By S. Mitra, MBA (ISB)
Last week, Johnson & Johnson (JNJ) got an approval for its interleukin (IL)-23 inhibitor Tremfya for the treatment of adult patients suffering from moderate to severe plaque psoriasis. Although Tremfya enters a crowded market, it still has the potential to achieve blockbuster status, especially if it succeeds in a head-to-head trial against Novartis' (NVS) IL-17 inhibitor Cosentyx.
Tremfya was approved by the FDA for the treatment of adults suffering from moderate to severe plaque psoriasis. With the FDA’s decision, Tremfya becomes the only approved biologic therapy that only blocks IL-23. JNJ’s Stelara, also an IL-inhibitor, was approved way back in 2009. Stelara targets both IL-12 and IL-23.
Stelara has been one of JNJ’s top drugs. In 2016, it achieved sales of more than $3 billion. Stelara though has been approved in multiple indications, including as a treatment for adults with moderate to severe psoriasis.
The IL inhibitor market has become increasingly crowded. Tremfya will compete with Novartis’ Cosentyx, Eli Lilly’s (LLY) Taltz and Valeant Pharmaceuticals’ (VRX) Siliq. Despite these, Tremfya has significant commercial potential.
In the U.S. alone, an estimated 7.5 million people have psoriasis. Between 80% and 90% of these patients have plaque psoriasis. This translates to a patient population of 6 million to 6.75 million. Of these 20% have moderate to severe plaque psoriasis. At the low end of the estimate, the addressable market for Tremfya stands at 650,000 patients (assuming 90% of the patient population is adult and the penetration rate is around 60%).
The annual cost of Tremfya in the U.S. is $58,100 based on the assumption that patients will require six doses of the subcutaneous injection. The drug is administered as a 100 mg dose every eights after two starter/loading doses at weeks 0 and 4. After discounts to pharmacy benefit managers, Tremfya’s cost could come to roughly $45,000. Now if Tremfya even captures 5% of the addressable market at peak, this translates to sales of around $1.46 billion. This is in the U.S. alone and just for one indication. The drug has been licensed from Morphosys, a German biotechnology company. (Author's Update, dated July 19, 2017: The Nasdaq/Reuters reference above appears to say that JNJ is the licensee of the drug itself, but we received communication from Janssen that they are the developers of guselkumab, and they merely licensed "the HuCAL antibody library technology from MorphoSys to generate the guselkumab antibody.")
The exact details of the licensing agreement are not available but even if a 20% royalty rate is applied, Johnson & Johnson could still rake in more than $1 billion from Tremfya.
Cosentyx Head To Head Trial Could Potentially Boost Sales
Tremfya was approved on the basis of results from VOYAGE 1 & 2 and NAVIGATE studies, which compared the IL-23 inhibitor to Humira and Stelara. JNJ, though, is also evaluating the efficacy of Tremfya in another Phase 3 study. In this study, the efficacy of Tremfya is being compared with Novartis’ Cosentyx. In 2016, Cosentyx had achieved sales of $1.13 billion. If Tremfya is found to be superior to Cosentyx in this Phase 3 study, the sales numbers discussed above could look even better. Even a two percentage point increase in market share for Tremfya could increase sales by half a billion. Approval in additional indication of psoriatic arthritis could further boost sales. The drug is being currently tested in a Phase 3 study for this indication.
Disclosure: I am/we are long JNJ, LLY.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.