Biogen Idec Inc (BIIB), Pfizer Inc. (PFE): Out With the Old, In With the New in Treating MS

Hidden beneath all the numbers and metrics in Biogen Idec Inc (NASDAQ:BIIB)‘s recent earnings report is a key confirmation of a shifting market in the treatment of multiple sclerosis. This alteration could yield billions of dollars for companies positioned to take advantage of it.

Biogen Idec Inc (NASDAQ:BIIB)

What Happened

On July 25, Biogen Idec Inc (NASDAQ:BIIB) reported second-quarter financial results. Earnings of $2.30 per share and revenue of $1.7 billion both trumped estimates, while the company’s higher guidance fueled investors’ optimism regarding the company’s future.  However, neither development could steal the report’s spotlight away from the unexpected success of the company’s new multiple sclerosis oral drug, Tecfidera. The drug generated sales of $192 million in the quarter, more than double what the Street expected.

A Coming Revolution in MS Treatment

Contrary to most current multiple sclerosis treatments , Tecfidera is a pill, not an injection. The treatments which currently dominate this $14.4 billion global market — Avonex (Biogen), Copaxone (Teva), Tysabri (Biogen), Rebif (Pfizer & EMD Sereno) — are all injections.

However, a 2010 Thomson Reuters market analysis report expressed a view shared by other prominent market analysts: “Oral drugs will soon revolutionize the treatment of multiple sclerosis. Until recently, the only disease-modifying agents available were the interferons, a highly competitive drug class, but with the disadvantage of administration by injection.”

The Kings Could Fall

A shift away from the traditional injection treatments of MS would have a monumental impact on some of the largest players in the pharmaceutical industry.

Avonex and Tysabri combined to account for more than $4 billion in revenue generation in 2012, representing 73% of Biogen Idec Inc (NASDAQ:BIIB)’s overall company revenue.

For Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), Copaxone generated nearly $4 billion in revenue in 2012, which accounted for nearly 20% of overall company revenue.

EMD Sereno largely controls Rebif, but Pfizer Inc. (NYSE:PFE) also is marginally influenced by the drug, which it includes in its alliance revenues. In 2012, this segment generated $3.49 billion in revenue for Pfizer Inc. (NYSE:PFE), accounting for nearly 6% of overall company revenue. Pfizer Inc. (NYSE:PFE)’s collaboration agreement with EMD Sereno will either expire in 2013 or 2015, depending on the outcome of pending litigation between the two companies concerning the interpretation of the agreement. If the agreement extends to 2015, Rebif will generate hundreds of millions more in revenue for Pfizer Inc. (NYSE:PFE), making the drug potentially substantial to Pfizer Inc. (NYSE:PFE)’s future.