Can Biogen Dethrone Baxter in Hemophilia?

Drugmakers like Biogen (NASDAQ: BIIB  ) are enjoying a new wave of success as they usher next-generation therapies to market that are displacing prior treatments.

Gilead has de-throned injectible drugs as the standard of care with a faster and better working oral drug, Sovaldi. Johnson & Johnson's Xarelto is casting aside warfarin's decades-long dominance as an anticoagulant in postoperative and cardiovascular patients. And in multiple sclerosis, Novartis, Sanofi, and Biogen are grabbing market share away from prior generation infusion therapies with new, oral drugs.

Biogen thinks it can be equally disruptive in treating hemophilia patients. Those patients have been treated with recombinant drug therapy for years that require two to three infusions weekly. By developing a longer-lasting alternative, Biogen hopes it can capture market share away from industry leader Baxter (NYSE: BAX  ) , which commands more than 35% of the market.

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Improving treatment
Of course, Baxter isn't about to just hand over its market share leading position in the hemophilia market. It's worked too hard to build that product line into a multi-billion dollar franchise led by its top selling Advate.

But Biogen's most recently approved drug, Alprolix, and a likely approval later this year for Eloctate, could be one of the most significant advances in hemophilia treatment in years. That's because these drugs work longer, and are easier to adhere to, than prior generation therapies like Advate.

For example, Alprolix is approved as a treatment for hemophilia B. Because the drug works longer than existing therapies, it's more convenient to use, and offers fewer chances for patients to forget taking their medication as prescribed. Similarly, Biogen has formulated Eloctate, a treatment for hemophilia A that works longer, too.

How big is the opportunity?
Industry analysts project that spending on hemophilia drugs will grow from $8.5 billion in 2011 to $11.4 billion in 2016. The lion's share of that market is in hemophilia A, the most common version of hemophilia, affecting about 400,000 worldwide.

Currently, Baxter is the market-share leader in hemophilia A treatment thanks to Advate, a recombinant factor VIII replacement drug delivered two to three times a week by infusion. Advate's sales should total nearly $2 billion this year.

Others competing successfully in hemophilia A include Bayer and Pfizer  (NYSE: PFE  ) . Bayer makes about $2 billion a year from Kogenate, and Pfizer's Refacto/Xyntha had $169 million in sales during the fourth quarter.

While Biogen hasn't won FDA approval for its twice-a-week hemophilia A drug, Eloctate, it does expect an FDA decision this year. If approved, Eloctate will offer patients an alternative with a half-life 1.5 times longer than other existing hemophilia A drugs. Additionally, in trials, patients reported that they suffered a median six bleeding episodes in the prior year while on prior generation therapies, and no bleeding episodes while on Eloctate for three-months.

While Biogen awaits the FDA's decision on Eloctate, it will be rolling out Alprolix, its hemophilia B drug that got the FDA greenlight in March.

Hemophilia B is rarer than hemophilia A, affecting just 80,000 globally. But it's still an important market that is expected to grow from $1.2 billion to $1.8 billion by 2016 as more people are diagnosed. Currently, less than a third of those with hemophilia B have been diagnosed and are receiving treatment and, like type-A patients, type-B patients receive infusion two to three times weekly.

Pfizer is the market share leader in hemophilia B treatment thanks to its Benefix, which has been on the market since 1997. Pfizer's Benefix sales are north of $800 million a year, and its sales grew 8% year over year to $213 million in the fourth quarter.

Biogen hopes Alprolix can carve away sales from Pfizer and Baxter, given the drug can be taken once every week or 10 days -- a significant improvement over existing therapies like Baxter's twice-weekly Rixubus, which won FDA approval last June. In hopes of convincing doctors and patients to switch to Alprolix, Biogen has priced the drug in line with competitors' existing cost of roughly $300,000 per year.

Fool-worthy final thoughts
Biogen will have to overcome a handful of challenges. Hemophilia is a new market for Biogen, and Baxter, Bayer, and Pfizer are deeply entrenched with doctors worldwide. Biogen will have to also overcome the challenge of a historically slow rate of therapy switching among hemophilia patients.

Typically, patients starting on one therapy remain on that therapy. That means Biogen will need to convince doctors and patients that Alprolix and Eloctate are truly better. If it can't convince patients to switch, growth will be slower, and driven by newly diagnosed patients instead. Regardless, the opportunity has some analysts expecting that Biogen's hemophilia drugs could eventually generate more than $1 billion a year in sales, giving investors one more reason to consider this exciting biotech.

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