Launch Of SILIQ Makes Valeant A Great Short Opportunity – Valeant … – Seeking Alpha

Recently, Valeant Pharmaceuticals (VRX) announced that it had launched its psoriasis drug SILIQ (brodalumab). SILIQ is an injection drug that has been developed to treat patients with psoriasis. The injection drug has shown good prospects in terms of efficacy, but I feel that it won't sell as well as other competitors in the same space. I feel that because of the competitive nature in this space, along with troubling side effects Valeant becomes a good short opportunity.

In my opinion, just evaluating the history of SILIQ alone would make one think twice about the prospects of it selling well in the market. That is because the original developer of the drug was Amgen (AMGN) and AstraZeneca (AZN). Both companies had co-developed the drug. The issue was that as soon as Amgen caught notice of a suicide issue in a clinical trial, it walked away from its partner AstraZeneca. It doesn't seem that AstraZeneca was too enthusiastic to hang onto the drug either. Which is why it had outlicensed the drug to Valeant. In my opinion, knowing this it doesn't bode well for the market opportunity of the drug. Amgen and AstraZeneca are highly respected big pharmaceutical companies. I highly doubt they would ditch this drug if they believed it would be a huge money maker.

The biggest problem is that the psoriasis space is highly crowded. Especially, with Johnson & Johnson (JNJ) just receiving approval for its psoriasis treatment TREMFYA just a few weeks ago. Further information on TREMFYA FDA approval can be read in a Seeking Alpha article I wrote titled, "Johnson & Johnson: Approval Of TREMFYA Is Huge Win For Shareholders". The whole basis of that article is that TREMFYA was expected to be priced a lot lower than most competitors. Of course, not lower than Valeant's drug SILIQ. I will give SILIQ a positive on pricing. For me though, the issue with the drug is not about pricing. I mean in my opinion it had to be priced lower, because it is the only drug with a suicide risk as a black box label warning. If I was a prescribing doctor, I would only prescribe SILIQ as a last resort if all other psoriasis options failed. It would not be my first go to product for psoriasis treatment because of the suicide risk. This is the excerpt from the FDA approval of SILIQ:

"Suicidal ideation and behavior, including completed suicides, have occurred in patients treated with Siliq during clinical trials. Siliq users with a history of suicidality or depression had an increased incidence of suicidal ideation and behavior compared to users without this history. A causal association between treatment with Siliq and increased risk of suicidal ideation and behavior has not been established."

"Because of the observed risk of suicidal ideation and behavior, the labeling for Siliq includes a Boxed Warning and the drug is only available through a restricted program under a Risk Evaluation and Mitigation Strategy (REMS) called the Siliq REMS Program"

The good news, and the only good thing that I can see about Valeant's psoriasis drug is that it will be cheaper than all the other drugs. It will carry a price tag of $3,500. TREMFYA will be priced around $9,684. Eli Lilly (LLY) Taltz is in the range of $14,600. Novartis (NVS) Cosentyx is upwards at about $17,600. While the pricing may be seen as a positive for Valeant, the other competitors shouldn't be so easily dismissed. Johnson & Johnson, despite having priced its psoriasis drug at around $9,684, has stated that it will offer tons of pricing discounts. It even went as far as to say that it could offer a copay card so that eligible patients could pay as little as $5 or less per dose.

Psoriasis is a disease where the body overproduces skin. The skin that is overproduced leads to raised lesions that are red in nature. These red raised lesions are known as plaque and can cause both pain and itching. The market opportunity is huge, because psoriasis is expected to reach up to $12.1 billion by the year 2024. Despite, the large market, SILIQ will have trouble producing sales. I'm not saying that Valeant won't be able to sell the drug at all, but with better safety profiles from other psoriasis drugs it is likely that these other competitors will take a bigger piece of the market.

A big risk would be if Valeant started to sell well in the market, despite the competition. Although, that remains to be seen until the drug is fully launched in the market. I'm still of the opinion that it will be hard to sell SILIQ with so many other better psoriasis treatment options. Especially, ones that don't carry suicide risks. Another risk would be that Valeant could end up selling the drug to another pharmaceutical company for upfront cash. In that situation, that could cause the stock to spike one day and hurt short sellers in the process.

The past history of SILIQ makes it a tough sell on the market. The black box label warning of a suicide risk is more than enough for it to deter doctors from prescribing the drug as a first choice therapy option. Psoriasis treatments, like recently approved TREMFYA, provides a better treatment option for patients with less risks. The space in plaque psoriasis is competitive, and I still am inclined to believe that the black box label warning will be a major obstacle for SILIQ going forward. Another psoriasis treatment option would be Otezla from Celgene (CELG). That is because Celgene offers its treatment of plaque psoriasis in pill form. It is not an injectable, cream, or biologic. For all the reasons listed above I feel that Valeant is a great short opportunity.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Launch Of SILIQ Makes Valeant A Great Short Opportunity - Valeant ... - Seeking Alpha