Novartis AG's novel multiple sclerosis pill Gilenya holds the potential to shake up the $10 billion multiple sclerosis market and give the Swiss pharmaceuticals giant a cutting edge over rivals such as Irish drug maker Elan Corp. PLC , U.S.-based Biogen Idec Inc. and Germany's Merck KGaA.
The
once-daily pill that promises to improve the lives of thousands of
patients who suffer from the disease that debilitates the central
nervous system has good chances to become the gold standard after a U.S.
regulatory panel earlier this month recommended the drug for approval.
Despite
raising safety concerns, the U.S. Food and Drug Administration's panel,
in an unanimous vote, found the drug to be so effective as to allow it
to become a first-line multiple sclerosis treatment despite side effects
such as lung, heart and eye problems.
This,
analysts say, raises the likelihood the FDA in September will fully
back Gilenya's marketing launch that could come as early as in the third
quarter of 2010 and net more than $1 billion in sales for Novartis.
The
FDA panel's decision was a positive surprise and will act as a
confidence booster for the Swiss pharma giant, which with the help of
Gilenya may curb the sales drop it faces when its two top
medicines--heart drug Diovan and cancer medicine Gleevec--lose patent
protection over the next few years.
Analysts
have hitherto been skeptical that Gilenya will make a deep impact, as
early-stage trials raised the specter that the drug's side-effects could
negate its benefits, limiting the sales and profit potential for the
drug or even annihilating its chances to win approval.
But
after the U.S. drug panel's verdict, the market's view is slowly
changing and analysts have started to upgrade their forecasts that range
between $1 billion to $3.5 billion.
"The
strong endorsement [from the FDA panel] sets the stage for Novartis to
shake up the multiple sclerosis market which is projected to grow to $15
billion by 2015," said Karl-Heinz Koch of brokerage Helvea. "We believe
there is significant upside to our above consensus $1.4 billion sales
forecast."
Analysts
also welcomed Gilenya's potential to become a first-line treatment,
thus hurting existing players, who are set to lose massive market share.
"The
Gilenya recommendation for approval was expected, but the first line
status wasn't", said Ian Hunter of Goodbody Stockbrokers. "The
implication is that it is a greater setback for drugs already on the
market." According to his estimates, Elan, for example, could lose some
10% of its patient base.
Other
market leaders could suffer too as think tank Datamonitor expects
Gilenya to become the leading multiple sclerosis therapy by 2016 and
could net sales of more than $1 billion.
To
date, the market for multiple sclerosis, which affects about 2.5
million people worldwide, is led by firms such as Biogen, Merck Serono,
Bayer AG ( BAYN.XE), Elan and Teva Pharmaceutical Industries Ltd
(TEVA.TV).
Teva
and Sanofi-Aventis SA's (SAN.FR) own the market's best-selling drug
Copaxone, which had more than $2.8 billion in sales in 2009. Biogen's
Avonex also had more than $2 billion in annual revenue, while Bayer's
Betaseron and Merck's Rebif had more than $1 billion in sales.
Most
of these drugs, however, go with side-effects that could prove
crippling for them once Gilenya is on the market. While many existing
drugs need to be administered through a daily injection or infusion, the
medicines also cause flu-like symptoms, a condition many patients
dislike although it isn't dangerous.
Gilenya's
pill form is believed to appeal to both patients and doctors because
it's easier to administer and analysts say the lack of flu-like symptoms
could even help Novartis expand the market, as many early-stage
patients avoid taking some of the existing drugs because of the
hampering side-effects.
"I
believe the drug will be approved and will become a success because it
is administered orally and is very efficacious," said Andrew Weiss,
pharma analyst at Bank Vontobel. Still, he warns that Gilenya's dose
related side-effects could prove a stumbling block and even delay the
drugs approval. Weiss puts the approval probability at 50%, while he
sees non-probabiltiy adjusted peak sales at about $2.9 billion.
Concerns
about the drug's side effects have diminished after the FDA's panel
decision, they but haven't fully abated--partly because the FDA asked
Novartis to provide more research data and to consider lowering the
drug's dosage to reduce side effects.
Fears
that the drug could falter in late stage or even after approval are
fueled by the fact that late-stage setbacks for multiple sclerosis drugs
medicines are common.
For
example, one year after the launch of multiple sclerosis drug Tysabri,
Biogen and Elan had to pull off the drug from the market due to serious
side effects such as brain tumors. The drug was later reintroduced but
has since failed to live up to the high hopes of its producers. Also,
Merck's oral multiple-sclerosis drug needed be resubmitted after the FDA
rejected approval, saying Merck's filing was incomplete.
For
brokerage Bernstein, these recent drug setbacks could serve to postpone
Gilenya's market introduction. Also, the brokerage expects that
Novartis' post- marketing efforts to highlight the drug's side effects
will be strenuous. Nevertheless, the drug holds blockbuster potential
and the brokerage sees sales of more than $1 billion by 2015.