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Pharma Stocks Destined For Greatness

These aren’t the largest players in the field right now, but they could take the lead faster than you think.

Global spending on cancer drugs has soared in recent years along with the number of expensive new treatments reaching patients in need of new options. Roche (NASDAQOTH:RHHBY) led the industry with around $26 billion in oncology sales last year, but losses from aging brands will soon push the Swiss pharmaceutical giant out of the top spot.

Who’s going to take over Roche’s position in the years ahead? AstraZeneca (NYSE:AZN)and AbbVie (NYSE:ABBV) don’t have the largest oncology businesses at the moment, but they reported more growth in 2018 than their peers. Here’s a look at what their oncology programs are doing right.

1. AstraZeneca: Triple threat

This big British pharma reported total oncology sales that soared 50% higher in 2018, thanks to a handful of new treatments. Tagrisso earned an important approval to treat newly diagnosed lung cancer patients with tumors that harbor certain mutations last April. The expanded population drove annual Tagrisso sales 95% higher in 2018 to $1.9 billion, and it could reach $5 billion in 2022.

AstraZeneca’s PD-1 checkpoint inhibitor, Imfinzi, probably won’t overtake Keytruda, but it brought in $633 million during its first full year on the market thanks to an approval to treat inoperable lung cancer patients while they’re responding to their first round of chemotherapy or radiation. The treatment reduced patients chances of disease progression by 48% compared to a placebo, which could drive enough demand to push annual sales to $2.8 billion by 2023.

Lynparza has been around since 2014, but it didn’t gain much traction until earning label expansions in 2018 to treat relapsed breast cancer patients, and newly diagnosed ovarian cancer patients while they’re responding to standard first-line chemotherapy. Annual Lynparza sales jumped 118% to $647 million in 2018 and could rocket up to more than $3 billion in a few short years.

Despite having the fastest-growing oncology segment in the industry, AstraZeneca’s chances of becoming the world’s top oncology company aren’t great. Total oncology sales rose 50% to $6.0 billion last year, which was around $20 billion less than the leader, Roche.

2. AbbVie: Exceeding expectations

AbbVie’s oncology presence has surged along with sales of two blood cancer drugs, Imbruvica and Venclexta. Since becoming the first chemo-free treatment option for newly diagnosed chronic lymphocytic leukemia (CLL) patients in 2016, Imbruvica’s popularity has exceeded all expectations and it isn’t finished yet. Annual Imbruvica sales climbed 40% in 2018 to $3.6 billion, and it could reach $6 billion at its peak. 

Venclexta sales reached $344 million in 2018 thanks to an approval that expanded its patient population to include CLL patients following their first therapy to prevent a relapse. Rituxan plus chemotherapy was the standard treatment for this setting, but not for much longer. Adding Venclexta to Rituxan, instead of chemo, reduced patients risk of a relapse by 81%, and that’s not the only big approval the drug earned last year.

In November, the Food and Drug Administration approved Venclexta in combination with low-dose chemotherapy for acute myeloid leukemia (AML) patients that are too old or frail to safely complete a round of chemotherapy at an effective dosage. A majority of patients diagnosed with AML fit this description, and going forward they’ll probably receive Venclexta plus low-dose chemo as their first treatment. That could drive enough demand to push annual Venclexta sales from just $344 million last year to more than $5 billion at its peak

In 2019, an estimated 20,940 adults will be diagnosed with CLL and another 19,520 will receive their first AML diagnosis. AbbVie may have just two big cancer drugs driving growth for its oncology segment, but they’ve got room to grow. In 2018, annual sales of the company’s blood cancer drugs rose 46% to $3.9 billion, and will probably double by the end of 2021.

On the way down

Before you run out and buy up shares of AbbVie and AstraZeneca because their oncology segments are roaring to life, it’s important to remember these companies are made of multiple moving pieces that don’t always move in the direction you want them to. Soaring oncology sales will help these pharma giants to offset sales of aging blockbusters, but you might not be satisfied with total revenue figures that could stagnate or decline this year and into the foreseeable future.

In 2018, Humira lost market exclusivity in the European Union, and total sales of the company’s flagship drug will probably decline slowly from a peak last year of $19.9 billion. Humira’s U.S. market will probably unravel in 2023 and it’s going to take more than two cancer drugs to make up the difference. AbbVie still relies on the anti-inflammation injection for 59% of total revenue.

Growth from AstraZeneca’s oncology segment was offset by sinking sales for three of the company’s top four products last year. AstraZeneca still relies on Symbicort, Nexium, and Crestor for around 27% of total product sales, and they’re all in steep decline since losing patent protection. 

source: fool.com

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