Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
After three months of hemming and hawing, U.K. regulators are now embracing Sanofi's (NYSE: SNY ) multiple sclerosis drug Aubagio. The drug is already approved in the EU. However, the U.K.'s National Institute for Health and Care Excellence, also known as NICE, balked at paying the drug last September.
The agency's about-face this month suggests that Novartis' (NYSE: NVS ) competing MS drug Gilenya may see some risk to its overseas sales this year, particularly given Biogen's (NASDAQ: BIIB ) Tecfidera is likely to roll out in Europe this year, too.
Battling for next-generation market share
Regulators' change of heart was likely driven more by Sanofi price cuts than by new evidence supporting its use over competing prior generation therapies from Biogen, including Avonex and Tysabri, and Teva, which markets Copaxone, a drug slated to lose patent protection this year.
Despite those prior-generation drugs' price advantage over Aubagio, Gilenya, and Tecfidera, doctors and patients are embracing the friendlier dosing regimen of these new oral alternatives.
All three of the new drugs proved successful at reducing MS relapses during trials. Aubagio reduced MS relapses by 30% compared with placebo during phase 3 studies. Gilenya, which is also approved to lower the occurrence of relapses, showed a 52% reduction at one year versus Biogen's $4 billion-a-year Avonex. And Tecfidera showed a roughly 50% reduction in relapses compared with placebo.
However, Aubagio's sales have been more timid than Gilenya's since their respective launches. Aubagio's third-quarter sales totaled 44 million euros, solidly higher than the prior quarter, but well behind Gilenya's $518 million in third-quarter sales. Novartis sales for Gilenya increased 44% year over year in the U.S. and 90% in the rest of the world, thanks to new launches during the quarter.
That growth has come as sales of Biogen's legacy blockbusters Avonex and Tysabri has stalled. Avonex sales slipped 4% year over year to $733 million, and Tysabri sales were flat at $403 million, last quarter.
Fool-worthy final thoughts
However, while Aubagio is likely to win some sales otherwise destined for Gilenya this year, it's Tecfidera that may prove the bigger threat.
Tecfidera had a blockbuster-style launch last summer, raking in $192 million in Q2 sales and another $286 million in sales in the third quarter -- far ahead of expectations.
Tecfidera's jump out of the gate suggests that Biogen's franchise will remain tough for Novartis and Sanofi to crack. However, both Gilenya and Aubagio will likely have a bit more time to build up a lead in overseas markets, given Biogen's previous warnings for a slower launch in the EU than it enjoyed in the United States.
Of course, that delay is just a temporary benefit for Sanofi and Novartis. Longer term, the two will likely need to compete on price if they want to keep Biogen at bay. Regardless, investors will get more insight into whether Aubagio's momentum continued in the fourth quarter when results are reported on Feb. 6. Investors should also pay attention to Novartis and Biogen's results when they're reported on Jan. 29 to see if Gilenya and Tecfidera continued to gain ground, respectively.
1 more company you need to know about this year
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.