Although Biogen Inc. (NASDAQ:BIIB) is one of the globe's biggest biotechs -- and it has the balance sheet to prove it -- it could face a big threat soon from an unexpected competitor: Celgene Corp. (NASDAQ:CELG). Celgene is best known for its cancer drugs, but it's in the final innings of a late-stage study evaluating a multiple sclerosis drug that could significantly cut in on Biogen's turf. Will a Celgene success spell doom for Biogen's investors?
First, some background
Biogen is the market share-leading manufacturer of medicine used to treat multiple sclerosis, a common autoimmune disease that can be debilitating when it progresses.
MS is characterized by an immune system's attack on the myelin sheath surrounding nerve fibers. As the sheath gets damaged, nerve signaling can deteriorate, causing muscle weakness, numbness, blurred vision, and other symptoms.
The company's top-selling MS drugs include infusible interferons (Avonex and Plegridy), an oral MS drug (Tecfidera), and a monoclonal antibody (Tysabri). Combined, these drugs generated sales of $8.7 billion in 2016, which works out to about 46% of this $19 billion and growing market.
An emerging challenger?
Biogen is unquestionably the Goliath in this indication. However, about $4 billion of its MS revenue comes from Tecfidera, and that means the company's MS market share could come under fire if a competitor launches an oral alternative that's viewed as more effective or safer.
Currently, the oral MS drug market consists of Tecfidera, Novartis' Gilenya, and Sanofi's Aubagio. Gilenya was the first to win FDA approval. However, Tecfidera racks up the most in sales.
In 2016, Tecfidera's sales were $3.97 billion, Gilenya's were $3.1 billion, and Aubagio's were annualizing out at 1.8 billion euros exiting Q3. Although Tecfidera is the biggest of these three drugs, Gilenya and Aubagio are growing more quickly.
Following reports of a rare and life-threatening brain disease called progressive multifocal leukoencephalopathy, Tecfidera's sales growth has been flattening, while Gilenya's and Aubagio's have been steepening. Tecfidera's sales grew 9% and Gilenya's sales climbed 14% in 2016. Sanofi hasn't reported full-year sales yet, but Aubagio's sales were up 50% year over year in Q3.
Slowing sales of Tecfidera relative to these peers could suggest that its sales are more susceptible to a new competitor. And that's worrisome, given that Celgene's data for ozanimod is on tap.
As a refresher, Celgene acquired ozanimod when it bought Receptos for $7.2 billion after ozanimod put up arguably best-in-class results in phase 2 trials. In September, Celgene released long-term extension study data showing that people participating in the midstage study still enjoyed positive signals of efficacy at week 96. Importantly, Celgene noted that there hadn't been any worrisome developments in terms of ozanimod's safety.
That's important for a couple of reasons. It could mean that ozanimod has a safety advantage over Tecfidera, because of the PML cases. it could also mean that ozanimod offers doctors and patients a better safety profile than Gilenya. Gilenya has the same target as ozanimod, but some Gilenya patients see a drop-off in their heart rate following their initial dose of it, and that's raised some cardiac concerns about it.
A better oral MS drug could significantly reshape the oral MS drug market, and while Biogen isn't the only one that could end up on the losing end of positive data from Celgene, it stands to lose the most, given Tecfidera's revenue run rate.
Obviously, there's no guarantee that ozanimod's phase 3 data will be positive, or that if it is, it's as good as the phase 2 data was. Investors should keep in mind that, historically, up to 40% of phase 3 trials have fallen short of their mark.
Nevertheless, Celgene was confident enough in ozanimod's potential that it ponied up big money to get its hands on it, and if ozanimod's trial is a success, then it could begin challenging Biogen for market share as soon as 2018. Because Celgene's data could be a big binary event for Biogen investors, make sure to pay close attention to Celgene's news releases over the coming months.