Celgene Monitor

Source: Celgene.

They're two of the biggest biotechs in the world, but Biogen (NASDAQ:BIIB) and Celgene (NASDAQ:CELG) largely compete in different spaces. Biogen has dominated the multiple sclerosis market, while Celgene has raked in billions primarily in treating various types of blood cancer. The two companies, however, appear likely to clash in the not too distant future thanks to recent acquisitions.

New battleground
Celgene announced in July that it planned to buy Receptos. This acquisition, which closed on Aug. 27, allowed Celgene to pick up Receptos' crown jewel, Ozanimod. The drug targets treatment of ulcerative colitis and relapsing multiple sclerosis. 

Then along came Biogen. The big biotech announced on Sept. 9 its agreement to exclusively license MT-1303, a drug from Mitsubishi Tanabe Pharma Corporation, that also intends to treat ulcerative colitis, multiple sclerosis, and other autoimmune diseases. 

Both Ozanimod and MT-1303 are sphingosine 1-phosphate 1 and 5 receptor modulators (S1P). The drugs work by interfering with the signaling of the lipid mediator S1P, which ultimately reduces white blood cell migration to areas of inflammation. 

Celgene thinks Ozanimod could reach peak annual sales of $4 billion to $6 billion and refers to the drug as potentially best-in-class. Biogen hasn't thrown out potential revenue numbers for MT-1303, but chief medical officer Dr. Alfred Sandrock said that it "could be a best-in-class S1P modulator". Sounds like a head-on clash is in the works between the two companies. 

Head start
At least for now, it looks like Celgene has the upper hand in the pending battle thanks to a head start. Ozanimod is already in phase 3 clinical trials for relapsing multiple sclerosis, with data expected to be released in the first half of 2017. If all goes well, that could mean approval for the indication in 2018.

A phase 3 study of Ozanimod is also currently under way in treating ulcerative colitis. Results from this clinical trial are expected in 2018.

Meanwhile, MT-1303 wrapped up a successful phase 2 trial in treating multiple sclerosis. Biogen plans to move forward on this front as well as start a clinical trial targeting ulcerative colitis. The biotech is also considering advancing MT-1303 to phase 3 for Crohn's disease.

Who will win?
Which of these two big biotechs will win the clash of S1P modulators? It's too soon to tell.

Celgene has the best shot at getting to market first with Ozanimod. Keep in mind, though, that Celgene paid $7.2 billion for Receptos. Biogen only paid $60 million up front for MT-1303, with the potential for up to $484 million in additional milestone payments. In terms of return on investment, Biogen could still emerge as big winner even if it arrives later to the market.

The other key will be which drug patients tolerate better. Novartis has the only approved S1P modulator right now with Gilenya. The drug has achieved considerable success, with sales last year of $2.5 billion. However, Gilenya can cause patients' heart rates to slow down. Ozanimod could have a better cardiovascular side effect profile than Gilenya, but so could MT-1303. Tolerability might decide which drug gains the most market share. 

My view is that both Biogen and Celgene should help investors win over the next several years. Biogen's multiple sclerosis franchise, led by Tecfidera, continues to perform well. Celgene's Revlimid, Abraxane, and Pomalyst also are growing by solid double-digit percentages. Both biotechs claim solid pipelines. Biogen and Celgene might be headed for a clash, but either stock could potentially have shareholders on the path to make more cash.

Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.