Building the brand base
Shield Therapeutics is a UK-based company actively and directly marketing its approved product, Accrufer, in the US. In Europe, it is branded as Ferracru and marketed by partner Norgine. Accrufer is an effective oral product to treat iron deficiency (anaemia). Accrufer is positioned against ineffective, if cheap, generic oral iron products that have significant gastrointestinal side effects. This makes Shield one of the few UK companies to both achieve full FDA approval and to gain the maximum US-market profit from its R&D investments. This note looks at the current position of Accrufer ahead of potential trading updates and FY21 results over the next few months.
Evidence from three pivotal clinical studies shows that Accrufer effectively treats iron deficiency leading to iron deficiency anaemia (IDA). Shield now has new market data suggesting there are 11.8mln IDA patients in the US (previously estimated at 10mln). The majority of iron prescriptions are issued by either general practitioners, otherwise called primary care physicians or interns in the US, or obstetric and gynaecological specialists. With its current 30 person sales force, Shield directly accesses about 4,000 of these across major population centres. The process of launching a new pharmaceutical in the US is bureaucratically complex. Once the FDA gives approval, the many insurers, health care organisations and hospitals have to list it as reimbursable. It also needs to be stocked by wholesalers, listed on formularies and then the doctors still need to be aware of the product and evaluate their patients' responses to understand its efficacy and profile. This normally takes large companies up to a year to organise (without COVID-19 complications). Shield started the process once its March 2021 funding was secured, so has made fast progress.
Shield has indicated to us that its launch campaign, which officially started in July, is gathering momentum, Patients are being given prescriptions which are mostly filled by Shield through its access scheme. Where possible, these are reimbursed, otherwise, there is a small co-pay. This gives doctors the opportunity for clinical experience with Accrufer, and as reimbursement becomes effective, reliance on this scheme is reduced, and revenues will increase. From the trials, restoration of normal iron levels takes up to 12 weeks so the first full responses, together with the favourable, low side effect profile, will be becoming apparent to physicians about now.
We expect an acceleration of the marketing campaign into Q1 2022. This could lead to a clear impact on top-line revenues from mid 2022 onwards.
Iron deficiency is common but particularly associated with women (due to regular periods), people with kidney disorders and people with inflammatory bowel disease who lose blood due to gut lesions. Some cancer patients can also become iron deficient. The cheapest treatment is to use various soluble iron preparations: one estimate is that there are over 3,000 brands worldwide. Generally, these are not very effective as based on ferrous solutions, discussed below, with gastrointestinal side effects.
The alternative to oral iron preparations are various branded injectable or infused ferric iron products. Shield notes that these are much more expensive to buy and administer in the US system and typically require a hospital visit. Their big advantage is that they give a rapid boost to the body's iron stores so are ideal for severely iron-deficient patients. However, clinical guidance recommends that oral iron is given before infused or injectable preparations in mild to moderate iron-deficiency cases.
The US market is the largest and the most receptive market in the world for novel pharmaceutical treatments. Accrufer is positioned as a second-line option after generic oral ferrous salts and before the use of injectable or intravenous ferric products. There are about 11.8 mln prescriptions for oral iron products in the US plus about 2.3m iv / injectable prescriptions. Shield estimates there are 10mln iron deficient patients and about 5mln with iron-deficient anaemia (IDA).
In the US, Shield sells Accrufer directly using its own 30-person sales force. Shield estimates that there are about 65,000 physicians, mostly primary care or obstetrics/gynaecology specialists, who issue about 60% of oral iron products (chart 1). Currently, Shield's focussed sales force targets about 6% or 4,000 of these so there is plenty of scope to expand demand.
Clear market positioning
Chart 1 - Iron prescriptions by speciality
US Market data
Source: Sheild Therapeutics
Accrufer was launched on schedule on 1 July 2021. The current activity is to gain reimbursement with commercial payers and make Accrufer available on their formularies so that it is available for physicians to prescribe. Shield has so far found the interest level amongst physicians to be high. Key aspects for prescribers, from Shield's market research, are that the therapy is effective and well-tolerated. Doctors are also concerned about the cost to the patients.
Shield raised £27.7mln 'net' in March 2021 to fund the US marketing launch. This will cover the launch costs of sales representatives, market research and data analysis, marketing spend and other US operational costs.
An iron clinical case
Iron supplements are essential for patients with anaemia (low red blood cell counts). Iron atoms can be ionised (become electrically charged) to one of two forms: ferrous (double-positive) and ferric (triple positive) ions. Iron ions in the diet have to be transported across the gut lining by a specific transporter protein: ferroportin (Exhibit 1) but this only transports ferric ions.
Red blood cells transport oxygen by using haemoglobin (Hb). Hb requires a ferric ion so patients with iron deficiency make lower amounts of Hb, so become anaemic. Effective iron supplementation, as with ferric maltol, enables normal production of Hb so reversing anaemia and its symptoms.
Exhibit 1 - Schematic of ferric iron delivery in the gut by Accrufer
Source: Sheild Therapeutics
Ferrous ions are soluble, so are used in cheap generic oral preparations. However, the ferrous ions have to oxidise within the gut for ferric ions to be absorbed. This oxidation (rusting) creates gut toxicities.
Ferric preparations are orally poorly bioavailable so, other than Accrufer, need to be given by injection or intravenously. Accrufer / Ferracru, ferric maltol (Figure 1), by delivering ferric ions to the gut transporter, aids absorption.
Ferric maltol is an iron-containing compound taken by mouth at a dose of 30mg twice per day. Maltol, a harmless sugar, surrounds the iron solubilising it.
Once inside the body, the iron is taken up and transported by normal iron metabolism proteins like transferrin and ferratin. This restores normal iron levels and Hb. Excessive iron is also dangerous.
Figure 1 - Structue of ferric maltol
Source: Accrufer pack insert
Two of the phase III trials were conducted in patients with inflammatory bowel disease (ulcerative colitis and Crohn's disease) against placebo. The initial phase was randomised and lasted 12 weeks. This showed a clear and statistically significant gap in the haemoglobin levels between those treated with ferric maltol and those that received placebo. There was then an open-label follow-up period where all patients received ferric maltol. The stability of the iron levels of patients in the active group and the response of patients who had been on placebo were monitored. Graph 1 shows the data. Note that all these patients had failed to respond to oral ferrous iron preparations before entry into the trial. There were no similar studies in other indications specifically targetting women's health.
Graph 1 - Ferric maltol vs placebo Phase 3 data
Source: Sheild Therapeutics
There was a further phase III study against infused ferric iron in patients with chronic kidney disease who were unresponsive to, or unable to tolerate other oral iron therapies. However, Accrufer is not being positioned against infused products, Exhibit 2.
Phase I of the paediatric study, during which the child-appropriate suspension formulation (5ml) was tested for equivalence against the adult capsule (in adults), was completed in H1 2021. The next stage, a phase II, will be a study in paediatric patients due to start in H2 2021; this is not yet registered on the clinical trials database.
Exhibit 2 - Accrufer positioning in US market
Source: Sheild Therapeutics
Expectations for rising sales over 2022
We expect that steadily rising US sales from H1 2022. The company has recruited an initial US team of 30 and may progressively increase this up to 60 people.
The revised market size estimate of 11.8mln prescriptions is somewhat larger than initial market research indicated. This, plus actual physician feedback from the sales team and payor responses to reimbursement requests, are likely to lead to revived peak sales estimates.
Expectations of rapidly rising revenues do depend on the key payors reimbursing the Accrufer at the expected level. As chart 2 shows, there are multiple payors in the US healthcare system, and they all act independently and at their own speeds now that FDA approval is granted.
Chart 2 - Payors in the US market
Source: Shield Therapeutics
Eye catching promotional campaign
In addition to direct sales person detailing to doctors, online and print marketing campaign is being run. Exhibit 3 shows the eye-catching ad. There is now a dedicated website: accrufer.com
Exhibit 3 - Accrufer marketing
Source: Shield Therapeutics
Approvals in the US and Europe
Ferracru was European Medicines Agency-approved in 2016 following a positive regulatory opinion. It is indicated for patients with inflammatory bowel disease suffering from iron deficiency.
In the US, Accrufer was Federal Food and Drug Administration-approved in July 2019 for iron deficiency, a much broader indication than in Europe.
Shield notes that Accrufer potentially has patent protection until 2035.
Partnered markets Europe and China
Shield licensed the European rights for Feraccru to the gastrointestinal specialist Norgine in September 2018. Norgine currently markets the product in Germany, UK and Scandinavia. Reimbursement discussions are underway ahead of planned launches in the larger European markets including France, Italy and Spain.
Progress in Europe to date has been gradual. In our view, this is partly because of price sensitivity in current European markets. It may also be because Norgine has a GI focus. Whilst clinical data shows that Ferracru is effective in treating anaemia due to inflammatory bowel disease. As chart 1 (above) shows, GI specialists only write 2% of oral iron prescriptions. Shield management notes that Norgine is now adapting its sales strategy to take advantage of Ferracru's strengths.
In China, Ferracru is licensed to Beijing Aosaikang Pharmaceutical Co. Ltd (ASK Pharm). A phase III bridging study is required for approval and is expected to complete in 2022. Shield notes that marketing approval and product launch could follow by late 2023. On approval, Shield is due to receive an US$11.4mln milestone payment and tiered royalties of 10% or 15% depending on the level of net sales, and up to US$40mln in milestone payments upon the achievement of specified cumulative sales targets. ASK Pharm will be responsible for all clinical and regulatory costs and activities as well as all manufacturing and distribution costs of goods sold in the territory. China can be a very price-sensitive market and market volumes and returns are hard to forecast.
Valuation considerations - responsive to sales growth
We do not provide an estimated valuation for Shield. We note that the current price is just above the March 33.5p low, itself just above the 2021 placing price. It, therefore, seems possible that as sales momentum starts to build, the shares should perform strongly. The company is well into the launch process and, whilst this can seem interminable to investors, building strong market foundations now will pay off later. Investors may also be concerned about the positioning effectiveness with respect to cheap ferrous products with premium pricing more akin to the rapid-response injectables / infusion products. However, management has assured us that this positioning as a premium oral product (exhibit 2 above) is robust in the market. However, we do not expect significant European growth for some time.
Shield is revising its internal peak revenue projections given that the market appears somewhat larger than originally estimated. We expect an update once the sales trajectory is clearly established.
US sales costs can be high and the need to get product onto formularies and get traction on specialist prescribing, especially when COVID-19 still makes direct product promotion difficult, means that we do not expect significant US revenue generation during H2 FY21. A better perspective will be given by sales development over 2022. Positively, Shield fully controls the sales and reaps all the profits. This means that once Accrufer gains US market traction, it should develop into a strong, consistent and profitable franchise. The gross margin is stated by Shield to be 90%.
The product is licensed to ASK Pharma for China with launch anticipated in 2023. Licensing agreements are being negotiated in other countries. A deal for South Korea was announced in August 2021.
Financials FY H121
We do not make a financial forecast.
Sales, adjusted royalties, in H1 FY21 were £0.5mln. The comparable period in 2020 was distorted by the excellent partnering deal with ASK Pharm with a substantial upfront payment of US$11.4mln.
H1 saw a rise in sales and admin costs to £6.1mln vs £4.8mln due to investment in the US sales force. This will rise further in H2 FY21 as the full impact of the 30-person sales force and advertising support are seen. R&D rose from £0.7mln to £1.6mln due to the paediatric study; this will stay high over H2 FY21 as the trial enters its next, larger phase in paediatric patients.
A 'net' £27.7mln placing in H1FY21 gave June 30, 2021 cash of £22.6mln. This is funding the US launch and will support sales development through 2022.