The Hidden Risk In Cell & Gene Therapy Commercialization

By Jason O’Neill, former CEO, Dendreon Pharmaceuticals

Pharmaceutical companies launch new products for two fundamental reasons: new products drive growth and growth drives valuations. But consistent growth has never been harder to come by. The decreasing tenure of companies in the S&P 500 Index is an indication of this. The 33-year average tenure of companies in 1964 declined to 24 years by 2016 and is projected to shrink to just 12 years by 2027. More than ever, companies must understand the levers that accelerate growth and put their shoulders behind them.

New drug launches are the most important event in the life cycle of every brand. They establish a trajectory that’s hard for companies to change. In fact, the majority of drugs that underperform in year one, underperform in subsequent years. The takeaway is that we rarely get a second chance to make a good first impression. Despite this knowledge, new products fail at the stunning rate of between 36% and 66%, depending on the study.

In The Secrets of Successful Drug Launches, I expose the hidden reasons why. Paradigm-changing products like cell and gene therapies face additional challenges that their more traditional counterparts don’t. Of the six root causes of new product launch failure, insufficient relative advantage is by far the most important. Research¹ suggests that more than 50% of the variation in an innovation’s rate of adoption can be explained by this single variable. One way in which relative advantage can be insufficient is when meaningful improvements in one area of performance are offset by declines in another. These are often paradigm changing products and these offsetting drawbacks explain why so few paradigms ultimately change.

Lessons From Dendreon Pharmaceuticals’ Provenge

Dendreon’s Provenge is a good example. Approved by the FDA in April 2010, Provenge was only the second product approved for the treatment of metastatic prostate cancer. Provenge delivered a four-month median overall survival benefit in men with asymptomatic or minimally symptomatic disease. The product was one of the most widely anticipated launches of 2010 with estimated peak year sales in excess of $2 billion. What made Provenge unique is that it was the first autologous cell therapy approved by the FDA.

While there was widespread enthusiasm for Provenge, the product had notable drawbacks. First among them was the product’s administrative burden. Provenge required three infusions over a four- to five-week period before reaching its full effect. For patients with aggressive forms of the disease, this was a delay that could prove costly. As a result, Provenge was reserved by most physicians for more indolent forms of the disease.

Another Provenge drawback was the product’s narrow indication. Provenge was indicated for men with asymptomatic or minimally symptomatic disease. This narrow indication provided a relatively small window of opportunity to identify appropriate patients. Patients often progress quickly from locally advanced disease to metastatic disease. Those with asymptomatic or minimally symptomatic disease are not always followed closely by their physicians, making it difficult for them to identify patients before they become symptomatic.

The third Provenge drawback was that its survival benefit failed to correlate with known prognostic factors. One of these factors is prostate specific antigen levels (PSAs). Patients consequently got no indication that the drug was working. Competing products that also lowered PSA levels offered emotional benefits that Provenge couldn’t deliver.

The final Provenge drawback related to pricing and reimbursement. The drug’s $93,000 price tag was nearly three times the cost of chemotherapy and it had to be paid up front before the drug’s effect was known. Additionally, Provenge was a buy-and-bill product, so physicians had to purchase the treatment and then file for reimbursement. If reimbursement was denied for any reason, it would have serious business consequences. To make matters worse, Provenge was followed to market by two oral therapies that had comparable efficacy and a significantly lower price. These products quickly overtook Provenge, achieving annual sales in excess of $2 billion. Provenge sales plateaued at $325 million in 2012 and Dendreon filed for bankruptcy in 2014.

Lessons From Johnson & Johnson’s Carvykti

Another product whose improvement was offset by a significant drawback was Johnson & Johnson’s Carvykti. Approved by the FDA in February 2022, Carvykti was indicated for the treatment of patients with relapsed/refractory multiple myeloma after four or more lines of therapy. Despite the severe nature of these patients, Carvykti produced a response rate of 98%. Its 18-month progression-free survival rate was 66% and its 18-month overall survival rate was 81%. These results were from a single-armed study of 97 patients and they secured Carvykti an accelerated approval.

Carvykti is another class of autologous cell therapies known as CAR-T therapies. Carvykti generated $137 million during its first three quarters on the market despite significant manufacturing constraints. Based on its initial financial performance, Johnson & Johnson (J&J) projected peak global sales of $5 billion.

Based on Carvykti’s performance in the relapsed/refractory setting, J&J and its partner Legend Biotech launched a second study in multiple myeloma patients with at least one prior line of therapy. The new indication would expand access to about 36,000 U.S. patients. This would roughly triple the drug’s eligible patient pool. Unfortunately for Carvykti, a troubling safety signal soon emerged. An FDA investigation into secondary cancer risk revealed that myelodysplastic syndrome and acute myeloid leukemia events occurred in 10 of the 97 patients who received Carvykti. This suggested that secondary blood cancers developed in more than 10% of users. According to the FDA’s investigation, nine of those 10 patients eventually died from bone marrow problems.

In December 2023, the FDA added a black box warning to Carvykti’s product label to alert doctors and patients to the risk of secondary cancers. While Carvykti is not the first multiple myeloma treatment to be associated with this problem, the magnitude of its increase was unexpected. Gold standards Revlimid and melphalan are associated with an increased risk of secondary cancers but only in about 2%-3% of patients and over a much longer follow up period of 15 years rather than two years. The label change is expected to relegate Carvykti to later lines of treatment where the product’s risk/benefit ratio is more acceptable. This will fundamentally change the product’s trajectory.

Behavior Change Psychology And Its Role In Cell & Gene Therapy Adoption

What makes paradigm changing products more challenging to launch is that prescribers, payers, and patients are averse to losing benefits they already possess. We are all familiar with many of the traditional costs associated with behavior change – things like transaction costs, learning costs, and obsolescence costs. What we are less familiar with are the psychological costs associated with behavior change, and these are far more important determinants of new product and service adoption. The heuristics at play here are the endowment effect and the status quo bias. These are two different sides of the same coin and they lead customers to overvalue benefits they currently possess over ones they can readily acquire. And they do so because losses have a far greater impact on us than similar sized gains, a concept known as loss aversion.

In a series of experiments designed to measure the magnitude of this effect, Nobel Laureate Richard Thaler and colleagues divided people into sellers and buyers. The sellers in one experiment were given a free coffee cup and then asked to set a price for it. The buyers were simply asked to set a bidding price for the same coffee cup. If the study subjects were behaving rationally, the average selling and bidding prices would have been roughly the same. To everyone’s surprise, the average selling price set by the coffee cup owners was $7.12 while the average bidding price set by the buyers was $2.87. The experiment was repeated multiple times with a variety of different products but always with similar results: sellers demanded at least twice as much compensation to give up products they already possessed than they were willing to pay to obtain these products in the first place. Subsequent research revealed that the magnitude of this effect actually intensifies over time, so that up to four times more compensation can be required to convince current users to switch brands.

As the Provenge and Carvykti examples reveal, products that fail to meet the minimum requirements in a given category routinely underperform. In the cell and gene therapy case, physicians expect drugs to be administered and begin taking effect in a matter of hours. They also expect drug and non-drug related administration costs to be similar or better than incumbents. That has not been the case for cell and gene therapies. This leads us to one of the realities of product positioning: namely, that differentiators alone are not sufficient. Points of parity are the minimum requirements to compete in a given category and can be just as important to product adoption as differentiators.

This explains why so few of these products have become standards of care. In essence, cell and gene therapies enter the deliberation process at a disadvantage. When that disadvantage can be offset by superior performance on other dimensions, cell and gene therapies can be competitive. This finding has important implications for the way companies prioritize their assets in development. Cell and gene therapies that are unable to compensate for their inherent deficits will have a more challenging road to adoption. Consequently, companies would be wise to apply an even higher bar in the commercialization of these assets.

Reference

1. Rogers E. 2003. Diffusion of innovations. 5th ed. New York, Free Press, p.221I.

About The Author:

Jason O’Neill is a global pharmaceutical executive with a passion for learning and teaching. He was the former CEO of Dendreon Pharmaceuticals and Iridium Therapeutics. Prior to these roles, he served in general management positions at Sanofi, Genentech, and Mallinckrodt Pharmaceuticals. He also served as the global therapeutic area head for immunology and ophthalmology at Roche, where he oversaw the Phase 3 development and global commercialization of a diverse array of assets. Earlier in his career, O'Neill served as a vice president of U.S. marketing, Asia Pacific marketing and global marketing at some of the same companies mentioned above. He has played a primary role in eight new drug launches and this experience informs the concepts in this book. O'Neill is a graduate of Yale University and the J.L. Kellogg Graduate School of Management.