The revenue miss would not be such a problem if the underlying expectations were not so high – mine included. My base case was at least $25 million in net sales based on the strong early launch metrics we have seen in the first two months on the market. But that kind of growth did not materialize in the second quarter. And while the deal with Neuraxpharm does provide TG with the option to buy back the rights to Briumvi in those territories within the next two years if there the company is acquired, it does mean a deal is not imminent and this is likely a contributing factor to today’s decline.
And with a second quarter like this one, the hype (to which I have also succumbed) is gone and TG is back to earth.
With two quarters of launch information, we have a better idea of how it is progressing. And while it missed my expectations, it still looks like the launch is going well.
What did go wrong?
As mentioned in my previous article, my expectation was for Briumvi to generate at least $25 million in net sales in the second quarter and sales ended up at $16 million. To get to $25 million, approximately 800 patients would need to get the first two infusions of Briumvi and this ended up being around 550.
My assumption was that the 200+ patients who were prescribed Briumvi in Q1 but did not get it would receive it in the second quarter and that another 600 would receive the two infusions in the second quarter.
On the earnings call, management commented that it takes approximately six weeks from a prescription to infusion and this means that more than half of patients prescribed Briumvi in the second quarter did not receive a single infusion (assuming demand has increased in the second half of the quarter compared to the first half).
And there were 800+ prescriptions going through TG’s hub in the second quarter and another 10-20% outside the hub, so, the numbers add up and it appears that at least 450 patients have slipped into the third quarter. To be clear, I accounted for some of that in my estimate, but not to this degree, and the sales would still fall short of my expectations as I thought prescriptions could be above 1,000 in the second quarter (including patients coming outside of the hub).
The Q2 numbers were disappointing but this is far from being a failed launch and Briumvi looks well-positioned to grow in the second half of the year.
Another way to assess the launch is market share. As there are over 80,000 new-to-market multiple sclerosis patients every year in the U.S. and at least 50% or more being put on an anti-CD20 antibody, TG’s 800 prescriptions in Q2 translate to 3,200 annualized and 8% of the projected anti-CD20 market share. Including the patients outside of the hub (the company estimates that between 80% and 90% of patients go through its hub) probably gets us to approximately 10%. I would not say this is bad at all considering the early stage of the launch and my long-term requirement/estimate of TG hitting 20% anti-CD20 patient share and 15% dollar market share by 2027.
What to expect going forward
As I already said, predicting how each quarter will look is a hard and ungrateful task. But we have more information to work with now. In the third quarter, TG will have:
- Approximately 450-500 patients from the second quarter coming to receive their first two infusions in the third quarter.
- Since it takes approximately six weeks from prescription to infusion, the company will effectively have the patients that were prescribed Briumvi in the first part of the third quarter. If demand continues to improve sequentially, we should see 500 patients receive the first two infusions.
- We will see the first patient cohort coming back to receive the third infusion. Based on the Q1 numbers, this adds another 200 patients and I do assume there will be some erosion and that not every patient will come back.
This means that 1,150 to 1,200 patients would receive Briumvi in the third quarter, up from approximately 530 in the second quarter, and should translate to net sales in the $32-34 million range. But take this with a grain of salt because my predictions for the second quarter were off quite a bit. The key moving parts are prescription numbers for the third quarter (specifically the first half considering the time it takes from prescription to infusion) and the number of returning patients.
The J-code was effective as of July 1, and coverage has improved to over 80% of commercial and Medicare patients which was the company’s year-end goal and this puts the company in a much better position to grow Briumvi sales going forward.
The Neuraxpharm deal
I said an ex-U.S. deal was a potential drag on the share price in the near term as it would lower the expectations for a buyout. This deal has likely contributed to the negative sentiment for this reason and as this is basically a no-name ex-U.S. partner.
The deal terms look okay – TG gets $140 million upfront and another $12.5 million in the near term and a total consideration of up to $650 million and tiered royalties on net sales going up to 30%.
The better part of the deal is that TG retains the buyout optionality and can buy back the rights from Neuraxpharm if it is acquired in the next two years. So, this part makes this ex-U.S. deal easier to swallow and is perhaps a reason that TG went with Neuraxpharm – who else would be willing to lose an asset within two years of buying the rights?
TG ended the second quarter with $145 million and it raised $46 million through its at-the-market offering in the quarter. With the proceeds from Neuraxpharm, the pro-forma cash balance is $285 million and eliminates the need to raise additional cash anytime soon. Of course, if Briumvi sales do not live up to expectations and quarterly sales do not come close to $50 million a quarter, raising cash becomes an issue again in 2024 or 2025.
Very disappointing headline results for TG but taking the launch dynamics into account, Briumvi sales are heading in the right direction. However, if we do not see a more meaningful inflection point in the third quarter with sales coming in above $30 million along with continued sequential improvements in prescriptions, it will be time to reconsider the positioning and/or move on if growth falls well short of expectations.