A Closer Look at Three Companies Focusing on Myelofibrosis Treatments

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Myelofibrosis, a type of chronic leukemia, has been gaining attention among biotech investors recently due to the scarcity of proper treatments. There is currently only one approved treatment on the market, co-developed by Incyte Corporation (NASDAQ: INCY) and Novartis (NYSE: NVS), and an experimental one from Geron Corporation (NASDAQ: GERN). Let’s take a closer look at what myelofibrosis is and the potential future sales of its sparse treatments.

What is Myelofibrosis?

Myelofibrosis is a disorder that causes red blood cells to build up within the bone marrow, scarring the marrow and slowing down the production of healthy blood cells. The disease usually leads to severe anemia, fatigue, and the enlargement of the spleen and liver. Myelofibrosis can occur on its own, as primary myelofibrosis, or as the result of other bone marrow problems, as secondary myelofibrosis.

Until recently, the only known treatment has been stem cell transplantation, which has significant risks. Folic acid, allopurinol, dexamethasone, alpha-interferon and hydroxyurea are frequently used in some degree along with frequent blood transfusions to control the symptoms. Lenalidomide and thalidomide, which are traditionally used to treat multiple myeloma, are also sometimes used, but the combination can cause gout and weaken the patient’s immune system considerably.

Targeting the gene mutations

In November 2011, Jakafi (ruxolitnib) was approved by the FDA for the treatment of myelofibrosis. The drug, developed by Incyte and Novartis, is considered a huge step forward since it targets the JAK1 and JAK2 gene mutations that are thought to be at the root of the disease. Jakafi can also reduce other symptoms associated with the disease and reduce the size of enlarged spleens. However, Jakafi stops activity in all JAK-related genes in the body, even in healthy cells, which decreases levels of platelets and red blood cells and increases the risk of bleeding and infection.

Novartis currently holds the rights to develop and market Jakafi outside the United States through a November 2009 agreement with Incyte. However, Jakafi sales are more important to Incyte than Novartis, since Jakafi is Incyte’s only marketed product.

What Jakafi means for Incyte and Novartis

During the second quarter, Incyte’s revenue rose 17.5% year-on-year to $101.7 million. However, that was short of the consensus estimate of $107 million. Jakafi revenue came in at $54.1 million, topping the consensus of $53.0 million, and representing 82% growth from the prior year quarter. The rest of Incyte’s top line (46.8%) was composed of product royalty revenues.

Novartis, by comparison, fared worse last quarter, with Jakavi (Jakafi’s overseas trade name) sales coming in at $33 million, below expectations. However, Jakavi is only a drop in the pond for Novartis, accounting for 0.2% of its total global revenue.

Jakafi is also being tested in a Phase II trial in combination with Roche Holding’s Xeloda to treat metastatic pancreatic cancer. In addition, Novartis is running two phase III clinical trials, RESPONSE and RELIEF, to gauge its effect on polycythemia vera (PV) patients. PV is a blood disorder in which the bone marrow produces too many blood cells in a similar manner to myelofibrosis. Novartis intends to submit a supplemental new drug application for Jakafi as a PV treatment based on positive results from the RESPONSE trial.

Incyte and Novartis are also evaluating the application of its JAK inhibitors in other oncology treatments, which could expand Jakafi’s market dramatically over the next few years.

A new kid on the block

However, Incyte and Novartis might not be the only players in myelofibrosis treatments for much longer. Geron Corporation, a clinical stage biotech, recently caught Wall Street’s attention after it reported positive data regarding its core experimental drug, imetelstat, a new myelofibrosis treatment.

Imetelstat was originally tested as a treatment for breast and lung cancer. After it failed in those applications in September, Geron decided to focus on using imetelstat as a treatment for blood disorders related to the bone marrow, such as essential thrombocytopenia (caused by bone marrow disease) and myelofibrosis. Imetelstat’s approach is straightforward -- to stop the rapid growth of blood cells within the bone marrow by inhibiting telomerase, an enzyme which provides cells with the capacity for limitless replication.

Shares of Geron surged more than 20% on August 9, after the company stated that it expanded enrollment in a small clinical trial of imetelstat after the Mayo Clinic board approved a change in the study, allowing the admission of new patients with myelofibrosis that had developed into a form of leukemia.

Bouncing back after the fall

Geron was originally focused on stem cell development, but that business eventually faded, and annual revenues have declined 68% over the past five years. Shares plunged from nearly $15 in 2003 to $1.57 at the time of this writing. In January, Geron made a shocking decision to sell all of its stem cell intellectual property rights to Biotime for $10 million to focus on new products.

Geron recently reported a second quarter loss of $0.07 per share, an improvement from the loss of $0.14 it reported in the prior year quarter. Revenue from license and royalties came in at $112,000 -- down from $130,000 a year earlier. Several analysts, such as Piper Jaffray’s Charles Duncan, are bullish on Geron’s prospects, expressing confidence that imetelstat will work as a myelofibrosis treatment. Duncan, who currently has an “Overweight” rating on the stock, raised his price target from $1.50 to $4.00 per share.

The Foolish Bottom Line

Myelofibrosis treatments are still a new frontier for the biotech industry, but huge advances have been made over the past two years.

Incyte and Novartis are definitely at the forefront of this revolution, and Jakafi could become a game-changing blockbuster drug if it is used for more blood disorder and oncology treatments. Investors who believe in the future of the drug should invest in Incyte, since the entirety of the company’s top line comes from Jakafi sales.

Novartis, with its highly diversified portfolio, would be a good choice for more conservative investors, but it will be affected far less by rising Jakavi sales. Last but not least, investors should keep an eye on Geron’s success in using telomerase to treat myelofibrosis, which could become a viable alternative to JAK inhibitor-based treatments.

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