When Nestlé SA’s peanut allergy medicine first hit the market in 2020, Robert Wood, the director of pediatric allergy at Johns Hopkins Hospital in Baltimore, started preparing to offer it to the children he treats. But Covid-19 soon derailed in-person treatment, so over the next year and a half Wood and his colleagues told some 1,000 patients about the new drug instead, suggesting they consider it when the pandemic abated.
Their responses came as a shock. Only six people were interested in a medicine that had been billed as a game changer for life-threatening allergies—the first of its kind to be cleared by US authorities. Three years later, Wood has yet to prescribe the drug, Palforzia, and he isn’t alone. Doctors and patients from California to Germany appear to be shunning the medicine in favor of the tried-and-true prescription for sufferers: simply avoiding peanuts and carrying an adrenaline injection for emergencies.
Nestlé’s chief executive officer, Mark Schneider, admitted as much in November, conceding that the drug’s uptake had been slow. Schneider in 2020 bought out Palforzia’s developer for $2.6 billion, paying a staggering 174% premium as he sought to take “the science business to the next level,” snapping up vitamin makers such as Puritan’s Pride and Solgar as well. The company is looking for a buyer, and the Swiss food giant says it will have to recognize a significant impairment to the deal’s original value—likely presaging a big writedown at a time when its core grocery business faces pressure from inflation.
Maybe the company known for Nespresso capsules and Kit Kat chocolate wafers was never the right owner for a complex-to-administer niche medicine, but Schneider is on the hunt to find new avenues of growth in keeping with his strategic tilt toward health and wellness. The CEO “is looking to make acquisitions in new areas, and that inherently carries risks,” says Martin Deboo, an analyst at Jefferies. “Palforzia is a signal of that.”
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Nestlé reiterated its commitment to nutritional health in an email and said Palforzia is safe and effective and solves the problem of variable potency that can hobble efficacy or trigger an allergic reaction with other less stringent treatments.
Peanut allergy is a widespread condition whose successful treatment has eluded Big Pharma for years. In the US, 6.1 million people are affected, according to the nonprofit group Food Allergy Research and Education. Overall about 2% of the population in Western nations suffers from it. Nestlé thought it had found the answer when it agreed to buy out Palforzia owner Aimmune Therapeutics, which had developed the first form of desensitization to peanuts to win US regulatory approval.
The product is essentially peanut protein that’s been packed in a pill, standardized and categorized as a medicine after meeting the Food and Drug Administration’s exacting clinical-trial requirements on safety and efficacy. By exposing children to tiny but gradually increasing amounts of the ingredient, Palforzia slowly raises their sensitivity threshold. But the process requires commitment by parents and kids to a demanding regime that lasts more than a year.
The first doses get administered in an allergist’s office, during an appointment that can take as long as four hours and includes monitoring for any immune reaction. Then, over a period of about six months, the amount is slowly increased, requiring a visit to the doctor every two weeks and daily doses at home in between. After that, there’s a maintenance period.
Palforzia’s website says the medicine must always be taken at the same time, preferably with a meal. Kids shouldn’t take an extra dose if they miss a day. The powder in the capsule must be mixed with food that can’t be too hot or too liquid, and children shouldn’t exercise for three hours after ingestion. The product must be stored in the refrigerator.
Priscilla Hernandez, who lives in California, considered Palforzia for her 10-year-old son, Zacky, who has been allergic since he was a baby. She ended up choosing to continue avoiding peanuts instead, in part because her son suffers from other food allergies as well. “At least I know how to control this situation,” she says. “We avoid, we eat at home, we do all these practices that we’ve already learned.”
Palforzia is not without risk. During the clinical trials, about 9% of children suffered potentially dangerous immune reactions when their doses were being increased.
Germany’s Institute for Quality and Efficiency in Health Care concluded that Palforzia doesn’t offer any advantage over peanut avoidance. Daniela Preukschat, head of the agency’s chronic diseases division, said kids on the drug still had to carry adrenaline pens, meaning they “continue to be restricted in terms of their diet and lifestyle.” They also end up using the injection pens more often than children who simply avoided peanuts, she said.
Despite its humble contents, the drug is expensive. The UK panel that assesses medicines’ cost-effectiveness estimates the price tag for the National Health Service is about £5,162 ($6,220) per patient in England. Paul Turner, an allergy doctor at Imperial College London, advises patients to start on the therapy and switch to peanut fragments as soon as they can, because it’s “a better use of the limited financial resources we have in the health-care system.” Nestlé says that could put patients at risk.
As for Wood at Johns Hopkins, he says the allergy center would’ve lost money administering Palforzia—something it was willing to do if there had been enough interest among patients. When asked whether some patients might’ve gone elsewhere for Palforzia, Wood says probably not. A few joined a clinical trial for another allergy treatment, Roche Holding AG’s Xolair, though most of them are “still in our clinic and just said in the end it wasn’t worth it.”
Nestlé’s Schneider has been pragmatic in culling businesses that don’t fit his health, nutrition and wellness strategy in the wake of a 2017 attack by activist investor Dan Loeb. He’s sold off the company’s dermatology unit as well as stakes in ice cream, and he’s cut Nestlé’s longtime investment in L’Oréal SA.
The moves have left him with a pile of cash to invest. Schneider came to Nestlé in 2016 with a health-care pedigree, having previously led the German medical conglomerate Fresenius SE. So his admission about Palforzia’s woes at a strategy seminar in Barcelona late last year prompted a grilling from investors over his other health investments.
Pascal Boll, an analyst at Stifel, says this was a one-off for Schneider, who’s done well steering Nestlé overall. “Mark Schneider continues to enjoy investors’ trust,” he says. “This mistake has been forgiven, but it should not be repeated.” —With Marthe Fourcade, Thomas Mulier and Dinesh Nair.
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