Late last month, Bristol Myers Squibb's (BMY 0.96%) immunology drug, Sotyktu, received good news. The medicine was recommended for approval by the European Medicines Agency's Committee for Medicinal Products for Human Use to treat adult patients with moderate to severe plaque psoriasis.
With an approval from the European Commission likely just months away, it's worth asking the following question: How much revenue could a plaque psoriasis indication in the European Union (E.U.) generate for the pharmaceutical company? Let's turn our attention to Sotyktu's phase 3 clinical trial results and the E.U. plaque psoriasis market to learn more.
Superb patient outcomes
Psoriasis is a common skin condition. Plaque psoriasis makes up between 80% and 90% of psoriasis cases. Plaques are raised red patches of skin that typically affect the elbows, knees, and scalp, but can show up anywhere. These areas of skin generally itch or hurt.
The disease can present as mild to severe. Doctors use the Psoriasis Area and Severity Index (PASI) as a clinical measure to assess the severity of a plaque psoriasis case. This is done by measuring the surface area of the body affected by psoriasis and the average thickness and redness of lesions. PASI scores range from 0 to 72, with 10 or higher being diagnosed as moderate to severe plaque psoriasis.
More severe cases of plaque psoriasis can be detrimental to a patient's quality of life, which makes it important to find the right treatment for each patient to manage the condition. Topical products like corticosteroids are the first-line treatment for the disease. But since less than half of patients comply with these options for various reasons, there is a high unmet medical need for additional treatments.
Fortunately, Sotyktu was approved in the United States last September to treat plaque psoriasis patients. And an approval could be around the corner in the E.U. as well.
Bristol Myers enrolled patients with moderate to severe plaque psoriasis into two clinical trials. These patients were randomized to take either Sotyktu once daily, a placebo pill, or Amgen's Otezla. Patients in the Sotyktu group achieved much higher rates of PASI 75 response (at least a 75% improvement in their PASI score from their pre-treatment baseline). At week 16 of the clinical trials, up to 59% of patients on Sotyktu attained PASI 75. Putting the efficacy of the drug into perspective, this was far superior to the 40% rate for Otezla and almost 13% rate for the placebo.
Image source: Getty Images.
The sales bump could move the needle
Sotyktu is an efficacious treatment. But what impact will a plaque psoriasis indication in the E.U. have on Bristol Myers' overall revenue?
Psoriasis is estimated to impact 7.8 million adults in Europe. Of those cases, approximately 20% are estimated to be moderate to severe in nature. This equates to nearly 1.6 million patients. I will conservatively assume that the eligible patient population for second-line treatments is 25%, which is around 400,000 patients.
With a crowded field of treatments such as Novartis' Cosentyx and AbbVie's Skyrizi, Sotyktu likely won't take the plaque psoriasis market by storm. But since no treatment works for every patient, there is room for Sotyktu. That's why I anticipate that the medicine will seize 5% of the eligible patient share, which is 20,000 patients.
Sotyktu's annual list price in the U.S. is $74,000. Adjusting for the fact that drugs in the E.U. cost about half as much as in the U.S., I will use an annual list price of $37,000. I'll further assume that negotiations with health insurers and patient financial assistance programs will result in an annual net price of $25,000 per patient.
This means that Sotkytu could generate $500 million in annual revenue for Bristol Myers in the E.U. from a plaque psoriasis indication. Against the $47.2 billion in revenue that analysts expect from the company in 2023, this would be a 1% increase in the drugmaker's revenue base. Along with sales contributions from other major markets, Sotyktu could be a blockbuster for Bristol Myers several times over.
A value stock with a strong pipeline
Fortunately, Bristol Myers is much more than just Sotyktu. The company has over 50 compounds currently in different stages of clinical development. This is why analysts anticipate that the company's earnings will grow at 3.7% annually over the next five years.
Yet, the stock trades at a forward price-to-earnings (P/E) ratio of 9.1. This is well below the drug manufacturers industry average forward P/E ratio of 14.6, which makes Bristol Myers Squibb a compelling pick for value investors.
