AbbVie, Allergan Merger Puts IL-23 Inhibitor Competition in Doubt

Interleukin-23 (IL-23) inhibitors are an important new class of drugs for the treatment of Crohn disease (CD) and ulcerative colitis (UC), both common causes of inflammation of the digestive tract. Johnson & Johnson’s Stelara (ustekinumab) is the only IL-23 inhibitor currently approved to treat moderate-to-severe CD and UC in the United States. Although a variety of other drugs have been approved to treat CD and UC, the effectiveness of most is limited, according to the Federal Trade Commission (FTC).

Further, biosimilar competition for Stelara is at least a few years off. The patent exclusivity on this product expires in 2023. NeuClone Pharmaceuticals of Sydney, Australia, recently completed a phase 1 clinical trial for its ustekinumab biosimilar candidate NeuLara. This agent is under development for treatment of both CD and UC.

Another ustekinumab biosimilar candidate is FYB202, which Formycon, of Martinsried-Planegg, Germany, is developing. In October 2019 the company announced the start of a phase 1 clinical trial of FYB202. NeuLara and FYB202 are aimed at the formidable market dominated by Stelara, which in 2019 achieved global sales of $6.6 billion. That market is expected to reach $7.8 billion in 2024, according to EvaluatePharma.

Limited IL-23 Competition

According to the FTC, there are just 3 companies with other types of IL-23 products in late-stage development for the treatment of CD and UC. Those are AbbVie, Allergan, and Eli Lilly and Company. So, it was with consternation recently that the FTC approved the $63 billion merger of AbbVie and Allergan. The panel, which voted 3 to 2, was divided over whether the arrangements made to ensure a competitive drug market in the wake of the merger were sufficient.

In explaining its decision to require the merging drug companies to divest themselves of certain assets, the FTC explained that “The proposed acquisition would likely result in substantial competitive harm to consumers in the markets for prescription drugs for the treatment of EPI [exocrine pancreatic insufficiency], IL-23 inhibitors for the treatment of moderate-to-severe Crohn’s disease, and IL-23 inhibitors for the treatment of moderate-to-severe ulcerative colitis.”

AbbVie is seeking indications for CD and UC for its Skyrizi IL-23 inhibitor, which is currently on the market with FDA approval only for plaque psoriasis. Allergan’s brazikumab IL-23 inhibitor is under development for CD and UC. Under the merger agreement with the FTC, Allergan must transfer its brazikumab business to AstraZeneca, the initial developer of the drug. In the dissenting opinion, FTC Commissioner Rohit Chopra contended that there is not enough evidence that AstraZeneca would be aggressive about completing development of brazikumab and bringing it to market, such that it becomes a viable alternative IL-23 treatment for CD and UC.

“Divesting assets is only an appropriate remedy if the buyer will fully replace the competition lost by a merger. But, merging parties have little incentive to sell to a strong competitor and, in fact, succeed more when the buyer fails,” Chopra said. “The FTC has put its faith in a proposal that AstraZeneca, who publicly reported a few years ago that it was retreating from immunology, will follow Allergan’s path to bring this drug to market.” AstraZeneca might decide to “relicense” the product to another party, which adds more uncertainty to the idea that brazikumab eventually will come to market, he said.

Simmons' Counterargument

In a strongly worded opinion, FTC panel Chairman Joseph J. Simmons disagreed with Chopra. “The commission must have proof that [a merger’s] likely effect is ‘substantially to lessen competition.’ We cannot meet this burden of proof just by surmising there might be harm.” Explaining that he thought Chopra’s dissent was based on flawed reasoning, Simmons said he was attempting to “set the record straight.”

“No drug development is without risk and there is no guarantee today that Allergan will successfully commercialize this product,” Simmons said. He noted that AstraZeneca will receive payment from the merger partners to cover the development of brazikumab in both CD and UC indications, and that those payments are contingent on AstraZeneca’s continuing to develop brazikumab in each indication. He said AstraZeneca will be incentivized to bring the drug to market by the potential for further revenue. “AstraZeneca has a stronger financial incentive to develop brazikumab than does Allergan…under the proposed settlement,” he argued.

AbbVie and Allergan account for more than 95% of the market for drugs to treat EPI, and with regard to the panel’s division over whether there would be sufficient postmerger competition in the EPI drug market, Chopra noted that Allergan drugs Zenpep and Viokace would be divested to Nestlé under the FTC brokered plan, and Nestlé is more of a specialist in food than pharmaceuticals. “Neither the board nor management have recently stated that they intend to transform Nestlé into a major player in the pharmaceutical business,” he said. “Nestle and its nutrition subsidiary cannot match Allergan’s experience and know-how.”

Simmons responded that “a company can both sell consumer products and be a formidable competitor in the pharmaceutical industry. For example, Johnson & Johnson sells Band-Aids and baby powder and is, at the same time, a major player in pharmaceutical industry.” He said Nestlé, in fact, had executive leadership with much experience in pharmaceuticals. “Nestlé has been involved in the pharmaceutical industry for over 40 years, in various iterations,” he said, noting that the company previously owned Alcon, which Nestlé built from a $280 million business in 1977 to a $40 billion operation by the time it separated from the company in 2010.