The Priority Review Voucher: Past and Predictions Andrew Robertson, Ph.D., JD Global Regulatory Policy

Agenda 1.What is a Priority Review Voucher (PRV)? 2.Nuts and Bolts: Getting and Using a Voucher 3.Admin and Legislative History (and future) 4.Industry Response 5.FDA Thoughts (?) 6.Thoughts on Valuation 7.Looking Forward

What is a Priority Review Voucher (PRV)? PRV program is a regulatory incentive program administered by the FDA to promote drug development for certain unmet medical needs. A voucher is issued by the FDA to the sponsor of a drug for a tropical disease or rare pediatric disease at the time of marketing application approval. Sponsors can redeem a PRV to gain priority review of one New Drug Application (NDA) or Biological License Application (BLA)— regardless of indication. 3

Nuts and Bolts – Getting a PRV  Eligibility for a PRV is determined by the FDA at the time of NDA/BLA approval.  A sponsor must meet the following criteria:  The application must be for one of the 17 currently listed tropical diseases., or for a rare pediatric disease.  The application must be a 505(b)(1) or 351(a) of the PHS Act, and rely on data on developed by sponsor.  The application must qualify for a priority review on its own merits  The drug must contain no active ingredient (including any ester or salt of the active ingredient) that has been approved by the FDA  RPD vouchers must not be approved in any other Reg. Auth.  The application must qualify for a priority review on its own merits  Open questions … (e.g., vaccines & “active ingredient”) 4

Nuts and Bolts – Using a PRV  Redemption: Voucher redemption grants “priority review” for any product submitted under the 505(b)(1) or 351(a) pathway, regardless of indication.  Priority review uses a six-month PDUFA target date from the time of filing, providing a net gain of 4 months.  Note that priority review does not guarantee product approval or 4 month review.  Expiration: The TD-PRV and RPD-PRV do not expire.  Notice: FDA must be given notice 90-days prior to filing  Revocation:  TD-PRV has no marketing commitments for a TD-PRV.  The sponsor receiving the RPD-PRV must market the product within one year, or risk losing the voucher.  Voucher User Fee: set to $2.562 million in FY  TD-PRV due at the time of submission of the NDA/BLA.  RPD-PRV due at the time of notification of intent to use the voucher, and is in addition to applicable user fees under PDUFA. 5

PRV’s Administrative History  2006 – Health Affairs (Ridley et al.) paper introducing PRV  2007 – Tropical disease voucher program (FDAAA)  Provided initial 16 qualifying diseases  2008 – DRAFT Guidance: Tropical Disease Voucher  “Bare bones” Guidance  2012 – Rare pediatric disease program (FDASIA)  Addressed several issues with TD-PRV program, but only for RPD-Voucher  2014 – Legislation  Filoviruses (including Ebola)  Fixed administrative issues with TD-voucher; simplified process for adding diseases  2014 – DRAFT Guidance: RPD Voucher  Defines “rare pediatric disease”;  2015 – Fed. Reg notice  Added Neurocysticercosis and Chagas  Clarified process for petitioning FDA for additional diseases 6

PRV’s Administrative Future (?)  Mar. 2014, Advancing Hope Act int. to House (H.R. 1537)H.R  Representative G.K. Butterfield (D-NC)  Makes RPD Voucher Permanent  Adds any form of sickle cell disease” and “any pediatric cancers”  Excludes drugs “approved for commercial marketing for any tropical disease indication by a government authority outside of the United States for more than 24 months before the application is submitted”  July 28, 2015, Advancing Hope Act int. to Senate (S. 1878)S  Scrapped the amendments to the tropical disease priority review voucher program.  Proposes to make RPD Voucher program permanent  Designates pediatric cancers and sickle cell anemia as rare pediatric diseases. 7

PRV had slow uptake as an incentive  Only 1 PRV issued in 2012 (for previously available drug)  Little evidence of new programs being developed Industry Response: pre-2012 Why? –No examples of voucher sale –Unclear FDA support for voucher program –Usage rules for the voucher undermined its value In short: PRV is a way to increase return for development of NTD drugs, but huge uncertainty of its value. Company surveys of value varied dramatically –Between $0 and $450 million However: Voucher was initiating/prioritizing some NTD programs

Present Status – A little more certainty:  7 vouchers have been issued  4 vouchers have been sold  2 vouchers have been used YearPRV TypeDiseaseDrugCompanyStatus 2009NTDMalaria Coartem (artemether/lumefantrine) NovartisUsed by Novartis 2012NTDTuberculosisSirturo (bedaquiline)Janssen (JNJ)Unused 2014RPDMorquio A syndromeVimizim (elosulfase alfa)BioMarin Sold for $67.5 million, used successfully by Sanofi 2014NTDLeishmaniasisImpavido (miltefosine)Knight Sold for $125 million (Gilead currently using) 2015RPDHigh-risk neuroblastomaUnituxin (dinutuximab) United Therapeutics Sold for $345 million 2015RPD Rare bile acid synthesis disorders Cholbam Asklepion Pharmaceuticals Sold for $245 million 2015RPD Hereditary orotic aciduriaXuriden (uridine triacetate) Wellstat Transferred to AZ immediately ~Approximately 2-3 vouchers / year Industry Response: present

FDA’s response “FDA will follow the law, but we’re not happy about it” - Paraphrasing J. Woodcock, BVGH/CDER Meeting, 2011 Via Jon Jenkins (Oct. 2015):  The PRV programs require FDA to provide a service … that would not otherwise be warranted on the merits for the application for which the voucher is redeemed.  This approach is not consistent with FDA’s usual approach to determine priorities for its public health work based on the merits of the application under review.  In effect, these programs allow sponsors to “purchase” a priority review at the expense of other important public health work in FDA’s portfolio.  FDA’s concerns about the PRV program have remained consistent since they were first proposed. Our concerns have been amplified now that more vouchers have been issued, as required by law, and are beginning to be redeemed.  The PRV additional user fee is designed to account for the extra work required by FDA to conduct a priority voucher review, however, in reality the additional fees do not translate to additional staffing to support the division that must conduct the priority voucher review. -- Jon Jenkins, RPM Report, Oct. 15,

How much is the PRV really worth?  Scenario #1: +4m peak sales  Additional time on market for existing / next-gen drug: 4 months  In most estimates, approx. worth $30- 40M total (~$10 M / month) Prevision Policy, BioMarin Priority Voucher Sale To Regeneron Demonstrates A Model For Future Market, July 31, 2014  Scenario #2: Advantage is in “leap-frog” scenarios 1.new drug class; 2.competitive landscape with multiple players; and 3.the sponsors are relatively close in terms of time-to-file with FDA and coming to market. 1 E.g. – Amgen / Sanofi / Pfizer race for PCSK9-class cholesterol lowering drugs was worth $125 million to Sanofi.`

Scenario #1: Extra 4 months peak sales Look at historical evidence 1.Standard Approvals from 2007 – Top 100 best selling drugs in U.S. in revenue ( 3.Calculate additional 4 months revenue at peak sales in inflation adjusted dollars 12 * Work is ongoing to look back through 2001

Scenario #1: Extra 4 months peak sales Observations  Data suggests that only 2 products / year could would value the voucher at > $150,000,000  However, max value of voucher could be significantly more – closer to $1 Billion 13 * Work is ongoing to look back through 2001 YearMax. Ben.>$350M>$250M>$150M 2010$360,000, $297,589, $142,992, $563,030, $923,665, TOTAL5910

Scenario #2: “Leap Frog” situations 14 Advantage is highly context- dependent Average first-mover gain is 6% of market share Late entrants still win in >50% of drug classes after 10 years Fast-followers (entering in same year) are even closer (< 2%) What is the first-mover advantage? How big does the market need to be to justify the $245 Million / $125 Million price?

Should we expand the program? Making RPD Voucher Program Permanent? Other disease areas? 15

Is it working?  Voucher issuance suggest “yes … its starting to”  Voucher sales suggest “yes” But important questions still remain…  Are the voucher sale prices a trend, or outliers?  Is there a saturation point? What is the consequence of increasing the eligibility for a PRV?  Where is the PRV most valuable? (e.g., “leapfrog” scenarios)  How much is it costing the FDA?  Will the FDA continue to support the program? Finally … Causation ≠ Correlation – how many programs are initiated/continued due to the PRV? Important questions …

Questions? 17 Andrew Robertson Director, Global Regulatory Policy Merck & Co.