Great biotech companies tend to dominate at least one indication. In Biogen's (NASDAQ:BIIB) case, that indication is multiple sclerosis. Biogen's Avonex and Tysabri are long-standing blockbuster treatments for reducing multiple sclerosis relapses, but it's Biogen's Tecfidera that has been crushing competitors this year.
However, Tecfidera's blistering sales pace might be threatened by reports that a patient taking the drug died after being diagnosed with a rare and often fatal brain disease.
For years, MS patients have relied on injectable drugs like Avonex or Teva Pharmaceutical's (NYSE:TEVA) blockbuster Copaxone. But a new generation of FDA-approved oral drugs are quickly winning market share.
Novartis' (NYSE:NVS) Gilenya, which outperformed Avonex during clinical trials, was the first of these new oral MS drugs to hit the market. Since winning approval in 2010, Gilenya has become one of Novartis' best-selling drugs, with sales of nearly $2 billion last year.
Sanofi's (NASDAQ:SNY) Aubagio notched FDA approval in 2012 to become the second oral MS drug to win over regulators. While so far not as successful as Gilenya, it still collected sales of about $220 million during the first six months of 2014.
But Biogen's Tecfidera has really taken the market by storm.
Since launching in the second quarter of 2013, Tecfidera has become the most widely prescribed oral MS drug in the U.S., and that has translated into billions of dollars in revenue for Biogen. In the third quarter alone, Tecfidera's sales totaled $787 million, up an eye-popping 175% from a year ago. That brought Tecfidera's sales to nearly $2 billion through the first nine months of 2014, 316% above last year.
During Biogen's third-quarter earnings conference call, the company reported that one patient who took Tecfidera for four years died after being diagnosed with progressive multifocal leukoencephalopathy, or PML, a rare viral disease that damages the material that protects white matter of the brain.
PML is a scary and dangerous disease, but it's uncommon. Regardless, since cases of PML come with high mortality rates, investors are right to question whether more cases of PML will occur in patients receiving Tecfidera over time and if such cases could derail the drug's success.
Despite the potential risk of PML to Tecfidera's market share, this isn't the first case of PML diagnosed in MS patients receiving treatment.
In 2005, three patients who were receiving Biogen's Tysabri were diagnosed with PML. That led to a suspension of sales and a thorough review of 3,000 Tysabri patients that showed just one in 1,000 patients, or 0.10%, taking Tysabri were at risk of developing PML. Since Tysabri reduced relapses by 68% during clinical trials, and 21% of Tysabri patients suffered an MS relapse when treatment was halted for the review, the drug was reintroduced in 2006.
Novartis' Gilenya has also come under the microscope in the past year following news that one patient using the drug had been diagnosed with PML. A review of MRI scans of the patient prompted Novartis to question whether the patient might have had PML before taking Gilenya, yet questions remain.
Since PML isn't new to doctors treating patients with MS, existing treatment protocols will likely mean the risk to Tecfidera's market share is smaller than some may fear.
Despite its history, Tysabri has proven to be one of the top-selling therapies for treating MS relapses, with sales totaling nearly $1.5 billion through the first nine months of this year.
Sales of Gilenya haven't dropped off, either. Based on third-quarter results, Gilenya revenue is running at an annualized pace of roughly $2.4 billion.
Since sales of those drugs grew in the face of PML risks, Biogen could similarly see Tecfidera sales continue to climb -- particularly given that Biogen is only now rolling out the drug throughout Europe.
European regulators gave Tecfidera a green light in February, and Biogen has been actively negotiating prices with individual European Union countries. In those EU countries in which Tecfidera has launched, including Germany, Biogen reported that the drug is seeing success similar to that in the U.S. If that momentum holds up, then Biogen could see Tecfidera sales climb meaningfully from the $149 million recorded abroad in the third quarter.
Biogen's third-quarter sales and earnings outpaced industry watchers' forecasts, but those results were overshadowed by the PML report. Thanks largely to Tecfidera, Biogen's sales grew 37% to $2.5 billion last quarter, allowing the company to deliver earnings per share of $3.80, up 61% from a year ago.
That strength prompted Biogen to maintain its full-year guidance of 38% to 41% top-line growth and increase its EPS outlook to between $13.45 and $13.55, up from prior projection of $12.90-$13.10.
Given those developments, Biogen appears to believe the PML risk won't derail Tecfidera. If management is right, then Biogen's recent slide might offer a good buying opportunity for long-term investors. After all, Biogen's shares have returned 880% since Tysabri's struggles weighed on the company in 2005. Regardless, given the news, investors should watch closely over the coming quarters to see if Tecfidera scripts slip or more PML cases are reported.