NVS: Entresto Expectations are (2x) Too High

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Richard Evans / Scott Hinds / Ryan Baum / Hardy Evans


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March 8, 2016

NVS: Entresto Expectations are (2x) Too High

  • Entresto aims to become the standard of care for congestive heart failure (CHF) patients with reduced ejection fraction. Entresto’s pivotal trial (PARADIGM-HF) compared Entresto to the current standard of care (enalapril), at a dose of 10mg enalapril twice-daily (BID); in the trial Entresto reduced all-cause mortality and heart failure associated hospitalizations as compared to enalapril
  • At issue is whether the 10mg BID enalapril dose was sufficient. PARADIGM-HF’s authors claim the next higher (20mg BID) dose is impractical; however, prescription audits show that US physicians write more than 1.4M Rx’s annually for enalapril 20mg BID
  • Where NVS uses the PARADIGM-HF results as a basis for positioning Entresto as first-line therapy in CHF with reduced ejection fraction, we believe practitioners see Entresto as a second-line alternative reserved for patients in whom optimally titrated ACE-inhibitors (such as enalapril) have failed
  • There are no further Entresto outcomes trials underway, meaning practitioners’ interpretation of PARADIGM-HF will determine whether Entresto is used first-line (as guidance and consensus imply), or second-line, as we expect
  • Slow US uptake of Entresto, and vocal thought-leader opposition to a first-line role for Entresto, both imply the brand is being held in reserve for ACE-inhibitor failures. N.B.: Entresto’s slow US uptake has frequently been blamed on a six-month waiting period for Part D formulary acceptance; in truth no such waiting period exists, and Medicare’s share of Entresto prescriptions is roughly the same as Medicare’s share of prescriptions for CHF therapies that have been on the US market for many years
  • We see Entresto as a second-line alternative for patients that fail optimally titrated ACE-inhibitors, a position with global peak sales potential on the order of $2.3B – just less than half NVS’ guidance of $5B, and current consensus of $4.8B

Where we’re BULLISH: Biopharma companies with undervalued pipelines (e.g. AMGN, BMY, GILD, SHPG, VRTX); Biopharma companies with pending major product approvals (e.g. ABBV, ACAD, ADMA, ALIOF, BIIB, CHMA, CLVS, CPRX, CTIC, GILD, ICPT, JAZZ, LLY, LPCN, MRK, NVO, OCUL, PTCT, SRPT, TEVA, ZSPH); SNY on sales potential for Praluent (alirocumab); CNC, MOH and WCG on bullish prospects for Medicaid HMOs; and, DVA and FMS for the likely gross margin effects of generic forms of Epogen

Where we’re BEARISH: PBMs facing loss of generic dispensing margin as the AWP pricing benchmark is replaced (e.g. ESRX); Drug Retail as dispensing margins are pressured by narrowing retail networks and replacement of AWP (e.g. WBA, CVS); Research Tools & Services companies as growth expectations and valuations are too high in an environment of falling biopharma R&D spend (e.g. CRL, Q, ICLR); and, suppliers of capital equipment to hospitals on the likelihood hospitals over-invested in capital equipment before the roll-out of the Affordable Care Act (e.g. ISRG, EKTAY, HAE)

Summary and Conclusion

In-line with guidance, consensus projects $5B in global Entresto sales by 2020, at which point Entresto accounts for 10 percent of NVS’ total global consensus sales estimate. This level of sales implies that Entresto is to become the standard of care for patients with NYHA Class II-IV congestive heart failure (CHF) and left ventricular ejection fractions (LVEF) ≤40%

Whether Entresto’s pivotal trial (PARADIGM-HF) proves Entresto superior to the current standard of care is controversial. Our view is that it does not, and that as a result, Entresto is more likely to be limited to second-line use in CHF patients who fail ACE-inhibitors. Global sales potential for this narrower niche is on the order of $2.3B, less than half the level anticipated by guidance and consensus

The PARADIGM-HF Controversy

NVS’ Entresto is a combination of the ARB[1] valsartan and the neprilysin inhibitor sacubitril, indicated for congestive heart failure (CHF). Specifically, Entresto is indicated to reduce the risk of cardiovascular death and hospitalization for heart failure in patients with chronic heart failure (NYHA class II-IV)[2] and reduced left ventricular ejection fraction (LVEF ≤ 40%)

The pivotal clinical trial (PARADIGM-HF) behind Entresto’s approval is controversial for several reasons, two of which are central to Entresto’s commercial prospects. PARADIGM-HF compared Entresto to a 10mg BID[3] dose of the ACE[4]-inhibitor enalapril, and the nature of this comparison forms the underpinning for both key controversies

First, because Entresto consists of valsartan (an approved drug) and sacubitril (before Entresto an unapproved drug substance), traditional clinical trial design would call for a comparison of valsartan to valsartan + sacubitril, in order to establish that sacubitril is producing a measurably beneficial effect. Because this comparison never took place, there’s no direct evidence that sacubitril contributes to the advantages Entresto showed v. enalapril in the PARADIGM-HF trial. The architects of PARADIGM-HF explain their decision not to run a valsartan v. valsartan + sacubitril comparison by claiming that relatively few CHF patients are treated with ARBs (the drug class to which valsartan belongs), thus obviating the practicality and/or appropriateness of a valsartan-only arm[5]

Second, PARADIGM-HF compared Entresto to 10mg BID of enalapril – which is not enalapril’s highest dose; enalapril can be dosed as high as 20mg BID. Thus PARADIGM-HF offers no direct evidence that Entresto is superior to the standard of care, if one reasonably defines the standard of care as an optimally titrated dose of enalapril. The architects of PARADIGM-HF defend the 10mg BID enalapril dose by arguing that the higher 20mg BID dose is poorly tolerated[6], and even go so far as to characterize the 20mg BID enalapril dose as ‘extreme’. This suggests that 20mg BID enalapril is an impractical dose – and if this were true we would rarely expect to see 20mg BID enalapril prescriptions being written in actual practice

As it turns out, at least in the United States enalapril is quite often prescribed at the 20mg BID dose – we estimate that 38% of enalapril 20mg prescriptions, or about 1.4 million prescriptions annually, are written BID[7]. This plainly shows that 20mg BID is an enalapril dosage that physicians are commonly writing in practice. To these same physicians, 10mg BID enalapril is unlikely to be accepted as the standard of care

The controversy over PARADIGM-HF is reflected not only in professional debate following the trial’s release, but also in at least one early draft of (informal) post-Entresto CHF guidelines. UpToDate® is a more or less real-time on-line resource for expert-authored and peer-reviewed articles intended to reflect the latest standards in clinical practice. UpToDate by no means takes the place of more formal guidelines that come from relevant professional bodies (e.g. ACC, AHA); however, the service is often a window into how consensus evolves as new technologies (and new information) emerge. Under the section “Pharmacologic therapy of heart failure with reduced ejection fraction”, the author[8] – an NVS advisory board member – writes (emphasis and Entresto brand name in parentheses added):

Angiotensin converting enzyme (ACE) inhibitors are typically initiated during or after the optimization of diuretic therapy. These drugs are usually started at low doses and then titrated to goals based upon trial data.

•Angiotensin II receptor blockers (ARBs) are an alternative to ACE inhibitors in patients who cannot tolerate ACE inhibitor [sic] for reasons other than renal dysfunction or hyperkalemia.

We reserve use of the angiotensin receptor neprilysin inhibitor (ARNI) sacubitril-valsartan (Entresto) in place of ACE inhibitor (or single-agent ARB) therapy for patients with no improvement in functional class or worsening symptoms despite optimum combination therapy as discussed below. However, some experts recommend the ARNI sacubitril-valsartan as initial oral therapy (in place of ACE inhibitor or single-agent ARB) in hemodynamically stable patients.

To be fair, the author makes clear that Entresto’s role is evolving, and that other experts consider Entresto as a viable first-line agent. Nevertheless, the section makes clear that at least one key thought leader – in this case an NVS advisor – and the editors overseeing his review, see Entresto as a second-line agent for use only after optimally titrated ACE inhibitors have failed

In light of the controversy, what are reasonable sales expectations?

NVS’ original guidance called for $5B in global peak Entresto sales. Consensus estimates now roughly mirror that guidance (2020E global consensus is $4.8B, Exhibit 1), after having fallen recently from $6B on weak early demand

US prevalence of CHF is approximately 5.1M persons, of whom an estimated 9.7% or roughly 500,000 fall within the limits of Entresto’s labelled indication (NYHA Class II-IV & LVEF ≤ 40%, Exhibit 2). The US list price of Entresto is $375 / month; assuming an average 15% discount, net pricing is likely to be on the order of $320 / month. Thus if all 500,000 persons meeting Entresto’s labelled indication were prescribed and fully compliant, US net sales expectations would be on the order of $1.9B annually[9]. The US prescription market, across all classes, is roughly 40% of global prescription demand; assuming this proportional relationship were to hold for Entresto this implies global demand of $4.8B – in line with both guidance and consensus

The above figures make clear that guidance, and consensus, reflect a belief that Entresto becomes the standard of care for NYHA II-IV & LVEF≤40% patients. Because PARADIGM-HF, Entresto’s pivotal outcomes study, falls short of establishing Entresto as the standard, and because no further studies that might position Entresto as the standard are underway, we conclude that Entresto is unlikely to be accepted as the standard of care, putting both guidance and consensus expectations out of reach

We believe Entresto demand is more likely to reflect the number of NYHA II-IV & LVEF ≤40% patients who fail ACE-inhibitors – i.e. we believe Entresto will be accepted as second-line, rather than as first-line therapy. Working from the enalapril cohort mortality[10] and heart-failure hospitalization[11] rates in PARADIGM-HF, we estimate roughly 40% odds of a patient in the enalapril cohort being hospitalized for heart failure if the trial were extended indefinitely. If we adopt the heart-failure associated hospitalization rate as a reasonable proxy for the rate at which NYHA II-IV & LVEF ≤40% patients fail ACE-inhibitors, and assume that all hospitalized ACE-inhibitor failures are converted to Entresto, this implies that Entresto would ultimately be used in roughly 40% of patients meeting the NYHA II-IV & LVEF ≤40% criteria

If we assume no change in price, this implies peak US sales of roughly $760M, and global sales on the order of $1.9B. It’s reasonable to assume US pricing could work its way higher if Entresto is niched to ACE-inhibitor failures; however ex-US pricing will have been set to reflect NVS’ aim of first-line therapy, and will be difficult and perhaps even impossible to increase in the likely event Entresto is niched to second-line status. A 50% net price gain in the US would raise the second-line status US estimate to $1.1B; with no pricing gains on ex-US sales the global expectation would rise to only $2.2B – $2.3B – less than half of current consensus

The myth of the six-month Part-D waiting period

On a number of occasions, we’ve heard Entresto’s slow uptake being attributed to a six-month waiting period that affects newly approved drugs before they are, or even can be, added to Medicare Part-D formularies

This seems to be a misinterpretation of what we believe is the applicable rule, specifically Chapter 6, Section 30.1.5 – Formulary Management, of the Medicare Prescription Drug Benefit Manual[12], which reads:

The P&T committee will make a reasonable effort to review a new FDA approved drug product (or new FDA approved indication) within 90 days and will make a decision on each new FDA approved drug product (or new FDA approved indication) within 180 days of its release onto the market, or a clinical justification will be provided if this timeframe is not met

Our reading of the rule, and we believe standard practice, is that CMS[13] expects new drugs to be decided on within 90 days of approval, and that new drugs must be decided on within 180 days of approval. To our knowledge there is no requirement to withhold decisions and/or coverage for 180 days following approval

Additional evidence that Entresto’s trajectory is unaffected by any presumed Part D waiting period can be found in Entresto’s share of prescriptions by payor. In 4Q15 and in January of 2016, Part D as a percentage of total Entresto prescriptions tracks closely with Part-D’s share of other drugs commonly used in CHF (Exhibit 3). If a Part D waiting period applied to new drugs, Medicare’s share of Entresto prescriptions would plainly be much smaller



  1. Angiotensin-II receptor blocker
  2. NYHA = New York Heart Association
  3. BID = twice daily
  4. Angiotensin converting enzyme
  5. Milton Packer responding to Vinay Prasad on CardioExchange, in a discussion thread now titled: “Perspectives on PARADIGM-HF”: “As to the idea that we should have designed the trial as a comparison of valsartan in one arm and valsartan plus a neprilysin inhibitor in the other arm, most patients with heart failure are not taking an ARB, and those receiving valsartan are generally taking a dose less than 320 mg daily. Such a trial would apply to fewer than 10% of patients with chronic heart failure and therefore would have little practical value.”
  6. Dr. Packer in the same thread: “Dr. Prasad proposes that the dose of enalapril was too low, and we should have used 40mg daily of enalapril as a comparator. However, when 40mg of enalapril daily has been used in a clinical trial (CONSENSUS), these extremely high doses were poorly tolerated …”
  7. We gathered enalapril prescription data by strength, including detail on the average number of units (pills) per prescription. Two factors affect the average number of pills per prescription: 1) the number of days the prescription is written for (either 30 or 90); and 2) the number of pills the patient is to take each day (either once (QD) or twice (BID) daily). The percentage of prescriptions written for 30 or 90 days has changed over time as plan sponsors move into or out of plan designs that favor 90 day prescriptions for chronic meds. To control for this, we used the two most commonly prescribed statins (atorvastatin and simvastatin) as a comparator – because statins are written by roughly the same physicians for roughly the same patients, and are only dosed once daily, the change in statin pills per prescription is wholly explained by the percentage of prescriptions filled with 30 or 90 days’ supply. The results imply that roughly 38% of enalapril 20mg prescriptions (about 1.4 million annually) are written as BID
  8. Dr. Wilson Colucci
  9. 500,000 patients * $320/month * 12 months = $1.9B
  10. 19.8% over 1,260 days
  11. 15.6% over 1,260 days
  12. https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/downloads/chapter6.pdf
  13. Centers for Medicare and Medicaid Services


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