Cosmo wins FDA green light to challenge Bausch's Xifaxan

Bausch Health has yet to fully recover from its tainted past, and a new threat in the form of a rival to its top-seller Xifaxan could pile more pressure on the drugmaker.

The FDA approved Cosmo Pharmaceuticals’ antibiotic Aemcolo—which belongs to the well-established rifamycin drug class—to treat patients with travelers’ diarrhea caused by noninvasive strains of E. coli. The company’s subsidiary, Aries Pharmaceuticals, is now eyeing a launch in the first quarter of 2019.

Cosmo may not ring a bell for some industry watchers, but Aemcolo could seriously challenge Xifaxan and put a dent in Bausch’s recovery plan, one analyst said.

As Wells Fargo's David Maris sees it, the Friday nod "is the first step toward an eventual significant slowdown and potentially a decline in Xifaxan revenues," he wrote in a Monday note to investors.

Xifaxan is without doubt one of the most important products for Bausch. For the third quarter, its sales grew 11% year-over-year and constituted 15% of the company’s third-quarter sales total of $2.1 billion, according to the company’s quarterly securities filing from earlier in November.

Bausch has previously played down the threat of a competitor entrant, having told Maris’ team that the majority of Xifaxan sales actually came from irritable bowel syndrome, while traveler’s diarrhea only accounted for less than 10% of sales.

"We disagree," wrote Maris.

Aemcolo will likely come at a discount to Xifaxan, which could give rise to off-label use in IBS-D and hurt Xifaxan’s growth, Maris said. Besides, Cosmo is already in phase 2 studies for IBS-D, a program that Maris said has been derisked given the approval on Friday.

To make the situation more perilous for Bausch, Aemcolo could potentially land as a twice-daily regimen in IBS-D, versus Xifaxan’s more frequent three-times-per-day schedule. The Cosmo drug’s approval now in travelers’ diarrhea was based on two phase 3 studies where it was given at twice daily for three days.

Should Aemcolo succeed, it would have a clear convenience advantage over the Bausch drug. And even if it eventually has to go with the same dosing as Xifaxan’s, "it is competition for Xifaxan it has not had before," Maris noted.

As the phase 2 readouts are expected in 2019, Maris is modeling Aemcolo’s launch in IBS-D in 2021 or 2022.

Bausch Health has been trying to repair its image after its notorious relationship with now defunct specialty pharmacy Philidor mired it in scandal, and it’s also counting on newer drugs to help pay off debt incurred during its pre-Philidor M&A frenzy. But plaque psoriasis therapy Duobrii, one of the "Significant Seven" drugs the company has dubbed as key growth drivers, was recently rejected by the FDA. Though the company immediately resubmitted, and a decision is now expected for February 2019, Maris has estimated the drug will never even reach $100 million in sales, as it’s a combination of two generic drugs.

On the flip side, the Canadian company recently picked up an FDA nod for another "Significant Seven" drug, Bryhali, in plaque psoriasis. And it has exclusively signed on to co-promote US WorldMed’s opioid withdrawal drug Lucemyra and Dova Pharmaceuticals’ thrombocytopenia treatment Doptelet in the U.S.
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