CTIC - VONJO Keeps CTI BioPharma A Buy

2023-04-21 07:46:10 ET

Summary

• CTI BioPharma's sole product crushed rival drug Inrebic in fourth-quarter domestic sales.
• However, Wall Street expected too much revenue, leading shares to drop 10% following the Q4 call.
• Favorable placement among health insurers will lead to continued growth in future quarters, starting with Q1.

Initial coverage on small ($675 million market cap) biotech CTI BioPharma Corp. ( CTIC ) concluded that VONJO has clinical advantages over Inrebic, the competing JAK inhibitor from Bristol-Myers Squibb Company ( BMY ), which would lead to an earnings surprise and CTIC breaking $6 per share. The gap between the myelofibrosis ("MF") drugs has been erased, as U.S. Q4 sales of Inrebic were $17 million , or no growth over 2021 and similarly flat compared to Q3. Approved in 2019, Inrebic has already stalled with $69 million for 2022, a mere 3% increase from last year. Meanwhile, VONJO generated $21.1 million in Q4 and $54 million in 2022 sales since being launched in March. Investors could be pleasantly amazed at the level of accessibility for MF patients that VONJO enjoys.

Formularies were explored at the 15 largest health insurance companies in the U.S. overall. The most common plan was examined when possible and are specified in Table 1. If the insurer offered non-Medicare plans in a state Marketplace (Obamacare), the most populous state was chosen (California > Texas > Florida). Humana ( HUM ) doesn't do Exchanges, so their Medicaid plan and that of Blue Cross and Blue Shield of Texas are the only ones in the survey.

How to read Table 1:

Tier # Higher Tiers have higher cost share. Drugs in Tier 4 or higher (in 5+-Tier plans) are non-preferred brands and may also include drugs recently approved by the FDA or specialty drugs and may need special handling.

Sp Specialty drugs are used to treat difficult, long-term conditions and may need to get filled through a specialty pharmacy.

PA Prior authorization is the process of obtaining approval of benefits before certain prescriptions may be filled.

NF A non-formulary drug is not included on a plan's Drug List. Exception processes such as PA or Step Therapy could be available to request coverage for a NF drug.

X Not Covered drugs are specifically excluded from coverage by the terms of the plan. Patients likely won't get any reimbursement will have to pay out-of-pocket for these drugs.

Table 1. 2023 Coverage of Myelofibrosis Products at 15 Largest Health Insurance Companies in the U.S.

Inrebic was one of two Bristol Myers Squibb's New Products that had the broadest coverage at all patient age levels in January. There have been several changes since then. The most important of which were a Medicare formulary pickup by #1 Kaiser Permanente, known for its integration of care and focus on cost-effectiveness. Another was in Texas with #4 UnitedHealth ( UNH ) adding it to their Marketplace drug list.

To conclude, the good news for CTIC longs is that universal Medicare coverage and availability in many state health exchanges by Inrebic is mostly shared by VONJO. The wins in the preceding paragraph practically assure sales improvements in the first two quarters of 2023. Also as expected, while CTI BioPharma can only promote FDA-approved indications, Chief Commercial Officer Jim Fong observed that half of VONJO's usage is off-label , a signal that hematologists and oncologists are getting more comfortable with it, in preference over Inrebic. Furthermore, Q4 net loss narrowed to $13.5 million, and Chief Financial Officer David Kirske now sees "cash flow positive by the end of 2023" as a goal. But before that is Q1, and analysts' revenue forecast is $23.23 million . Just based on the VONJO 9.9% price increase on January 3 and the seasonality of prescribers returning to duty after the holidays, it looks like another earnings beat.

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