Bloomberg News

Almirall CEO Eyes $11.6 Billion COPD Market as Smokers Persist

June 18, 2013

Almirall CEO Eyes $9 Billion Pulmonary Market as Smokers Persist

Tablets pass along the production line during manufacture at the Almirall SA pharmaceutical plant in Barcelona. Photographer: Stefano Buonamici/Bloomberg

Almirall SA (ALM), the best-performing Spanish pharmaceutical stock, forecast demand for the lung-disease treatment Tudorza Pressair will increase in the U.S. as more managed-care plans cover the drug.

U.S. prescriptions for the product will significantly climb as more insurers, including the government-run Medicaid program, pay for the drug, Chief Executive Officer Eduardo Sanchiz said. Chronic obstructive pulmonary disease, often caused by smoking, is the third-leading cause of death in the U.S. and the growing $11.6 billion global market represents “a very important business opportunity,” Sanchiz said.

Tudorza, also known as aclidinium bromide and Eklira, is used to treat smokers’ diseases such as bronchitis and emphysema. The medicine has been struggling to increase its market share since it was introduced in the U.S. in December, according to Sam Fazeli, a London-based analyst at Bloomberg Industries. It was the ninth-most prescribed treatment for chronic obstructive pulmonary disease, or COPD, with almost 6,000 prescriptions in the week ending April 26, he said.

“The level of new prescriptions was a bit stalled for a couple of weeks, but the latest data show growth has resumed,” Sanchiz, 57, said in an interview at the company’s headquarters in Barcelona, Spain. “We expect to make important progress related to managed-care formularies, which would give a big boost to the product in the coming weeks.”

Family Affair

Almirall shares have gained 71 percent in the past year and closed yesterday at 9.60 euros, valuing the company at 1.64 billion euros ($2.2 billion) and outperforming all other Spanish pharmaceutical stocks and the benchmark IBEX 35 index. Almirall said last month first-quarter profit dropped 44 percent to 10.2 million euros as sales fell 10 percent.

“This year’s earnings will be hampered, as it happened last year already, by big marketing and R&D expenses as well as the impact from austerity measures,” said Ignacio Ortiz de Mendivil, a Madrid-based analyst at Banco BPI. “Investors, however, are betting on growth coming from the new drugs from 2014 onwards.”

Almirall’s biggest shareholders -- First Deputy President Antonio Gallardo and President Jorge Gallardo, who are brothers, as well as second Deputy President Daniel Bravo -- control about 71 percent of all shares but “will very likely correct their position” to as little as 68 percent of ownership, Sanchiz said.

The Gallardos’ father founded the company in 1943. “The family wants to keep its important presence in the company,” Sanchiz said.

Rival Medicine

Smoking-related medical conditions such as COPD are rising in emerging markets in tandem with growing tobacco use, with a potential patient population of about 75 million in China alone, according to Bloomberg Industries.

“Even if there’s an impression that people are giving up smoking, the reality is the market is still growing in emerging countries,” he said.

Tudorza, which Almirall licensed to Forest Laboratories Inc. (FRX:US) for the U.S. market, competes with New York-based Pfizer Inc. (PFE:US) and Germany’s Boehringer Ingelheim GmbH’s Spiriva lung drug, which has almost 97 percent market share among the airway muscle relaxers known as LAMA therapies, Fazeli said.

Tudorza is a powder that patients inhale twice a day, while Spiriva is taken once a day.

Tudorza Forecast

With Tudorza’s “share of new and switch patients beginning to plateau in the U.S., it’s possible the inconvenience of twice a day dosing could be impacting patient uptake more negatively than expected,” Barclays Plc analysts including Mark Purcell said in a May 17 report.

Barclays cut estimates on Tudorza’s market share in the U.S. from 5 percent to 3 percent in 2013, and from 8 percent to 4.5 percent in 2014.

Forest Laboratories said Tudorza sales will reach about $90 million in fiscal year 2014 compared with $23 million a year earlier.

“The main obstacle isn’t the product but the ability to introduce them into the formularies,” Sanchiz said, referring to the managed-care system. “We are very convinced that there’s going to be an evolution. We are optimistic.”

The pharmaceutical company, which in September will host its first investors’ day since its initial public offering, will submit for final approval in Europe and the U.S. a combination product using a reinforced version of Tudorza for patients with more severe symptoms, in the fourth quarter of this year. Peak sales for Tudorza and the combo product could reach at least 1 billion euros by 2020, according to information provided by Almirall.

Deal Strategy

Almirall, which is present in 22 countries through 14 affiliates, is also eyeing growth in China and Brazil in the next three to five years, according to Sanchiz. Almirall is exploring opportunities to enter those markets through a partnership with a local company, he said.

The Spanish drugmaker would also consider acquisitions to expand in any of its four divisions: pulmonary disease, irritable bowel syndrome, skin disorders and multiple sclerosis, Sanchiz said. No deal would be big enough to burden the balance sheet with debt, he said. Banco BPI’s Ortiz de Mendivil estimates Almirall could pursue acquisitions in the range of 100 million euros to 200 million euros from 2014 onwards, according to a June note.

Meanwhile, the market in Almirall’s home country is cause for concern, with government cost-cutting measures having a “brutal impact” on the industry, Sanchiz said.

“The pharmaceutical market in Spain is shrinking to reach 2003 levels,” he said. “We’ve lost basically 10 years of development.”

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Patricia Laya in Madrid at playa2@bloomberg.net

To contact the editors responsible for this story: Kristen Hallam at khallam@bloomberg.net; David Risser at drisser@bloomberg.net


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