STIFEL.
BUY
TARGET PRICE CHANGE
September 20, 2018 EU Pharmaceuticals
Pharming Group N.V.
PHARM – AEX; PHAR.AS
No prophylaxis approval but sell-off overdone
Summary
Pharming has received a complete response letter (CRL) from the FDA to expand the use
of Ruconest for the prophylaxis treatment of HAE, beyond the existing use in the acute
setting. We are surprised by the FDA's decision and request for a further clinical trial,
given the relative strength of the clinical data compared to Cinryze as one of the approved
drugs for prophylaxis use. We can only speculate that the more recent approvals for
Haegarda and Takhzyro have moved the FDA's goalposts on what data are required.
While approval for Ruconest in the prophylaxis setting was not a game-changer given
the focus on Ruconest as the best option for acute, rational, on demand treatment, we
did expect a boost to sales growth in 2019 from renewed sales force promotion and have
therefore pushed back our sales contribution from prophylaxis use to 2021. This lowers
our 2022 sales forecast from $425m to $350m, and therefore our TP is reduced to €1.45.
We believe the recent sell-off has been overdone and therefore reiterate our Buy rating.
Key Points
Surprising FDA rejection, Ruconest clearly works and is safe. Pharming has
previously reported, presented and published (in The Lancet) highly positive Phase II
clinical data with the use of Ruconest for the prophylaxis treatment of HAE. A onceweekly
and twice-weekly IV regimen resulted in significant reductions in HAE attacks
vs placebo, with what we also regard was a greater response rate (>50% reduction in
attacks) compared to Cinryze. The data demonstrate the product clearly works in the
prophylaxis setting, has been on the market since 2014 as an acute treatment, has an
established/acceptable safety profile, and anecdotally has been used as a prophylaxis
option, particularly during the recent shortages of Cinryze. The FDA's decision to ask for
another clinical trial, just to confirm a treatment response already observed, is bizarre in
our view. Our only conclusion is that the FDA has taken a wider market view in light of
approvals for Haegarda and Takhzyro as new prophylaxis treatments and sees less need
to sanction an accelerated approval (i.e. on Phase II data).
Options for next steps. We understand that Pharming needs to have a follow-up meeting
with the FDA to understand what clinical data the regulator requires in order to seek
prophylaxis approval. We see little merit in proceeding with the current IV regimen for the
next clinical trial, instead waiting for more convenient formulations (SC, IM, transdermal
patch), for a more appropriate offering in the prophylaxis setting. We therefore have
pushed back potential sales contribution from use in the prophylaxis setting until 2021,
which lowers our 2022 sales estimate to $350m from $425m.
Even with shifting dynamics, significant acute opportunity remains. We do expect
the overall HAE market to shift to more convenient prophylaxis products, such as
Haegarda (twice-weekly, SC), Takhzyro (once every 2 weeks, SC) and potentially daily
oral tablets (e.g. BioCryst's BCX7353 in Phase III), with a 40:60 proph:acute ratio today
to a 75:25 split in favour of proph by 2022. However, that still leaves a significant market
opportunity, we estimate at around $700m, and assuming Ruconest becomes available in
more convenient formulations, we believe Ruconest will have the best profile in the acute
setting, as a standard regimen but also to treat breakthrough attacks which will inevitably
occur in patients on prophylactic options. A head-to-head trial of Ruconest vs Firazyr due
by the end of 2018 will also be important given the likely genericisation of Firazyr by July
2019. Ultimately, we also expect the likes of Takyzyro to help to expand the market for
HAE treatment, as Shire anticipates, rather than displacing existing treatments, i.e. more
market expansion than market rotation.
Sell-off overdone. At the core of Pharming is a validated and differentiated technology
platform that has so far delivered Ruconest and has the potential to deliver further
candidates, such as for Pompe disease, due to enter the clinic by year-end. In our view
the recent sell-off presents an attractive buying opportunity given overblown concerns
over the headwinds to Ruconest.