1Q13 report at http://www.closeconcerns.com/knowledgebase/r/f0e5540f. If this holds true in Japan, co-promoting ipragliflozin certainly is synergistic for Merck. We think it is early to say the ultimate timing for SGLT inhibitors – this will certainly depend in part on ultimate assessment of the side effect profile, which is early to call for SGLT inhibitors.

Additionally, Merck and Pfizer are planning to initiate phase 3 testing of their SGLT-2 inhibitor ertugliflozin in 2H13 – except in Japan, so now, in the important Japanese market, Merck has an SGLT option. It would certainly benefits Merck to gain experience commercializing an SGLT-2 inhibitor as it develop a launch strategy for ertugliflozin; to boot, ertugliflozin marketing is certainly some time off and Merck can get smart early on with ertugliflozin marketing. As well – presumably the Pfizer agreement is exclusive – except in Japan, where ertugliflozin will not be co-marketed by Merck. To our knowledge, ipragliflozin was the first SGLT-2 inhibitor submitted in Japan. Astellas previously decided to discontinue ipragliflozin’s development in the US and EU partially because of increased competition. Ipragliflozin, therefore, will not compete with Merck/Pfizer’s ertugliflozin in most of the world.

We, of course, will be following the field closely and work to determine the extent to which SGLT inhibitors expand the overall anti-diabetic market or partly cannibalize the sales of existing classes. It will also be interesting to see how SGLT-2 inhibitors fair in Japan compared to DPP-4 inhibitors.

• The SGLT-2 inhibitor market looks to become crowded, which might have motivated Merck to get some earlier experience with SGLT-2 inhibitors in Japan. Additionally, during Merck’s 1Q13 and 2Q13 earnings calls, Merck underscored its ability to differentiate ertugliflozin by offering fixed-dose combinations of it with sitagliptin (Januvia). Merck and Astellas’ SGLT-2 inhibitor competitors will include BMS/AZ who’s Forxiga was recently launched in Europe and resubmitted to the FDA this summer. In Japan specifically, it could include Taisho’s luseoglilofzin, which has been submitted in the country. Lilly/BI filed empagliflozin in the US and EU in March. Additionally, several other companies are developing SGLT-2-based therapies, including Lexicon (phase 3 initiation for the SGLT-1/SGLT-2 dual inhibitor LX4211 slated to begin later this year), Novartis (SGLT-1/SGLT-2 dual inhibitor LIK066; phase 2), Roche/Chugai (SGLT-2 inhibitor tofoglilfozin; phase 3 in Asia), and Theracos (EGT0001442; phase 2).

Close Concerns Questions

• Does the co-promotion agreement stipulate the promotional messaging to be used?

• Will Merck/Astellas/Kotobuki Pharmaceutical promote ipragliflozin as a third line therapy following metformin and sitagliptin?

• How involved was Merck’s ertugliflozin development team in the decision to partner with ipragliflozin? (That is to say – perhaps a naïve question – did Merck or Pfizer decide that Merck would not be involved in Pfizer’s ertugliflozin in Japan?)

-- by Hannah Deming and Kelly Close