Celgene's Otezla Is A Big Hit

Image source: Celgene Corporation.

Celgene Corp(NASDAQ: CELG)launched Otezla in 2014 to diversify its revenue stream and by all measures, Celgene's first foray into autoimmune disease has been a success. Second quarter sales of Otezla clocked in at $242 million, up 170% from last year and 24% from Q1. Can Otezla's sales continue to head higher?

Transforming treatment

Psoriasis affects 125 million people worldwide and that makes it a major indication responsible for generating billions of dollars in sales for top drugmakers.

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In the past, doctors have sought to control psoriasis symptoms by using steroid creams that can reduce itching, disease-modifying antirheumatic drugs (DMARD) that can decrease pain, and biologics, such as AbbVie'smega multibillion-dollar per year blockbuster drug Humira, which can put the brakes on the immune system response responsible for the condition.

These various approaches can help many patients control their symptoms, however, some patients don't respond to these therapies or they suffer intolerable side effects from them. In the case of DMARDs and biologics like Humira, patients are subject to unsettling injection-based dosing and regular testing and monitoring. In one study conducted in 2013, 52% of psoriasis patients were unhappy with their current treatment options.

Today, these dissatisfied patients are increasingly being treated with Otezla. Otezla works in an entirely novel way compared to other treatment options. It minimizes psoriasis symptoms through the inhibition of PDE4, an intracellular enzyme. By inhibiting PDE4, Otezla can reducethe release of cytokines from immune cells that cause psoriasis symptoms.

Importantly, because Otezla is dosed as a tablet, rather than injected, and it's prescribing label doesn't require the routine testing, it's a far easier treatment for patients to stick with.

Market share growth

Otezla's advantages are resonating with doctors and patients and as a result, prescription volume for Otezla has grown more quickly than it has for other top sellers in the indication. As you can see in the following chart, the pace of prescription volume since launch is well ahead of top-sellers, including Simponi and Stelara, two multibillion dollar per yearJohnson & Johnson (NYSE: JNJ)drugs.Simponi is a once-monthly anti-TNF injection therapy approved for use in rheumatoid arthritis and psoriatic arthritis, and Stelara is a monoclonal antibody that blocks the activity of two proteins that contribute to the overproduction of skin cells and inflammation that's been approved to treat psoriasis since 2009.

Source: Celgene Corporation.

If we use Simponi and Stelara as benchmarks for where sales of Otezla may be heading in the future, Otezla's sales growth doesn't appear to be in jeopardy of leveling off anytime soon.

In Q2,sales of Simponi grew 45% year over year to $448 million and sales of Stelara sales grew 41% year over year to $804 million, giving it an annualized sales run rate of over $3.2 billion.

Adding conviction to the thinking that Otezla sales could double or more from it's current pace is the fact that Otezla is only recently beginning to catch fire abroad. In Q2, ex-U.S. sales represented only $25 million of Otezla's total sales. That's more than double the abroad sales for the drug a year ago and now that it's won reimbursement in 14 countries (with more countries on deck), the pace of international sales should accelerate meaningfully. To put that opportunity in a bit of perspective, international sales of Simponi and Stelara totaled about $450 million in the second quarter.

Source: Celgene Corporation.

More to come

Otezla is a big reason behind Celgene's confidence that it will be able to deliver on it's long-term sales and profit forecast. Celgene has set a goal of delivering $13 billion in sales next year and at least $21 billion in sales by 2020.

Otezla can help Celgene reach those targets via ongoing market share growth, international launches, and label expansions. Trials are ongoing evaluating Otezla's use inulcerative colitis and Behet's disease.

Overall, the company thinks Otezla will be good for at least $1.5 billion in sales next year and that it will contribute in large part to the company's $4 billion projection for immunology sales in 2020. Clearly, Otezla is a big win for Celgene and that makes it a drug that investors ought to be tracking every quarter.

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Todd CampbellTodd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him onTwitter where he goes by the handle@ebcapitalThe Motley Fool owns shares of and recommends Celgene and Johnson and Johnson. The Motley Fool has the following options: short October 2016 $95 puts on Celgene. Try any of our Foolish newsletter services free for 30 daysconsidering a diverse range of insightsdisclosure policy