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.
Warfarin has long been doctor's go-to medicine for guarding against blood clots in post-operative or cardiovascular disease patients. However, an important shift that began in 2010 is having a profound effect on warfarin's dominance -- the approval of a new class of anticoagulants.
The first of these new drugs to win FDA approval was Boehringer's Pradaxa. That drug quickly reached billion-dollar blockbuster sales as doctors embraced the opportunity to distance themselves from warfarin's side effects.
The second wave of this treatment tidal shift came with the 2011 approval of Johnson & Johnson's (NYSE: JNJ ) Xarelto, a Factor Xa drug that works in a completely new way.
As a result, Xarelto is displacing both warfarin and Pradaxa, and in the process is driving significant revenue growth for J&J.
Longing for change
Warfarin was developed 50 years ago, and the drug has some significant drawbacks. Patients require regular monitoring and dose adjustment, and warfarin can interact with a variety of common foods including leafy vegetables. Most importantly, warfarin carries a risk of brain hemorrhage, which although uncommon can prove deadly.
As a result, doctors eagerly anticipated new treatment options such as Xarelto and the more recently FDA-approved Eliquis, which is co-marketed by Bristol-Myers Squibb (NYSE: BMY ) and Pfizer (NYSE: PFE ) .
Both Xarelto and Eliquis are Factor Xa inhibitors. That means they work differently than warfarin, which blocks vitamin K, an important clotting factor. That brings me back to those leafy vegetables. Since they're high in vitamin K, they counteract warfarin.
Instead of blocking vitamin K, Xareleto and Eliquis reduce the production of the Factor Xa enzyme that contributes to thrombin production, a key cog in blood coagulation.
While the new class of drugs has quickly won script market share, it does come with one major drawback, which I'll get to in a bit.
Growing market demand
Both Xarelto and Pradaxa (which works differently than Xarelto and Eliquis) have already become blockbusters. However, it's Xarelto's rapid rise that is particularly intriguing.
Johnson & Johnson included the accompanying chart in its fourth-quarter earnings presentation, which shows that Xarelto is winning scripts from warfarin and Pradaxa.
As a result, sales of Xarelto eclipsed $270 million in the fourth quarter. That was up from $95 million the year before and $246 million in the third quarter. Overall, sales of Xarelto totaled $864 million in 2013, up from just $239 million in 2012.
That momentum carried over into the first quarter, with Xarelto sales growing to $319 million, double the amount from a year ago.
For comparison, while we don't have Pfizer and Bristol's first-quarter results yet, sales of Eliquis totaled just $71 million in the fourth quarter.
Bristol and Pfizer will report Eliquis first-quarter sales on April 29; if the fourth quarter is any indication, Eliquis should put up solid growth. The two companies reported that Eliquis had sales of just $12 million in the second quarter, which means that Eliquis revenue grew nearly 500% between June and the end of December.
However, it isn't just Eliquis that may be holding back Xarelto's sales. That one significant drawback I mentioned earlier is the absence to date of an antidote to Factor Xa inhibitors such as Xarelto and Eliquis.
Although significant bleeding events occur less frequently when taking Factor Xa drugs instead of warfarin, they do happen. And since there isn't an effective antidote that reverses their ability to prevent clots, doctors may be shying away from their use, particularly in frail patients.
That suggests investors should probably pay more attention to Portola (NASDAQ: PTLA ) than to Eliquis when it comes to Xarelto sales.
Portola is working on an antidote for both Xarelto and Eliquis that could significantly expand the use of those drugs, particularly in patients most at risk for bleeding. If successful, Portola's antidote should also counteract a new Factor Xa-inhibiting drug from Daiichi Sankyo that the FDA is considering for approval.
Fool-worthy final thoughts
Portola is developing its own factor Xa inhibitor, which means the company could someday compete directly against Xarelto. How that dynamic will play out remains to be seen, but it should be interesting. Investors interested in learning more about Portola should check out fellow Fool Max Macaluso's recent interview with the company's CEO.
For now, Johnson & Johnson's Xarelto appears to have surpassed Pradaxa and remains well ahead of Pfizer and Bristol's Eliquis. Given that warfarin remains the market share leader, there should be plenty more growth ahead, especially if an antidote can be developed.
Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That’s beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor’s portfolio. To see our free report on these stocks, just click here now.