Late last month, AstraZeneca's (AZN 2.65%) rare disease drug called Ultomiris received the green light from the European Commission to treat adult patients with the autoimmune condition known as generalized myasthenia gravis (gMG).
This approval raises a couple of key questions for investors:
- How many gMG patients in the European Union (EU) will benefit from this news?
- How much of a lift could it provide to the finances of this pharma stock?
Let's take a closer look at the results from Ultomiris' phase 3 clinical trials for gMG and the market in the EU and see if we can answer these questions.
A game-changing treatment for a progressive condition
According to AstraZeneca, gMG is a rare and chronic progressive autoimmune neuromuscular disease. Initial symptoms of the condition may include a lack of balance, double vision, and slurred speech. If the condition goes unchecked, it can worsen to include symptoms such as choking, severe muscle weakness, major fatigue, and respiratory failure.
Up until the development and launch of Ultomiris in major markets like the United States, the best treatment option that gMG patients had was Soliris. This drug was developed by the rare disease segment of AstraZeneca's business that was acquired in July 2021 and formerly known as Alexion Pharmaceuticals.
Soliris has proven itself to be effective in treating many cases of gMG. But Ultomiris looks like it could be more potent for patients with milder symptoms that are earlier into their gMG diagnosis. This means that not only could Ultomiris help extend AstraZeneca's patents for treating gMG, but it could also expand the company's patient share within the market.
Alexion Pharmaceuticals enrolled patients into its Phase 3 clinical trial with a confirmed diagnosis of gMG at least six months prior to the study's screening visit. For context, the condition is diagnosed using a blood sample. Patients also needed a Myasthenia Gravis-Activities of Daily Living (MG-ADL) score of at least six upon entering the study.
The MG-ADL is a clinical tool with eight items that are reported by the patient to assess the severity of MG symptoms and their impact on daily activities. A marked reduction in the MG-ADL from pre-treatment reference point to treatment would suggest that a treatment is working as intended. And Ultomiris certainly appeared to be very effective for patients that received it while taking part in the study. That's because the patients randomly assigned to the Ultomiris treatment group experienced an average 3.1-point reduction on the MG-ADL at week 26 of treatment. This was far better compared to the average 1.6-point reduction on the MG-ADL for patients in the placebo group at week 26.
The indication has blockbuster potential
Ultomiris could help AstraZeneca to reach more patients diagnosed with gMG in the EU.
It's estimated that there are roughly 89,000 patients with gMG in the EU. With treatments on the market for gMG being sparse, let's assume that Ultomiris will reach 10% of the patient base that Soliris hasn't already. That equates to a patient base of 8,900.
Ultomiris carries an annual list price of around $470,000 in the U.S. Since drugs in the EU are more than 50% cheaper than in the U.S., let's use an annual list price of $200,000. Fortunately, patients don't shoulder nearly this much of the financial burden. This is because health insurance and patient assistance programs often result in a much lower annual net price per patient. That generates an estimated net annual price per patient of $110,000.
Everything factored in, it works out to $1 billion in possible annual sales for Ultomiris in the EU for the gMG indication. By itself, that's a meaningful 2.2% boost over the $44.4 billion in total revenue that analysts are projecting for AstraZeneca in 2022.
A stock where value and growth intersect
With 184 projects in its pipeline throughout growing therapy areas like oncology and respiratory and immunology, AstraZeneca is well positioned for the future. This is why analysts are forecasting 14.8% annual earnings growth through the next five years. That's more than double the drug manufacturers' general earnings growth consensus of 6.8%, which clearly makes AstraZeneca a growth stock.
Considering these incredible growth prospects, the company is a great bargain at a forward price-to-earnings (P/E) ratio of just 15.4. This is more expensive than the industry average forward P/E ratio of 10.7, but AstraZeneca arguably deserves an even-higher valuation multiple to reflect its superior growth profile.