With 7 PD-(L)1s on the market, price competition hasn't been a factor. Will Regeneron be the first to ask for less?
In what seems like a counterintuitive strategy, seven drugs have piled in the anti-PD-(L)1 market so far, all at roughly the same list price. With no price competition to speak of, how do also-rans like Regeneron and Sanofi’s Libtayo differentiate themselves? Maybe try discounting, a top analyst muses.
In an open letter to Regeneron CEO Len Schleifer, Bernstein analyst Ronny Gal asked the New York drugmaker to be the first to discount its partnered Libtayo as more competitors pile into the field with no meaningful price competition.
On Thursday, GlaxoSmithKline’s Jemperli became the seventh PD-1 on the US market, joining bestselling Keytruda from Merck, Libtayo, and drugs from Bristol Myers Squibb, AstraZeneca, Roche and Pfizer. The drug will come at a list price of $10,000 per 500 mg vial with an estimated monthly cost of around $15,000 — about on par with the rest of the industry.
In his letter, Gal argued that price competition has not favored innovation in oncology, and oncologists have usually leaned toward more expensive drugs given their own financial incentives. But with attitudes around pricing changing, Regeneron could have an opportunity to undercut its competitors and snag a big share of the market before more competitors enter the field and inevitably take the discount route. Addressing Schleifer, Gal writes:
While some of your peers may not be too happy with your strategy at first, you will be doing the industry a favor. The strongest argument in favor of government intervention in drug pricing is that market forces are failing. There are now six approved PD-1s [seven with Jemperli], none have done a head-to-head trial, and they are all raising prices every year. The best thing you can do for the industry is to demonstrate that market forces work. This is an opportunity for Regeneron to truly lead in pharma as the company has historically led biotech.
If Regeneron follows that advice, Gal calculates, it could secure an additional 10% market share across some of the bigger indications, including non-small cell lung cancer, renal cell carcinoma and melanoma. Add that up and it could spell $2 billion in sales per year for Libtayo. Meanwhile, Regeneron could still ask top-dollar for drugs used in combination with the anti PD-1.
Choosing to discount now will matter if the PD-1 market does indeed add more competitors in the coming years with candidates from Eli Lilly, Novartis and Coherus all pursuing approvals. Jemperli’s accelerated nod shows that other drugmakers are also planning to charge a premium for their drugs, but the likelihood is high, Gal writes, that one of those later entries into the race will figure out that a discounting program will go a long way toward differentiating themselves.