A Winner and 2 Losers in the Battle Over Multiple Sclerosis Treatments

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There are several major players engaged in multiple sclerosis (MS) treatments. Orally administered treatments have been rapidly replacing older, interferon-based injections, and all eyes were on Biogen Idec’s (NASDAQ: BIIB) newest oral MS treatment, Tecfidera, which was launched in April. At the time, Biogen hadn’t reported its first quarter of Tecfidera sales yet, and investors were still waiting to see if Tecfidera would be the industry changing drug that Wall Street expected it to be.

On July 25, Biogen didn’t disappoint, crushing even the loftiest sales projections from analysts. What does Tecfidera’s game-changing arrival mean for older MS treatments, and which companies stand to lose the most from Biogen’s gain?

Biogen’s big beat
Prior to Biogen’s second-quarter earnings, analysts at JPMorgan projected $65 million in Tecfidera sales. However, an unofficial “whisper” estimate called for sales exceeding $100 million, and many investors expected a big plunge if that figure was not met.

Biogen blew past those forecasts, delivering $192 million in sales, with $110 million from patient demand and $82 million from inventory stocking. Tecfidera sales accounted for 11% of Biogen’s top line, which rose 21% year-on-year during the quarter to $1.72 billion. Biogen’s adjusted second-quarter profit rose 26% to $2.30 per share.

Sales of Biogen’s two other major drugs, Tysabri and Avonex, which are both injected MS treatments, also rose during the second quarter. Sales of Tysabri climbed 38% to $387 million while sales of Avonex rose 3.8% to $774 million. Tysabri is a humanized monoclonal antibody, and Avonex is a traditional interferon-based treatment.

Over the past several years, interferon treatments have fallen out of favor since they can cause flu-like symptoms in patients. To maintain interest in Avonex, Biogen released the Avonex Pen in the United States last year. The Avonex Pen is a single-use auto-injector that offers an easier way to administer the once-a-week Avonex injection.

However, Tecfidera’s feverish rise cooled off slightly recently, with prescriptions falling 6.7% in the week ending on Aug. 2 from the previous week, according to IMS Health. Biogen has not confirmed those numbers, stating that it does not release weekly sales data of prescriptions.

Turmoil at Teva
Tecfidera’s slight pause was enough to help Teva Pharmaceutical (NYSE: TEVA) bounce back slightly, since the company’s best-selling branded product, Copaxone, has come under massive pressure from Biogen’s new treatment. Copaxone is an injected immunomodulator that treats MS by using amino acids as decoys to alter the immune system’s reaction.

Copaxone is one of the most popular alternatives to interferon-based treatments, and accounted for nearly a fifth of Teva’s revenue last year. Last quarter, Copaxone generated $1.1 billion in first quarter sales for Teva, and is currently the leading MS treatment in the United States with 40% market share.

Wall Street, however, doesn’t expect that dominance to last for much long. According to analysts at Bloomberg, Tecfidera could overtake Copaxone as the leading MS treatment in the United States by the second quarter of 2014. To make matters worse, a U.S. court invalidated a 2015 patent for Copaxone on July 26, which means that generic competition could arrive as early as next year. In addition, Copaxone is known to cause lipoatrophy, a condition in which subcutaneous fat is lost too quickly, causing large, permanent depressions in the skin, in 45% of patients. Other MS treatments do not cause lipoatrophy.

For now, Teva will have to brace for its imminent loss of Copaxone as a leading drug, and rely on its diversified portfolio of branded and generic drugs to carry it through this rough patch.

Safer than Novartis’ Gilenya
Although Tecfidera has gained a lot of hype as an orally administered MS treatment, it’s important to remember that Novartis (NYSE: NVS) got there first with Gilenya, a once-a-day MS pill that was approved by the FDA in 2010. After its approval, Gilenya became a blockbuster drug, with $494 million in 2011 sales, $1.2 billion in 2012, and is estimated to hit $2.27 billion by 2016, according to Bloomberg.

However, a dark cloud has been hanging over Gilenya: its safety record. Between 2011 and 2012, 15 patients with cardiovascular conditions died from heart disorders after being treated with Gilenya. Those deaths resulted in a comprehensive safety review in the U.S and Europe, which resulted in added warnings to its label. At the end of July, a patient taking Gilenya for seven months developed PML (progressive multifocal leukoencephalopathy), a rare, viral disease that causes the inflammation of the white matter of the brain, which is usually fatal.

Therefore, Gilenya could take a big hit from Tecfidera’s rising popularity, since the latter doesn’t carry those safety warnings. Analysts at Wells Fargo noted that sales of Gilenya in the United States rose only 5% sequentially last quarter to $255 million, compared to an average of 13% quarter-on-quarter growth that it had reported over the previous six quarters. That’s also a major slowdown from the 28% quarter-on-quarter growth it reported between the fourth quarter of 2012 and the first quarter of 2013.

A Foolish final thought
If sales of Tecfidera continue surging, Teva and Novartis stand to lose the most. Losing the lead in MS treatments won’t completely sink either company, but it will represent a disappointing loss of a lucrative growth market.

Meanwhile, Biogen appears to have a blockbuster drug on its hands. Tecfidera is orally administered, lacks the flu-like symptoms of interferon, the potential of disfigurement from Copaxone, and Gilenya’s safety problems. In other words, it is a huge step forward for MS patients and a major new treatment that biotech investors should pay close attention to.

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