"I think it's pretty clear that Stelara is a dramatically effective drug, one of the most effective drugs we've ever had for psoriasis." Mark Lebwohl
Johnson & Johnson's (JNJ) winning strategy of identifying promising blockbuster candidates, rushing them through the FDA approval process and launching them globally with generous marketing campaigns has worked well with several of its drugs, Stelara is no exception.
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Stelara is turning into a star performer bringing in $393 million in 2010, its first full year on the market, generating $1 billion in sales in 2012 and is on track to realizing $1.4 billion in 2013.
Stelara, which is currently approved in 74 countries for plaque psoriasis, has recently received an indication extension for active psoriatic arthritis as Johnson & Johnson positions it as a head-to-head competitor to Amgen's (AMGN) Enbrel in the psoriasis indication.
Enbrel is a Tumor Necrosis Factor (TNF) receptor fusion protein. TNF is one of the chemical messengers that help regulate the inflammatory process.
When the body produces too much TNF, it overwhelms the immune system's ability to control inflammation of the joints or of psoriasis-affected skin areas. Enbrel binds certain TNF molecules before they can trigger inflammation and causes significant reduction in inflammatory activity.
Enbrel was launched in the US in November 1998 and is indicated for the treatment of adult patients with active rheumatoid arthritis, chronic plaque psoriasis, active psoriatic arthritis and active ankylosing spondylitis.
Amgen markets Enbrel under a collaboration agreement with Pfizer (PFE) in the US, which expires at end of October 31, and Pfizer has the rights to sell Enbrel outside the US and Canada
During 2012, Enbrel achieved US sales of $4.2 billion, of which an estimated $1.3 billion was attributed to the psoriasis indication. During the same year, Stelara achieved $627 million in US psoriasis sales, after less than four years on the market.
We took a look at Enbrel's and Stelara's US quarterly sales trends and we noticed a coinciding decline in Enbrel's sales with a surge in Stelara's sales during Q1-2013. However, Enbrel resumed its growth during Q2-2013 while Stelara flattened out.
The recent FDA approval, in September 2013, of a Stelara indication extension to include active psoriatic arthritis is bound to give a boost to Stelara's sales growth moving forward, with a potential impact on Enbrel sales in the psoriasis indication.
Stelara is dosed less frequently than Enbrel, making it a favorite with patients, and is seen by many physicians as one of the most effective currently available psoriasis treatments.
Stelara is not the only drug that Enbrel has to compete with in the crowded US immunology biotherapeutics space. Johnson & Johnson's Remicade and Simponi are also in direct competition with Enbrel as well as Abbvie's (ABBV) Humira, Bristol-Myers's (BMY) Orencia, Nektar' (NKTR) Cimzia, Roche's (OTCQX:RHHBY) Rituxan and Actemra and Pfizer's Xeljanz.
According to the National Psoriasis Association, Psoriasis is the most prevalent autoimmune disease in the US with as many as 7.5 million Americans affected and, based on data from a recent survey, half of these people are not satisfied with the treatment they're receiving.
The Psoriasis space is still growing and still represents an area of unsatisfied need. So, near term growth for all effective medications is rather assured and we do not see a zero sum game developing any time soon.
|Johnson & Johnson||JNJ||19.4||3.7||$246 Billion|
Since a rising tide lifts all boats we took a look at current valuation metrics of the companies active in the space. We particularly like Abbvie, the undisputed leader with Humira, and Johnson & Johnson, whose immunology business unit, with its key products Remicade, Stelara and Simponi, achieved sales of $7.9 billion in 2012, representing an increase of 16% as compared to 2011.
At a P/E of 57.9 and a P/S of 4.4, Bristol-Myers's valuation still looks rather rich compared to its peers. Nektar, at $1.2 billion in market cap looks rather tempting, given the valuation of recent high profile acquisitions taking place in the medical biotech space.
During Q2-2013 earnings call, Dominic Caruso, Johnson & Johnson's Chief Financial Officer, talked about a strong first half of 2013 and forecasted full year revenue growth of between approximately 6% and 7%, which is higher than previous guidance and would result in estimated sales of approximately $71.3 billion to $71.9 billion in 2013.
He also predicted 2013 earnings per share estimates, excluding the impact of special items, of between $5.42 and $5.49, which is also higher than previous guidance.