Blood Cancer Treatments to Know for 2014

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In the field of oncology, blood cancer treatments are evolving at a rapid pace.

Companies like Roche (RHHBY -1.70%), Celgene (CELG), Pharmacyclics (NASDAQ: PCYC), and Johnson & Johnson (JNJ -1.15%) are making sure that patients with both common and rare blood disorders are being treated.

Let's take a closer look at the different types of blood cancer and the treatments that health-care investors should be familiar with in 2014.

Understanding the three types of blood cancer
There are three main kinds of blood cancer -- leukemia, lymphoma, and myeloma.

Leukemia starts in the bone marrow and is characterized by the abnormal proliferation of white blood cells. Instead of fighting off infections, the white blood cells impair the production of red blood cells and platelets in the bone marrow.

Lymphoma interferes with the lymphatic system, which produces immune cells and removes excess fluids from the body. White blood cells known as lymphocytes become abnormal and turn into cancerous lymphoma cells, which accumulate in lymph nodes and tissues and cripple the immune system. Lymphoma is split into two kinds -- Hodgkin and non-Hodgkin. The former is far less common than the latter, which is split into more than 61 types and accounts for 4% of all cancers in the United States.

Myeloma specifically targets plasma cells, the white blood cells which are responsible for producing disease fighting antibodies. When antibodies cannot be properly produced, the immune system is weakened and the patient is highly vulnerable to infections.

There are three specific kinds of these diseases that are frequently mentioned in recent health care headlines:

Source: Industry websites.

As we can see, the current market for these three specific types of blood cancer is dominated by a handful of companies. Three of these drugs -- Rituxan, Revlimid, and Velcade -- are blockbusters.

Looking ahead into 2014, let's take a look at some newer treatments that investors should also be aware of.

Two things to consider about Celgene
Celgene's Revlimid is one of the most important blood cancer drugs on the market. Last quarter, Revlimid generated $1.1 billion in revenue, rising 12% year over year and accounting for 65% of the company's top line.

Since Revlimid is already approved for MM and MCL, it's natural that Celgene would want the drug to be approved for CLL as well. Unfortunately, a trial testing Revlimid as a potential CLL treatment was halted by the FDA in July due to safety concerns. The trial, which tested Revlimid against GSK's chemotherapy drug Leukeran, recorded 34 deaths out of 210 patients in the Revlimid arm compared to 18 deaths in 211 patients in the Leukeran arm.

Although that disappointing development dashed Celgene's hope that Revlimid would become an all-in-one treatment for various blood disorders, a newer multiple myeloma drug, Pomalyst, could help balance out its hematology portfolio.

Sales of Pomalyst, which was approved in February 2013, came in at $89.5 million last quarter, but it is forecast to hit $1.1 billion in peak annual sales and challenge J&J and Takeda's dominance of the MM market.

Will Pharmacyclics live up to market expectations?
Meanwhile, newcomer Pharmacyclics could disrupt Celgene and Takeda's growth in 2014.

Pharmacyclics, which is partnered with Johnson & Johnson, was one of the most closely watched biotech stocks of 2013. Its top drug candidate, Imbruvica, was widely expected to be a blockbuster treatment with peak sales estimates of $6 billion to $9 billion if approved for both CLL and MCL.

In November, half of that dream came true -- Imbruvica was approved for MCL by the FDA. Unfortunately, many investors had expected the drug to be simultaneously approved for CLL, and the stock has slumped more than 20% since the approval. There's no reason to believe that Imbruvica won't be eventually approved for CLL, but until then it's hard for Pharmacyclics to prove that Imbruvica can live up to the market's lofty expectations.

Another point of contention is the price of Imbruvica. With a price tag of $130,000 per patient per year, it is significantly more expensive than Velcade, which costs $45,000 to $70,000 per year, but still less than Revlimid, which costs $160,000.

Therefore, two things could move Pharmacyclics stock the most in 2014 -- the approval of Imbruvica as a CLL treatment and quarterly sales growth for Imbruvica.

Roche's Gazyva could replace Rituxan
Last but not least, investors should watch Roche's Gazyva, a new treatment for previously untreated CLL that was approved by the FDA in November 2013. Gazyva is extremely significant for two reasons:

• Gazyva is a first-line treatment for CLL, unlike Pharmacyclics' Imbruvica, which is being tested as a second-line treatment.

• Gazyva could offset the upcoming patent expiration of Rituxan, Roche's blockbuster first-line treatment for CLL which generated $7.5 billion in 2012 sales. Rituxan lost patent protection in Europe in 2013 and will lose U.S. patent protection in 2018.

Gazyva could generate annual peak sales of $1.5 billion to $2.5 billion. In the United States, Gazyva was part of a collaboration between Roche's subsidiary Genentech and Biogen.

The Foolish bottom line
In closing, 2013 was a huge year for blood cancer treatment approvals, and 2014 will be the year when these newer drugs could shift the market.

While Celgene will remain the best dedicated play on blood cancer treatments, investors should also pay attention to J&J and Pharmacyclics' Imbruvica and Roche's Gazyva. More treatments filling in the blood cancer market will lead to increased competition in the industry, which should encourage innovation and boost the quality of treatments.