A Changing of the Guard in Treating Multiple Sclerosis

Multiple sclerosis is a troublesome disease with a significant need for treatments that are easy to use, safe, and effective.

Previously, the multibillion-dollar market for MS treatment has centered on injectables like Teva Pharmaceuticals'  (NYSE: TEVA  ) Copaxone, and Biogen's (NASDAQ: BIIB  ) Avonex and Tysabri.

A big market opportunity
In 2012, Copaxone raked in $4 billion in sales for Teva, and Biogen's Tysabri -- a drug that has had safety stumbles -- pulled in $1.6 billion last year and $387 million in the second quarter. Biogen's Avonex also remains a big seller, generating sales of $774 million in the second quarter, down 2% from a year ago.

But those drugs are less than ideal because they're self-injected -- something that causes many patients anxiety. According to studies, between 7% and 22% of the population suffers from blood/injection phobia, and as a result, self-injection treatments carry higher risk of non-compliance, potentially reducing patient outcomes and drug unit sales and volume.

A new class of drugs
Recognizing the need for better treatment options, big pharma has a slate of new oral MS drugs hitting the market.

One of those is Novartis (NYSE: NVS  ) Gilenya, which was approved in 2010. The drug is growing quickly, with sales increasing 64% to $518 million in the third quarter. The growth is helping offset headwinds tied to generic competition for Novartis' blood pressure drug Diovan. The quarterly sales brought Novartis sales of Gilenya to $1.4 billion for the first nine months, up 66% from a year ago. Novartis recently gave doctors another reason to prescribe Gilenya, reporting that patients showed reduced brain volume loss when treatment starts sooner.

Last year, Sanofi's (NYSE: SNY  ) oral drug Aubagio gained FDA approval, and the EU recently followed suit, approving the drug in September. Aubagio carries a price of roughly $21,600 per year, which is likely to create some delays in rolling out through Europe as prices are negotiated. So far, Aubagio generated U.S. sales of 53 million euros in the first six months of this year.

And Biogen is set to report its first full quarter of results following the approval of its new oral MS drug, Tecfidera, earlier this year. Analysts expect Biogen's Tecfidera may capture peak sales of up to $3 billion annually.

That enthusiasm for Tecfidera is partially due to reports of shortages following the drug's launch, prompting some to estimate sales could achieve coveted $1 billion blockbuster status as early as next year. To do that, Biogen will have to overcome push back from insurers tied to the drug's $54,000 a year price tag -- a price slightly lower than Novartis Gilenya, but more than prior generation drugs Avonex and Tysabri.

In the second quarter, Biogen recorded Tecfidera sales of $192 million as wholesalers built up inventory.

Drugs are still coming down the pipeline
In addition to Aubagio, Sanofi has high hopes its MS drug Lemtrada. The company filed for FDA approval in January and gained EU approval in September. Like Aubagio, the drug came to Sanofi by way of the company's $20 billion acquisition of Genzyme in 2011.

Teva hopes its Copaxone successor, laquinimod, may help it preserve some market share when Copaxone loses patent protection next year. The drug has faced hurdles as it has made its way through trials, but recent phase 3 data shows promise in reducing inflammation and slowing disease progression.

The data showed the drug lowered disability progression by 26.7% in relapsing MS patients and 38.9% in relapse-free patients versus placebo. Teva hopes the drug eventually brings along some good news given that pressure from the Copaxone patent expiration has forced a major restructuring aimed at saving $2 billion annually by 2017.

Fool's final take
The market for MS treatments presents a lot of opportunity for these next-generation treatments. Novartis' Gilenya has had the greatest success so far, but you should watch Biogen's upcoming earnings report closely since Tecfidera may eventually surpass Gilenya. While Tecfidera is arguably the most intriguing over the coming year, you should also keep an eye on Sanofi's Aubagio and Lemtrada to see if they can establish market share. And, Teva remains a wild card with its laquinimod. Overall, the market is likely to see a significant sales shift in the coming year to oral drugs and away from injectables. But who wins the majority of that business remains in question.

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