Otsuka Holdings Outlook

Otsuka Holdings recently held its IPO on the Tokyo Stock Market priced at $2.4 billion, the largest IPO in Japanese history.  Otsuka was offered at the lower end of its range because there are concerns about future drug products that it will be a successor after Abilify (aripiprazole) is off patent in 2015.  The company is based on two business segments: pharmaceuticals and consumer products similar structure to Pfizer.     

Otsuka has several drugs in their pipelines which include drug candidates for depression, schizophrenia, ADHD, low blood sodium, cancer, tuberculosis, Crohn's disease, dry eyes, and COPD.  These agents range from Phase I to Phase III.  Otsuka does have one other drug on the market that has the potential to alter treatment standard: tolvaptan.

The drug Samsca (tolvaptan) is a FDA approved oral agent for the treatment of hyponatremia (low sodium in the blood).  The main competitor is Vaprisol (conivaptan) marketed by Astellas.  It's not fully clear which is the the superior drug, but theere probably are ongoing clinical trials evaluating them.  Other therapeutic options for low blood sodium are sodium rich fluids, fluid restriction, and treating the cause of the low sodium (this is usually not clear).  These are quite ineffective and the need for new options was great; leading to the disocveries of conivaptan and tolvaptan.

The SALT-1 and SALT-2 Phase III trials evaluated tolvaptan in patients with low sodium.  Patients receiving tolvaptan reached normal sodium levels and maintain these levels while on tolvaptan.  Unfortunately, the sodium levels dropped upon discontinuation of therapy.  

Tolvaptan would have been a gem if positive results were obtained in the EVEREST trial.  Tolvaptan showed modest improvement in difficulty of breathing, but no significant improvement in improving morbidity and mortality in patients with heart failure.

TOLVAPTAN SAVINGS POTENTIAL 
Tolvaptan can have a huge impact of saving on hospital budgets. Boscoe et al. estimated that direct cost of treating low sodium to be $1.6-3.6 billion annually.(Boscoe A, Paramore c, Verbalis JG. Cost of illness of hyponatremia in the United States. Cost Effectiveness and Resource Allocation. 2006;4:10 doi: 10.1186/1478-7547-4-10).  Another study showed that low sodium accounts for a 47.1% increase in treatment cost at 1 year (Shea AM, Hammill BG, Curtis LH, Szczech LA, Schulman KA. Medical costs of abnormal serum sodium levels. J Am Soc Nephrol. 2008;19:764-770). 

TOLVAPTAN VS. CONIVAPTAN COSTS 

1.MacDonald E. New drug bulletin: Tolvaptan (Samsca- Otsuka America). University of Utah Hospitals & Clinics. Sept. 2009.

2.

Medication	Dosage forms	Dosage Regimen	AWP cost per day
Conivaptan	20 mg/mL in D5W	20 mg LD, then 20 mg/d IV	$573
Tolvaptan	15 mg or 30 mg blister pack of 10 tab	15 mg/d po – 30 mg/d po	$300

 

• Tolvaptan is less costly than conivaptan and this will be a deciding factor for hospital's to choose tolvaptan over conivaptan unless conivaptan is proven to be far superior
• Tolvaptan is an oral agent.  It is preferred by patients, easy to administer, and  much cheaper to administer.  
• Patients do not have to be in the hospital to take tolvaptan: additional costs savings. 

OUTLOOK

• Tolvaptan should become the standard treatment for low blood sodium
• Otsuke expects profits to grow 18% by March 2011 (http://www.reuters.com/article/idUSTRE6B515920101206)
• IPO offering at the low range means there is more room for Otsuka to grow and investors to cash in.
• The stagnant Japanese economy is not encouraging.
• Otsuka trades at about 15 times future earnings compared to Takeda which trades at about 13 times future earnings.
• 56.7 million shares will be traded outside of Japan
• Although analysts may worry about Otsuka after 2015, I believe that it will be a good position which tolvaptan having a large clinical role and other candidates will reach the market if successful.  The consumer market should increase if the Japanese economy grows and Otsuka begins more heavy marketing of consumer products overseas.