Merck's new oral diabetes drug, Januvia, unexpectedly beat Novartis' version, Galvus, to the FDA finish line, but marketing efforts will determine the real winner in what's expected to be a $6 billion market.

Assuming Galvus (vildagliptin) gets the nod--which is expected to happen before the end of 2006--the struggle between Merck and Novartis will be one of creating brand loyalty for drugs that are not only the first in a brand new class, but that also have seemingly interchangeable competition.

"There's not a huge amount to differentiate them other than marketing," said Donny Wong, a research analyst at Decision Resources.

Januvia (sitagliptin) and Galvus represent the first two oral drugs known as DPP-4 inhibitors, and are being touted as the first major advance in type-2 diabetes in a decade.

With Januvia setting the bar, Novartis said its FDA application would include a more comprehensive data package that shows the drug's efficacy in hard-to-treat patient groups, like minorities, the elderly, and the obese.

Still, many observers had the reaction of Wong, who called the products "nearly identical."

"I think they'll split the market," Wong added, valuing the market for both drugs at $6 billion a year.

DPP-4 inhibitors are activated by a rise in blood sugar, and increase insulin production. In clinical trials, they worked as well as older TZD drugs, without hypoglycemia or weight gain.

Merck is reportedly working with CommonHealth and Interlink on marketing and medical education, but neither the company nor the agencies confirmed the relationships.

"Now that the drug has been approved, we're embarked on a full-fledged education effort to physicians," said Merck spokesperson Amy Rose.

She noted that DTC efforts would begin "at the appropriate time," and would include tactics such as Internet-based marketing.

Yet while Merck might have the lead, Novartis doesn't intend to sit idle. It is pushing ahead with its GALIANT trial, which involves primary care physicians at 800 US research centers. The purpose of the study is to test the drug in the "real world," since most diabetics are treated in a primary care setting, according to Marjorie Gatlin, MD, Novartis's vice president of US clinical development and medical affairs for cardiovascular and metabolic diseases.

So far, Novartis's message has focused on hard numbers attesting to Galvus' efficacy in a range of patient populations.

"There is no patient type for whom this drug is not indicated," Gatlin said. "What we have done is provided a robust data set to allow [physicians] to select the best therapy based on the data."

Novartis has also unveiled an unbranded diabetes awareness campaign with Donovan McNabb of the Philadelphia Eagles.

Merck, for its part, is also studying the drug in hard-to-treat patients, as well as in combination-pill form with metformin.

Pricing issues might be another factor in uptake. The launch of the DPP-4 class, which can be used either as a monotherapy or an add-on to current drugs, moves diabetes care from "somewhat expensive to extremely expensive," said Michael Russo, a partner at consulting firm The Bruckner Group.

Merck has priced Januvia at $4.86 per tablet for the once-daily drug. Novartis has not released its price yet, but it is expected to be comparable.

"Though overt competitive pricing is rarely done, competitive rebate negotiation can be a backdoor for such a tactic," Russo noted.

Another variable is Eli Lilly/Amylin's Byetta (exenatide injection), which also is part of DPP-4 class. Wong expects the current version of Byetta--now a $750 million product--to take a hit as patients are switched to the more user-friendly oral formulation. But he noted that a weekly dosing version of the injection could prove to be a billion-dollar competitor.

"There really is a lot of room for blockbusters in this category," Wong said.

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Merck's Januvia has a head start, but Novartis isn't sitting idle.

Oral Diabetes Race Comes Down to Marketing

Emerging markets--places like China, India, and the Russian Federation--will spur almost a third of pharma's growth next year, a reality to which industry must adjust.

These countries, and others with a gross national income of less than $20,000, are expected to contribute about 30 percent of pharma's growth in 2007, and represent 17 percent of the total market, according to IMS Health, which yesterday introduced its 2007 global forecast.

In contrast, emerging markets contributed five percent of pharma's growth just five years ago.

"Every company needs to have a strategy for the emerging markets, and have a business model to take advantage of that growth," said Murray Aitken, IMS' senior vice president of corporate strategy. "The issue for Big Pharma is: How do you play that?"

Aitken noted that there has been "further slowdown" of the market overall, with total growth expected to be five to six percent, rather than the six to seven percent seen in 2006.

Growth in the United States is lagging, contributing just 36 percent of total market growth compared with 54 percent five years ago.

Emerging markets currently are largely generics markets. But they spell opportunity for branded companies: For instance, they may be ripe for launching biogenerics, which are stymied by regulatory barriers in the United States.

While some companies like Sanofi-Aventis, Pfizer, and GlaxoSmithKline are well positioned to tap into these markets--with staff and offices already in place--others, like Wyeth, are not. Many industry executives have been cautious about investing in these countries because of concerns about political and economic security and intellectual property protection.

Moreover, developed countries, many of which offer financial incentives like tax breaks, are luring pharma's investments.

To date, about 60 percent of drug industry executives have spent less than $50 million in China and India, according to a survey of 218 senior industry executives that appeared in Ernst & Young's 2006 Progressions report.

"The biggest promise of emerging markets is still in the future," said Carolyn Buck Luce, global pharmaceutical sector leader at Ernst & Young Pharma. "The actual current purchasing of pharmaceuticals is still very modest because the middle class is small but growing."

Nevertheless, Luce attested to the growing number of partnerships with biotech companies headquartered in these emerging markets. She noted, however, that pharma is at "the beginning of that journey" as well.

Ernst & Young's report found that 43 percent of pharma respondents are concerned about reputation risks in China, and 41 percent are concerned about reputation risks in India.

The report emphasized the importance of having a local presence to respond to regulatory and compliance challenges in each region, while still maintaining a centralized command structure. Pharma companies already testing the emerging-market waters appear to be following that advice: About 67 percent maintain local compliance staff in at least half of their international offices.

"More and more," said Luce, "stakeholders are looking at ... safety, integrity, transparency, and compliance with a variety of rules and regulations."

Emerging countries are expected to drive pharma's earnings next year.

Big Growth in Small Markets

Barr Laboratories is poised to become the world's third-largest generics maker, and its chief executive says the company will waste no time going after brand name patents.

The Woodcliff Lake, NJ-based company emerged victorious in a bidding war to acquire Croatian generics maker Pliva for $2.5 billion. Its bid trumped that of Icelandic company Actavis.

The deal gives Barr access to European markets, low-cost manufacturing operations in Croatia and Poland, and new drug-formulation technology. In addition, the acquisition adds injections, creams, and ointments to Barr's portfolio, and might speed its entry into the biogenerics market.

Having access to injectable and transdermal drug-delivery technologies "expands in the US our patent challenge opportunities," Barr chairman and CEO Bruce Downey told investors. "We expect to be very active in that particular part of the US generics business."

Drug delivery is the fastest growing segment of the pharmaceutical industry, with more than $25 billion in sales, and growing about 15 percent annually, according to business intelligence firm Global Information. Injectables account for 15 percent of that market.

Biotech products have been driving much of that growth. And while FDA is still grappling with how to assess the equivalence of bio-similar products, Barr plans to use Pliva's R&D platform to mount some of first regulatory challenges in this area.

Already, Pliva and Barr have been collaborating on a biogeneric product for Amgen's Neupogen (filgrastim)--a partnership that began in March 2005 and was the impetus for the acquisition. The merger also adds to Barr's pipeline a biogeneric for EPO that would compete with Amgen's Epogen and Johnson & Johnson's Procrit.

Downey said Barr plans to "leap forward" into biogenerics and become a "global competitor in an emerging area."

In addition to technology, the deal gives Barr--which now ranks just behind Novartis and Teva in size--the financial strength to face the inevitable legal and regulatory hurdles. "Barr is [already] a substantial player, and they're very aggressive," said Ed Thwaite, president of generics consulting firm EW Thwaite Associates. With Pliva on board, the company "will have a meaningful way to move into biogenerics."

The deal will afford Barr about $2.4 billion in generic and proprietary revenue, and an annual R&D budget of $200 million, according to Downey. Post-merger, the company will have 120 generic products in the US and 550 in Europe. It also has 50 products pending FDA approval, and 220 additional projects in development.

The Federal Trade Commission has approved the deal, pending Barr's divestiture of overlapping product lines, the company announced Friday.

The new company will have three business units: Barr, the United States generics business; Duramed, its proprietary products division; and Pliva, its international arm.

After winning a bidding war for Pliva, the well-positioned generic maker is giving pharma reason to worry.

Pharmaceutical Executive-10-25-2006

Oral Diabetes Race Comes Down to Marketing

Big Growth in Small Markets

Barr to Pharma: 'Watch Out'