NASH MARKET! , WE SHOULD STAY REALISTIC

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Can we have a realistic approach to the future NASH market?


A MARKET ESTIMATED BETWEEN 20 M$US and 35 M$US?

The potential market for NASH treatment is regularly in the headlines and is estimated, we do not know how, between US $ 20 and $ 35 billion, according to sources.

It is always difficult to estimate the size and dynamics of a new market, however we can try to approach it with a methodical and prudent estimation.

For having spent a lot of time analyzing this potential market I would say that all these figures are possible, but it is necessary above all to set the timing of those market evaluations.

Indeed, many parameters will impact the size of this market but especially its dynamics.

Let's examine together the main parameters that will impact the size of the potential NASH market.

 We will focus on the United States of America but we will see that the European and Asian markets will be largely as strong

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ESTIMATING PREVALENCE WITH A CAUTIOUS APPROACH

To estimate the amount of a specific disease market, one begins by analyzing the prevalence of the targeted disease.

In the US some laboratories announce the prevalence of NASH to 12% of the US adult population. 

My more conservative approach that relies on many publications is rather in the order of 4.7%.

It's a cautious approach.

In this population, not all patients are to be treated; it is currently considered that the patients to be treated are patients with a NAS score greater than or equal to 4 and a grade of fibrosis greater than or equal to 2. However, it is possible that treatment would be extended to patients with a fibrosis grade of 1 but with other comorbidities such as T2 diabetes or a significant obesity.

According to studies, the rate of patients requiring treatment is between 50% and 65% of the global NASH population.

Always to have a conservative approach, my analysis makes me take the figure of 55% of patients to treat.

This means that about 2.6% of the US adult population would require treatment, or about 6.5 million people.


SICK PATIENT DONT MEAN TREATED PATIENT

However, needing to be treated does not mean being diagnosed or having a treatment prescription!

The diagnostic rate of NASH, a silent disease, is very low so far.

Several reasons for this:

•          A lack of knowledge of the disease by general practitioners.

•          A lack of simple diagnostic tools.

Liver biopsy, which remains the only recognized diagnostic tool to date, is complex, risky and therefore rarely prescribed.

All of this is evolving rapidly, imaging screening is progressing, a blood test is in the final testing phase and could be available by 2020, and important information work is being done with physicians to improve knowledge of the disease.

However, do not expect massive screening for the disease in the coming years. The rate of diagnosis and therefore of care, will follow an exponential curve, as was the case for the diagnosis of type 2 diabetes, but will be very low in the first years. 

This rate of diagnosis will of course be different depending on the rate of progression of the disease, or on possible comorbidities.

An obese diabetic patient with NASH with a fibrosis grade of 3 is much more likely to be diagnosed quickly than a patient with a fibrosis grade of 1 without other comorbidities.

Based on a curve close to that found for the diagnosis of T2 diabetes, it can be estimated after calculation that the diagnosis/care rate of the population suffering from NASH and requiring treatment would be approximately in the USA:

  •  Almost zero in 2020
  • 2021            0.20%
  • 2022            0.90%
  • 2023            2.35%
  • 2024            4.35%
  • 2025            6.70%
  • 2026            9.60%

 

This, compared to the total population with NASH (from F0 to F4), gives rates of diagnosis and care ranging from 0.10% to 5.30% over the first 6 years.

This rate should be compared to the current diagnosis and care rates for T2 diabetes, which is estimated over 70% in industrialized countries.

 This would correspond to a US population treated of approximately:


  • 2020        a few 
  • 2021              12,000
  • 2022              59,000
  • 2023              153,000
  • 2024              282,000
  • 2025              435,000
  • 2026              623,000

 The proposed figures are therefore not overly optimistic and result from a cautious approach.


COST OF TREATMENT IS ONE OF THE KEYS

It remains to evaluate the possible cost of treatment. This is not easy and laboratories remain discreet about their pricing strategies.

We can consider that the first 6 years, it will be the most affected patients who will be treated. 

In the absence of a combo on the market, the treatment should consist of a backbone treatment (treating the metabolic deficit and inflammation) associated with anti-fibrotic treatment. 

In the absence of serious competition between the molecules during this initial phase, it can be considered that the backbone treatment could be sold for $ 8,000 / year in the USA while the anti-fibrotic treatment could reach $ 12,000 / year.

Since some of the patients will be treated with only one backbone treatment, the average annual cost per patient should not be considered to exceed $ 18,000 / year.

It should be noted that these figures might seem high but that they remain under figures relayed by some analysts ($ 20,000 and sometimes more than $ 50,000).

Let's say that they are reasonable!  Although, with incoming competition and the arrival of combos, prices decrease can be envisaged in the coming years.



AN US MARKET STARTING SLOWLY BUT GROWING RAPIDLY

On the basis of these elements we can reasonably estimate the NASH market in the US for the first 6 years of marketing:

 2020 ≈ negligible, some tens of millions of euros approximately

2021 ≈ US $ 220 millions

2022 ≈ US $ 1,050 millions

2023 ≈ US $ 2,800 millions

2024 ≈ US $ 5,000 millions

2025 ≈ US $ 7,800 millions

2026 ≈ US $ 11,200 millions (11 B$US)

These figures are of course the result of a projective calculation and cannot be regarded as highly reliable, but they give an indication of how the NASH market could be approached in a cautious manner.

The whole of this analysis is therefore rather conservative and far from the figures announced by some laboratories! 

But the market is still huge.


PANDEMIC DISEASE MEANS LARGE WORLDWIDE MARKET

It is important to note that the US is far from being the only NASH market, to be sure, the previous calculations were done country by country, out of over a hundred countries taking into account the prevalence of the known disease, and especially of the estimated rate of diagnosis and care, which for some countries is almost nil.

Drug prices have also been adapted (lower European prices than in the US, particularly low Asian prices).

Some markets have also been postponed for known regulatory reasons (for example, China market postponed for 2 to 3 years).

According to these calculations, the entire world market weighs about three times the US market, because NASH is a pandemic very present in many countries.

The figures of 25 to 35 billion dollars for the worldwide NASH market could therefore be reached between 2025 and 2026.

With the raising of asian market, the market growth will accelerate strongly from 2026 .

 

BIOTECHS VALUATIONS ARE FAR FROM EXPECTATIONS

Is this taken into account in the valuations of Biotechs proposing a drug candidate? 

It is not really the case. There is of course a risk factor to take into account because the success rate remains limited and the possible safety problems can affect the future of a promising molecule. The latest results published in NASH have cooled investors because they reminded everyone of the risk of failure of clinical studies.

However, by 2026 only a few molecules can claim access to the market and their laboratories will benefit from a virgin market that is expanding very fast, which corresponds to several billion US dollars of sales for a single drug.

There are no rules for valuing a biotech company, however a cautious approach shows that a valuation of 2 to 3 times the peak of projected sales is a possible basis for approximate valuation. 

However, because of the strong dynamism of this market after 2026, the remaining duration of the patents protecting the drug should also be taken into account.

This duration can vary greatly from one laboratory to another.

It is also important to integrate the timing of market access into this valuation approach because, if on this basis, the first 3 molecules reaching the market could claim a valuation of 5 B $ US to 10 B $ US without many contestation, the followings will face greater competition and they should be necessarily discounted.

To date , regarding the valuations, we are far from the potential targets, the risk factor is one of the explanations but the current global context is not very favorable either.


HEALTH MARKET MOMENTUM EXPLAIN PARTIALLY THE VALORIZATION GAP!

These past few weeks have seen the health values very affected by the projects of the American Democrats in health. Some see it as a stop to the profits of pharmaceutical companies.

I will not engage in quarrels over the pros and cons of public or private health systems.

Coming from a country that has managed to reconcile the coexistence of public and private I will simply say that the devil is often in the excess.

A totally state-based system, as has been practiced in Great Britain for many years, covers the entire population well, but in itself carries the demotivation of the practitioners and the heaviness of the public structures, which unduly lengthens the deadlines for interventions.

A totally private system will keep a large part of the poor population of a country away from care, which poses a clear social problem for any self-respecting democracy.

A mixed system requires continual adjustment of the variables to respect the relative weight of each system and maintain a fragile equilibrium.

But, should we be afraid of the impact of a strong public health system with regard to the income of pharmaceutical companies?

It is clear that currently the American health care system or the laboratories are free to set the sales prices they want for their medicine is very far from a French system where the selling price depends on the reimbursement price by social security and is therefore negotiated between the two parties.

Public drug prices in the United States are generally much more expensive than those in Europe. However, these prices must be weighted by the discounts granted by the laboratories to the private health insurance networks. Exactly as in France, the laboratories have to discuss with the payers to find a price acceptable for both parties relatively to the service rendered.

A strong US public health service will only add one more player to this negotiation; it will not stop the labs from making money.

Some of the most expensive drugs because in a monopoly, will probably see their costs drop. But in return, the base of patients treated can increase.

Will this impact a currently untouched market like that of NASH treatment?

I'm not sure! In the worst case, the price of drugs in the US would be closer to those in Europe and this reduction must be weighted because the gap for untreated indications is often smaller than for the drugs installed.

The price difference estimated in the projections given above is of the order of 30% between Europe and the USA for a new drug in NASH.

Alignment with European prices would make the US NASH market lost$ 2 billion to $ 3 billion in 2025, a 10% drop in the estimated whole world market!

No reason to panic! To date, Biotechs capitalizations in NASH do not take fully into in account the potential market, so they still have a big margin to reach a fair value in the incoming months.

All will depend on their clinical trial results!

We just have to wait!


G Divry 2019

Notice that I am neither a physician nor a biologist, my point of view is only that of an enlightened amateur, so it must be taken for what it is, a questionable point of view


A free worldwide forecast of NASH Market is available HERE




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