January 25, 2012
Five Big Drugs for 2012
These medications could boost the fortunes of companies like Pfizer, Gilead Sciences and Bristol-Myers Squibb.
By Johanna Bennett
Regulators and investors can point to 2011 as the year that saw a spike in drug approvals and the introduction of groundbreaking medications that benefit patients and provide big sales opportunities to drug makers.
It's also a year marked by several disappointing commercial drug launches.
So what's in store in 2012?
The U.S. Food and Drug Administration could approve up to 45 new drug compounds in 2012, compared to 38 last year, that could generate U.S. sales of nearly $12 billion in 2017, according to Michael Latwis, an analyst with Decision Resources, a market-research firm.
But it isn't easy picking which medicines will outshine the rest and boost earnings and stock prices of the companies that develop them.
Barrons.com picked five drug candidates that could get regulatory approval in 2012 and advance the treatment of a serious illness. The drugs could also eventually deliver blockbuster sales for their companies.
The list includes the cystic fibrosis drug Kalydeco from Vertex Pharmaceuticals (ticker: VRTX), and the blood thinner Eliquis, which is being developed and marketed jointly by Pfizer (PFE) and Bristol-Myers Squibb (BMY).
Pfizer also has tofacitinib for rheumatoid arthritis. Danish drug maker Novo Nordisk (NVO) has the diabetes drug Degludec.
And Gilead Sciences (GILD) is developing a new AIDs treatment known simply as "the Quad."
Of course, the FDA remains unpredictable. And even an innovative drug can flop commercially if insurers don't cover it, doctors don't prescribe it, and patients don't use it.
All five drugs highlighted by Barrons.com in 2011 (see Weekday Trader, "5 Breakthrough Drugs for 2011," Feb. 2, 2011) received FDA approval. But disappointing launches ravaged shares of Human Genome Sciences (HGSI), Vertex, Dendreon (DNDN) and other high-flying stocks.
And now, the "mantra among investors is to short the launch," says Kris Jenner, manager of the T. Rowe Price Health Sciences Fund.
Here's a rundown of the drugs and their top-down potential.
Scheduled for an April approval, Kalydeco could be the first drug to treat the underlying cause of cystic fibrosis, a life-threatening respiratory disease.
It's not a cure. But existing treatments address patients' symptoms, while Kalydeco improved lung function and cut the risk of intermittent sicknesses in clinical testing.
Granted, the pill is for only a small fraction of patients with a specific genetic mutation. But Kalydeco is being tested in other cystic fibrosis patients and in combination with another experimental drug.
Sales could reach $1.3 billion by 2015 and $3 billion by 2020, says Bernstein Research analyst Geoffrey Porges.
Also called apixaban, Eliquis could be the latest arrival from a new class of blood-clot-preventing drugs.
Like Johnson & Johnson's (JNJ) Xarelto and Boehringer Ingelheim's Pradaxa, Eliquis would rival Coumadin and its generic warfarin, which prevent stroke but require frequent blood tests. But unlike Xarelto and Pradaxa, Eliquis has proved to be both safer and more efficacious than warfarin, says Barclays Capital analyst Tony Butler.
That's a big leg up in a potential $10 billion market. An FDA ruling is expected in March. Barclays' Butler sees sales reaching $5.5 billion by 2018.
Tofacitinib is the latest in a hot class of drugs called JAK inhibitors and could be the first oral medication to treat rheumatoid arthritis, an autoimmune disease that damages the joints.
As a pill taken twice daily, tofacitinib is a welcome alternative to current treatments that are delivered by infusion or injection.
An FDA decision is expected in August. Wall Street analysts are cautious, citing side effects such as hypertension and elevated cholesterol that could restrict the drug's use.
Still, it's a $13 billion drug market. And Barclays' Butler sees sales reaching $1.6 billion by 2020.
Degludec is ultra-long-lasting insulin, and potentially, the biggest product on our list.
Used with other drugs to keep blood-glucose levels in check, Degludec is injected three times a week. And if approved in July, it's a potential competitor to Sanofi's (SNY) Lantus.
But Degludec has an advantage: It's better at preventing hypoglycemia (a dangerous dip in blood sugar).
The drug has been combined with a short-acting insulin to create DegludecPlus, which also awaits FDA approval. Sales could reach $7 billion by 2020, according to Barclays Capital.
Combination pills that blend several medications into a single dose are nothing new in the treatment of HIV and AIDS. But the Quad is the first HIV/AIDs treatment that combines four medicines in one pill and is the cornerstone of Gilead's efforts to retain dominance in the AIDs market and fight off a looming generic threat.
The drug combines Gilead's blockbuster two-in-one pill Truvada, with two experimental compounds -- elvitegravir and cobicistat. And it has shown comparable efficacy and was better tolerated than the current market leader Atripla, a three-in-one AIDs medication by Gilead and Bristol-Myers Squibb.
Some analysts question its long-term prospects. But as the first combination medication to include an integrase inhibitor, the Quad simplifies a difficult drug regime.
Sales could reach $2 billion by 2015 and peak at $3.5 billion in 2018, says Bernstein's Porges.
Of course, sales forecasts can be wildly optimistic. Governments and insurers are pushing back on drug prices.
And it's hard to handicap the FDA, especially given the increasingly difficult compounds filling the drug industry's research pipeline.
Yet these five drugs could be the right prescription for an industry and investors hungry for success.
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