Ono Pharmaceutical suffering triple trouble over new cancer drug

Updated : 11.11.2016 / Category Corporate Investigations

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Having gambled its future on marketing Opdivo, an anticancer immunotherapeutic drug, Ono Pharmaceutical Co. Ltd. is now grapping with problems on three different fronts. "It's triple trouble," bemoaned a senior official of the firm.

The company's main concern relates to negative side effects associated with the drug. Recently, there has been a series of reports regarding serious symptoms with suspected links to the administration of Opdivo. The Health, Labor and Welfare Ministry announced Oct. 18 that six patients given the drug developed heart muscle inflammation, saying a causal relation was undeniable in half of the cases, in which one person died. The ministry also revealed instances of other side effects, though these were not fatal. According to the latest reports received by the ministry, three of the patients given the drug developed primary immune thrombocytopenia, or purpura, caused by a decrease in platelets. Rhabdomyolysis, in which muscle cells are destroyed, occurred in four of the patients.

"At present, the risk of further possible side effects in various forms can't be discounted, even though they haven't been seen as yet," said a source at a Tokyo hospital. "We're afraid to use the drug."

Potentially fatal side effects overlooked
Opdivo affects immune cells, helping them fight cancer cells by boosting the body's ability to remove foreign entities. The drug, which was developed jointly by Ono Pharmaceutical and Bristol-Myers Squibb, was launched in Japan in September 2014, initially as a treatment for malignant melanoma. In December 2015, the ministry decided to extend health insurance to cover treatment of non-small cell lung cancers with the drug in cases where a cancer is inoperable, recurrent and progressive. Since Opdivo's action mechanism completely differs from conventional anticancer drugs, it was said to cause relatively fewer side effects.

However, clouds have been gathering over this "myth" since the start of the year. In January, Ono issued a warning saying seven patients administered with Opdivo had developed acute type 1 diabetes, which could prove fatal by causing arrhythmia.

Acute type 1 diabetes destroys pancreatic islet cells (also known as "islets of Langerhans") through autoimmune reaction, forcing patients to indefinitely depend on insulin after achieving remission. Since Opdivo severely impacts quality of life, some medical professionals are increasingly cautious over its use.

This summer, additional cases have highlighted side-effect problems associated with the drug. The ministry said eight patients given anticancer drugs called epidermal growth factor receptor tyrosine kinase inhibitors (EGFR-TKIs) upon completing a course of Opdivo developed interstitial pneumonia, and it was impossible to deny that this may have been due to using Opdivo. Three of the eight patients consequently died.

EGFR-TKIs are molecular target drugs used to treat cancer and come in four different types: Iressa, Tarceva, Giotrif and Tagrisso. When a lung cancer is unresectable or inoperable, doctors commonly use these drugs in alternation to try to extend a patient's life.

Opdivo reportedly takes at least two or three months to start having an effect. If EGFR-TKIs cannot be administered during that period, patients could potentially die before Opdivo takes effect. However, the drug is said to be effective for only 20 percent of lung cancer patients. Furthermore, it is not yet known what type of patients benefit the most from Opdivo.

"The ministry's latest report has sharply increased the number of doctors who prefer to 'drive safely,' as it were, by continuing to rely on conventional treatment methods, rather than using Opdivo," a hospital source said.

Of course, Ono Pharmaceutical has not been indifferent to the drug's side effects. On the contrary, the company tightly regulates sales of the drug, such as by only selling it to medical institutions that can treat patients around the clock and which have doctors with sufficient experience and knowledge. It has also taken a cautious approach with regard to Opdivo's marketing, occasionally revealing information about the drug that is more detailed in comparison to that of conventional anticancer medications.

In spite of such corporate efforts, however, side effect-related deaths occurred among patients who received the drug. "The insufficient number of clinical tests we conducted might have led us to overlook potentially fatal side effects," said an individual with ties to the drug.

According to data released by Ono Pharmaceutical, as of the end of September, 10,816 patients had been administered with Opdivo since its introduction. There were 5,520 cases of side effects recorded among 2,971 of these individuals, and 1,833 cases of serious side effects recorded among 1,276 of them.

"Never-before-seen side effects should be expected, because it's a completely new and revolutionary drug," said a source at a public hospital in Kanagawa Prefecture. "National health insurance was extended in August to cover Opdivo's use for renal cell cancers that can't be treated with radical excision, or which are metastatic. Increased use of the drug will heighten the likelihood of unexpected side effects."

New drug threatens Opdivo's dominance
Amid the ongoing side-effect problems linked to Opdivo, a competing drug, Keytruda, has appeared on the market. Developed by Merck & Co. in the United States, it is said to have an action mechanism similar to Opdivo's. The health ministry approved production and sale of Keytruda in September as a drug for the treatment of melanoma. In the United States, Keytruda has already been approved to treat non-small cell lung cancer, and head and neck cancer. Approval for use of the drug in cases of non-small cell lung cancer has been sought in Japan, too. A pharmaceutical industry source said Keytruda will likely be approved in the first half of 2017, and will thus directly compete with Opdivo, which has monopolized the Japanese market to date.

In October, Ono officials were reportedly shocked by news from Europe that suggested Keytruda was superior to Opdivo. At a meeting of the European Society for Medical Oncology held in Copenhagen, Denmark, from Oct. 7-11 it was reported that in a clinical experiment, the period of progression-free survival for a previously untreated patient with non-small cell lung cancer was extended to 10.3 months following the administration of Keytruda, compared to six months of chemotherapy with conventional anticancer drugs. It was also reported that no significant extensions were confirmed among patients treated with Opdivo.

"Firstly, the clinical trials for Keytruda and Opdivo were designed differently," said a senior official from Ono Pharmaceutical. "Therefore, you can't draw a simple comparison."

However, a U.S.-based clinical test conducted in August by Bristol-Myers Squibb--joint developers of Opdivo--found Opdivo had no effect on the suppression of cancer progression, nor did it significantly reduce the risk of death compared to chemotherapy in cases of previously untreated non-small cell lung cancer. The ESMO-meeting report further confirms these facts, a source said.

However, an increasing number of observers say the health ministry will postpone until next year the extension of national health insurance to cover Keytruda's use in the treatment of melanoma--as opposed to November, at the earliest, as had been initially expected. Ironically, this is due to renewed criticism of Opdivo's extremely high pricing.

"Opdivo will enjoy its heyday during that period, though it will be very short," said an Ono Pharmaceutical official with a bitter laugh. But, a senior official of Shionogi & Co., a leading Japanese pharmaceutical firm, said this was merely "the calm before the storm."

Opdivo under fire
Criticism of Opdivo's sky-high pricing was rekindled at a meeting of the Council on Economic and Fiscal Policy held Oct. 14 at the Prime Minister's Office to discuss issues including the reform of government spending vis-a-vis the compilation of the fiscal 2017 budget. Following remarks made by Susumu Takahashi, chairman of the Japan Research Institute, private-sector members of the government council pointed the finger at Opdivo, saying its price had to be lowered drastically, as increased medication prices were one of the main factors in increased government spending on medical care-related costs.

Some members pointed out that compared to Japan, the price of Opdivo in the United States and Britain is less than half, prompting one member to say, "The price has to be reduced by more than 50 percent." A source at the Prime Minister's Office said Opdivo had come under heavy fire.

Opdivo current costs ¥730,000 per 100 milligrams. It thus costs around ¥35 million per year to supply the drug to an average adult weighing 60 kilograms.

Consequently, the medication's stratospheric price has been repeatedly denounced, including at meetings of the Fiscal System Council--an advisory panel to the finance minister--where some members opined that the drug could not only disrupt the finances of the national insurance system, but those of the government itself.

In response, the health ministry is considering applying to Opdivo a rule called "recalculation due to expansion of the market." This rule lowers the price of super-expensive drugs that outstrip pharmaceutical companies' projected sales. At a meeting held Oct. 5, members of the Central Social Insurance Medical Council reached a broad agreement to lower the drug's price by up to 25 percent, starting in fiscal 2017.

Since the price cut was relatively small, Ono Pharmaceutical representatives reportedly heaved a sigh of relief. "This will ease criticism of the drug's price for a while, and it might even die down eventually," said a senior official of the firm.

However, this was a false assumption.

Based on discussions held at the Council on Economic and Fiscal Policy, Prime Minister Shinzo Abe ordered ministers concerned, including Health, Labor and Welfare Minister Yasuhisa Shiozaki, to lower the drug's price. "You should flesh out countermeasures to accelerate government spending reforms," Abe reportedly told them.

A health ministry source said a further price cut was now being considered for Opdivo that would transcend the previous "up to 25 percent" figure.

The Central Social Insurance Medical Council is scheduled to officially decide Opdivo's markdown ratio in November. If a cut of 50 percent were to be made, it would have a significant impact on Ono Pharmaceutical's performance in the business year that ends in March 2018--and thereafter, too--according to a senior official of the Bank of Tokyo-Mitsubishi UFJ.

Ono is currently conducting clinical tests to discern Opdivo's effectiveness in the treatment of cancers in various organs such as the stomach, esophagus and liver cells, with an eye on expanding the drug's range of uses. However, if Opdivo does not generate expected revenue, the firm will be unable to recover the money it plowed into related research and development. Ultimately, the company will be forced to reduce the scope of its clinical tests, according to a source in the pharmaceutical industry.

Opdivo is a type of cancer immunotherapeutic drug known as an immune checkpoint inhibitor. In addition to Merck & Co., other leading pharmaceutical makers are working hard on developing a new immune checkpoint inhibitor, including F. Hoffmann-La Roche, Ltd. in Switzerland; AstraZeneca, plc. in Britain; and Pfizer Inc. in the United States. Consequently, delays, or a hiatus, in Opdivo's clinical testing will give Ono's rivals time to catch up.

Ono's fate dependent on Opdivo
The market is apparently taking Ono's adverse situations into consideration. The firm's stock price was previously very high, but has now completely lost momentum, according to a senior official of a leading securities firm.

Recently, the company's stock price has hovered at around ¥2,700, less than half last April's figure of ¥5,880--a post-listing record high. The firm's market capitalization once exceeded that of Daiichi Sankyo Co. and other leading Japanese drug makers, and even grew close to matching that of Takeda Pharmaceutical Co. and Astellas Pharma Inc. But it has since fallen to eighth place in the industry.

"Despite having fallen, there's still a strong impression within the market that Ono's stock price is too high, because its prospective price-earnings ratio is more than 25, and its price-book value ratio is nearly three," said a source in the securities industry. "Looking to the future, if additional negative information comes out, thus reducing expectations for Opdivo even further, then its stock price is likely to drop even lower."

An upcoming health insurance drug price revision--a two-yearly occurrence next scheduled for fiscal 2018--is apparently a major concern for Ono. Opdivo-generated profits will disappear if its price is lowered as a result of the revision, not to mention the ad hoc price reduction in fiscal 2017 from the "recalculation due to expansion of the market" rule.

Shortly before Opdivo was marketed, Harvoni, a drug developed by Gilead Sciences in the United States to treat hepatitis C, came in for criticism over its high price. However, this year's price revision forced its price down by 32 percent. For a standard prescription of the drug, one tablet is administered orally every day for 12 weeks, but a single tablet costs more than ¥80,000 (the current price is ¥54,796). The drug's sky-high price was slammed over the possibility that it could disrupt the finances of the national health insurance program.

However, Harvoni has a dramatic effect on hepatitis C, and most patients who receive the drug are cured of the disease. This prompted some members at the Central Social Insurance Medical Council to defend the drug, saying Harvoni might be favorable for the overall finance of the health insurance scheme if it means hepatitis C patients do not need any further treatment after its administration.

In the case of Opdivo, however, cancer cannot be cured completely. In the worst-case scenario, the drug might cause medication costs associated with the health insurance program to continue rising sharply. This is why Opdivo has even been dubbed "the new drug destroying the nation."

According to Ono's projections for the business year ending in March 2017, sales will be ¥259 billion, up 61.6 percent year-on year, and operating profits will come in at ¥72.5 billion, up 2.37 times, year-on-year. Of these figures, Opdivo's annual sales will constitute ¥126 billion, a six-fold increase compared to the previous business year. This means nearly half the company's total sales will derive from Opdivo.

Of the company's other major products, Glactiv--a drug for treating type 2 diabetes--boasts the largest annual sales. However, sales of Glactiv have already peaked, and projected sales of ¥29.5 billion represent a 6.1 percent drop, year-on-year. Sales of Glactiv are no longer large enough to sustain the company.

Opdivo's fate will likely decide the fate of Ono Pharmaceutical, too. Indeed, the company is now likely in the throes of a make-or-break period.

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This is a translation of an article from the November 2016 issue of Sentaku. The original article can be found here.