Amgen (NASDAQ:AMGN) recently shared data from its Phase 3 trial of tezepelumab, which it is developing in collaboration with AstraZeneca (NASDAQ:AZN). Tezepelumab was shown to be very effective in reducing "exacerbations and helping lung function and nasal symptoms in patients with severe, uncontrolled asthma and comorbid nasal polyps", according to a press release by Amgen.
But could tezepelumab become a blockbuster drug?
A potent treatment option
The Mayo Clinic describes asthma as "a condition in which your airways narrow and swell and may produce extra mucus." The condition often makes breathing difficult and may trigger coughing and wheezing.
The severity of asthma ranges from mild and intermittent to severe, persistent cases in which the condition is often not controllable through treatment. If the severity and frequency of a patient's asthma attacks and emergency room visits/hospitalizations have been reduced by a treatment, the asthma is considered to be controlled.
Amgen estimates that around the world, there are 2.5 million patients with severe, uncontrolled asthma. Those asthma cases are believed to account for 50% of all asthma-related costs in the healthcare system. This is due to the fact that many of the 439,000 asthma-related hospitalizations and 1.3 million emergency room visits in the U.S. each year are the result of severe, uncontrolled asthma.
In addition, it's estimated that one in five severe asthma patients develops nasal polyps -- benign growths that form in the sinuses of the nose. These can block nasal passages, further exacerbating breathing problems and reducing the patient's sense of smell.
This is where tezepelumab could provide clinically significant results.
When added to a treatment regimen of medium- or high-dose corticosteroids (the standard of care for asthma), Tezepelumab dramatically reduced the annualized asthma exacerbation rate (AAER) among patients with severe, uncontrolled asthma and nasal polyps. The AAER refers to the average number of times in a year that a patient suffered a severe asthma attack and needed to go to the emergency room or be admitted to the hospital.
In the study, among patients with severe, uncontrolled asthma and nasal polyps, those receiving corticosteroids and a placebo had an average AAER of 2.76. Those in the tezepelumab and corticosteroid arm boasted an average AAER that was 86% lower at just 0.39.
Though not as striking, the improvements among those patients without reported nasal polyps were still solid. The tezepelumab and corticosteroid pairing reduced the AAER to 0.98, 52% lower than the 2.05 AAER among those given corticosteroids and a placebo.
The Food and Drug Administration is targeting a decision on tezepelumab by the first quarter of 2022, and given the drug's efficacy -- and the tremendous unmet medical need it would fill -- I believe regulatory approval is imminent.
A massive and growing market
Market research company Precedence Research anticipates that the global asthma market will grow at a compound annual rate of 5.2% from $20.6 billion in 2020 to $37.3 billion in revenue by 2030.
Since it includes numerous drugs such as GlaxoSmithKline's (NYSE:GSK) Nucala, Sanofi (NASDAQ:SNY) and Regeneron's (NASDAQ:REGN) Dupixent, and AstraZeneca's Fasenra, it's fair to say this is a fragmented market.
I am expecting tezepelumab to seize about 5% of the market share in the years ahead. This would work out to approximately $1.9 billion in annual revenue near the end of the decade, which would be about evenly split between partners Amgen and AstraZeneca.
Considering that biopharmaceutical powerhouse Amgen is forecasting revenues in the range of $25.8 billion to $26.6 billion for 2021, adding on another $1 billion in annual revenue by the end of the decade with tezepelumab would certainly move the needle for the company. And diversifying Amgen's revenue base into a market where it doesn't already have a presence is the cherry on top.
Plenty of other growth catalysts
Despite patient visits being moderately lower in the second quarter of this year compared to pre-pandemic, Amgen posted mid-single-digit percentage year-over-year growth in revenue and adjusted earnings per share.
While dermatologist visits were still 15% below pre-pandemic levels (per Amgen's Q2 2021 earnings call), sales volumes of psoriatic arthritis and plaque psoriasis drug Otezla were actually up 5% year-over-year in the second quarter, though in terms of revenue, they fell by 5%. Once patient visits recover to pre-pandemic levels, there's reason to expect that Otezla will shift back to delivering steady revenue increases once again.
This is especially true since Amgen believes that Otezla will later this year receive FDA approval for use in the mild to moderate psoriasis indication, which is a multibillion-dollar market. And Otezla is due to launch in China soon.
In addition, FDA recently approved the lung cancer drug Lumakras, which should reach peak annual sales of $2.5 billion for Amgen, according to analysts at Cantor Fitzgerald.
And when AbbVie's (NYSE:ABBV) Humira loses patent protection in the U.S. in 2023, Amgen's Amjevita is set to be the first Humira biosimilar to launch domestically. This positions Amgen to siphon off a nice portion of Humira's billions in U.S. sales.
Aside from tezepelumab, it's abundantly clear that Amgen has a number of drugs that should facilitate its revenue growth. And given that this biopharmaceutical is trading at just 12 times forward earnings, investors should consider adding it to their portfolios.