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A host of newly approved drugs for pulmonary arterial hypertension, or PAH, means 2014 will be a battleground for market share in the multibillion-dollar indication.
Among those competing will be Acetlion's (NASDAQOTH: ALIOF ) Opsumit, Bayer's (NASDAQOTH: BAYRY ) Adempas -- both of which won FDA approval in October -- and United Therapeutics (NASDAQ: UTHR ) oral Remodulin, known as Orenitram, which got a surprising nod in December.
The FDA greenlights Actelion and Bayer
Pulmonary arteries have an important job. They carry blood from the heart to the lungs, where it collects oxygen to be delivered throughout the body. Unfortunately, sometimes the arteries between the heart and lungs don't work properly, forcing the heart to work harder, and increasing blood pressure to dangerous levels that can lead to heart failure. While PAH has no cure, drug makers like Actelion have carved out an important niche by treating the condition.
Actelion's billion-dollar drug Tracleer accounts for nearly 90% of Actelion's sales, and the drug loses patent protection in 2015. That meant winning approval for its next-generation PAH drug Opsumit was critical to the company's future.
The arrival of Opsumit insulates Actelion against future lost sales from Tracleer because it offers solid efficacy, including a statistically significant 45% reduction in mortality events and a 50% reduced risk of PAH related deaths and hospitalization. Importantly, unlike Tracleer, Opsumit won't have a black-box warning against liver damage.
The presence of that warning on Tracleer has allowed other competing drugs, like Gilead's (NASDAQ: GILD ) Letairis to grow more quickly. Sales of Letairis grew 30% to $381 million in the first nine months of 2013, while sales of Tracleer grew just 3%.
The approval of Bayer's Adempas was less vital to Bayer's future than Opsumit was to Actelion's. But the win could still prove significant for Bayer, given that Adempas's oral dosing may allow it to capture sales from prior-generation injectible drugs.
Additionally, Adempas offers a novel approach to treating PAH compared to Opsumit. Rather than blocking key endothelin receptors to keep them from overproducing like Tracleer does, Adempas stimulates guanylate cyclase, an enzyme that aids in relaxation. Bayer also got FDA approval for inoperable chronic thromboembolic pulmonary hypertension, or CTEPH, which occurs when clots clog the lungs arteries. It's a rare condition affecting just 5,000 patients in the United States, however approval for this indication further differentiates Adempas from its competitors.
Third time is a charm
Unlike Actelion and Bayer, United Therapeutics had a far more troublesome path to approval for its oral version of its best-selling Remodulin. The FDA denied Orenitram's application twice before issuing a surprising approval in December.
That approval strengthens United's PAH franchise, which already includes Remodulin, Tyvaso, and Adcirca because Orenitram's oral dosing will help United fend off Bayer and Actelion. However, sales of Orenitram may not move the needle significantly for United. Analysts project peak annual sales for Orentiram may amount to $100 million, or less than 10% of United's expected $1.2 billion in 2013 revenue.
Even if the drug does exceed $100 million a year, a good portion of those sales may not come from winning share away from other competitors like Pfizer's (NYSE: PFE ) Revatio, which racked up sales of $225 million in the first nine months of 2013, but instead from doctors moving patients off injectible Remodulin. That suggests Orenitram may prove more of a defensive play for United than a vehicle for substantial top line growth.
Fool-ishly crowded market
Currently, just 30,000 people are being treated for PAH in the U.S. and it's likely some of those patients will shift to low cost generics once Tracleer loses patent protection in 2015. That may mean the PAH market may find it has more treatment options than patients over the coming couple years, which could eventually drive drug prices lower and pressure margin.
Regardless, 2014 is shaping up as an important year for the indication. Investors should keep a close eye on Actelion, Bayer, and United's quarterly filings to see if one is more successful at capturing market share than the other. If the winner ends up being Actelion or United, a long-rumored suitor may finally arrive.
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