Celgene Corp. (CELG) hit a biotech home run with Otezla, a fast-growing drug that's used to treat psoriatic arthritis and psoriasis. Since winning approval for use in psoriasis in September 2014, Otezla has steadily been chipping away at U.S. market share in the indication, turning into a billion-dollar blockbuster in the process.
Otezla's sales continued climbing throughout 2016, and with launches planned in new international markets soon, sales could head even higher. How high? Read on for insight into how big the international market could be for this important medicine.
IMAGE SOURCE: GETTY IMAGES.
First, some background
U.S. Otezla sales clocked in at an annualized pace of $700 million in Q1 2016, and they clocked out 2016 at a blistering $1.07 billion annualized pace.
Otezla's success in the U.S. has been supported by four pillars: a direct-to-consumer marketing campaign, a growing number of prescribers as a result of greater brand awareness, improving patient compliance, and expanding access to insurance reimbursement as a result of successful price negotiations. Each of those pillars has benefited from real-world efficacy and safety that has allowed Otezla to win away considerable market share in the U.S. from non-oral competitors, including Humira, Enbrel, and Stelara.
Image source: Celgene Corp.
Expanding into new markets
The U.S. market is the biggest in terms of psoriasis drug spending. However, the company still has a big opportunity to grow Otezla's sales elsewhere, and those opportunities are only beginning to be realized now.
Although European Union regulators approved Otezla back in 2015, each EU member country can negotiate prices independently, and those negotiations have crimped Otezla's international sales, until now. Celgene recently started selling Otezla in the United Kingdom and Italy, and it secured Otezla's approval in Japan last month, clearing the way for Otezla sales there soon. The company's also planning regulatory submissions for Otezla's approval in Eastern Europe, Asia, and Latin America.
These launches suggest that a growing proportion of Otezla's future sales will come from abroad. Last quarter, Otezla's international sales of $37 million were up 137% from a year ago, but they still represented just 12% of Otezla's $305 million in global sales.
Admittedly, it's anyone guess how much Otezla will ultimately generate in international sales, but we can look at competitors' international revenue for clues.
Johnson & Johnson's Stelara, for instance, may be the best apples-to-apples comparison to Otezla to consider. Stelara's been on the market for psoriasis since 2009, and it won approval for psoriatic arthritis in September 2013. Stelara's also approved for Crohn's disease in Europe, but that approval didn't happen until last November. Therefore, Stelara's international sales before that additional approval offers the best comparison.
In 2015, $797 million of Stelara's global sales of $2.47 billion came from international markets, and through the first nine months of 2016, $722 million of Stelara's $2.35 billion in global sales were international. More specifically, Stelara's $253 million in third-quarter international sales suggests that a $1 billion annualized sales pace for Otezla might not be out of the question, especially since Stelara's market share in the U.S. has been declining ever since Otezla's approval in 2014.
Looking forward
Otezla is Celgene's fastest-growing drug, and a steady stream of launches in new markets suggests that's likely to remain the case for awhile. Management is guiding for Otezla sales of between $1.5 billion and $1.7 billion worldwide this year, and I imagine a healthy share of that 57% forecast growth will come from sales abroad. Although long-term sales forecasting is fraught with risk, Celgene is conducting studies that could expand Otezla into other indications beyond psoriasis, including ulcerative colitis. If these label expansion studies are successful, then Otezla's potential globally could be much bigger than it is today.
