A Me-Too Push By Biopharma Is Crowding the Psoriasis Market

A wave of R&D is leading to next-generation psoriasis drugs that work better than ever. That's great news for patients desperate for new treatment options, but it's bad news for biopharma companies that are fighting for market shares in an increasingly diluted market.

The risk associated with the changing landscape in psoriasis treatment was brought front and center by Celgene Corp.'s (CELG) lackluster third-quarter performance for Otezla, a historically fast-growing psoriasis drug that saw its year-over-year growth crimped by new competition. Since new medications are winning market share and more drugs are coming through clinical development, let's take a closer look at this market.

First, a little background

Psoriasis is a chronic inflammatory disease associated with an overactive response by the immune system. It can lead to skin and joint problems and the incidence rate of other conditions and diseases are higher in psoriasis patients than in the general population. For example, the rate of Crohn's disease, ulcerative colitis, depression, and lymphoma are all higher in psoriasis patients than would be otherwise expected.

IMAGE SOURCE: GETTY IMAGES.

In the United States, there are an estimated 7.5 million psoriasis patients, and of these patients, roughly 40% report symptoms of arthritis because of joint inflammation. Most patients -- about 80% -- are diagnosed with mild-to-moderate psoriasis, but 20% are diagnosed with severe cases that affect more than 5% of their body's surface area.

Because psoriasis is a serious, chronic disease requiring ongoing treatment, direct spending on psoriasis treatment exceeds $50 billion per year in the U.S., including more than $5 billion that's spent on medicine.

Tapping into this big market

In the past, psoriasis treatment relied heavily upon topicals and drugs like methotrexate and cyclosporine. However, these approaches were only moderately effective, and they required frequent testing because they suppress the entire immune system and can cause toxicity.

Nowadays, a significant amount of the spending on psoriasis medicine goes to biologics that specifically tamp down cytokines overproduced by the immune system. These biologic drugs are complex and costly, but they fill a big need for additional treatment approaches that are safe and can be taken long term.

Initially, AbbVie's (ABBV 1.05%) Humira, Amgen's (AMGN -0.59%) Enbrel, and Johnson & Johnson's (JNJ 0.22%) Remicade were the most frequently prescribed biologics in psoriasis patients. Prices in the tens of thousands of dollars annually and approvals in multiple autoimmune diseases turned each of these drugs into megablockbuster medicines generating billions of dollars in sales per year.

The commercial success of these early biologics didn't go unnoticed, and biopharma companies eager to win market share have developed increasingly more specific therapies, including J&J's Stelara, an IL-12/23 inhibitor, Celgene's Otezla, a PDE4 inhibitor, and Novartis's (NVS -0.13%) Cosentyx and Eli Lilly's (LLY 0.54%) Taltz, both of which are IL-17 inhibitors.

Stelara was the first of these drugs to win FDA approval, and it quickly became a top seller. Otezla joined the group in 2014 and similarly saw a rapid run-up in revenue. The sales growth for these drugs, though, is slowing following the entrance of Cosentyx and Taltz. As you can see in the following table, Cosentyx and Taltz are enjoying the fastest growth this year. 

Author's chart. YOY = year over year.

Cosentyx and Taltz are winning away share from legacy psoriasis drugs, but they're also crimping the market opportunity for Stelara and Otezla. In the past year, Stelara's growth is due largely to its recent approval in Crohn's disease, not a rapid increase in psoriasis. Meanwhile, Otezla's third-quarter marks a rapid deceleration from the 24% and 49% year-over-year growth reported in Q1 2017 and Q2 2017, respectively. 

Getting even more competitive

It may be even tougher in the coming year to notch significant sales growth because the FDA has approved two more drugs this year, and other drugs are on the way. 

In February, the FDA gave Valeant Pharmaceuticals' (BHC -0.92%) Siliq an OK, and in July, it approved J&J's Tremfya. Valeant hasn't updated investors with its third-quarter performance yet, but in J&J's Q3 earnings conference call, it said Tremfya is already outpacing IL-17 inhibitors in new to brand share.

In addition to those drugs, Sun Pharma's tildrakizumab -- licensed from Merck & Co. -- is pending FDA review, and AbbVie just reported that its risankizumab outperformed Stelara and Humira in phase 3 trials, suggesting it could be on its way to the FDA, too.

Overall, the flurry of activity makes it increasingly difficult for companies to maintain pricing power and market share. Psoriasis is tough to treat, so there's room for multiple drugs to be blockbusters, but the days of mega blockbusters in the indication could be coming to an end. If so, then investors ought to adjust their revenue expectations for drugs targeting this indication lower so they're not disappointed the next time a company like Celgene puts up tepid quarterly sales because of increasing competition.