Should Biogen Be Afraid of This Upstart?

Biogen (NASDAQ: BIIB) is a biotech Goliath that is best known for its dominant leadership in the treatment of multiple sclerosis. The company's top-selling MS drugs rack up sales of $7.9 billion per year, which makes it the market share leader in the $17 billion market for MS therapies. Although Biogen's MS franchise isn't likely to lose its luster anytime soon, a new drug in development at Receptos (NASDAQ: RCPT) could eventually pose a threat, so let's take a closer look.

A huge market Spending on MS medicine per patient is estimated to total $52.36 per year, and that means MS is the second most costly specialty indication behind inflammatory conditions, such as rheumatoid arthritis.

Spending on MS therapy is high in part because of the large number of people that are diagnosed with the disease, but also because the cost of MS medications can run into the tens of thousands of dollars per year. Globally, roughly 2.5 million people have MS, including more than 400,000 people in America and the average cost per MS prescription has been estimated to be $4,510 in 2014, which is up 9.2% from 2013.

Over the past decade, one of the globe's top-selling therapies for MS has been Biogen's Avonex. Since winning FDA approval in 1996, Avonex has racked up billions of dollars in sales, including $3 billion in sales last year alone.

However, Avonex's status as a top seller has recently been threatened by a shift to a new class of oral drugs that can be taken by pill, rather than injected. Gilenya and Aubagio were the first two oral MS therapies to win the go-ahead from regulators, but Biogen's Tecfidera -- the third oral therapy to launch -- has become the best-selling among these oral alternatives.

Last year, Tecfidera's sales jumped an astonishing 232% to $2.9 billion, in part because doctors and patients are increasingly prescribing it instead of Avonex in newly diagnosed patients.

Another option coming By blunting the threat from other oral alternatives, Tecfidera insulated Biogen's overall market share, but since MS is a large and attractive market, drugmakers continue to hunt for next-generation solutions.

One of those solutions is Receptos' ozanimod. Ozanimod is currently in phase 3 trials that, if they are successful, would pave the way for an FDA filing for approval and potentially put it head to head in a battle for market share with Biogen.

Like Tecfidera, ozanimod is an oral drug that helps reduce MS relapses. However, unlike Tecfidera, ozanimod's clinical trials compare its efficacy against Avonex, rather than placebo.

In phase 2 trials, ozanimod, which reduces the activity of autoreactive lymphocytes, or white blood cells, thought to be a cause of MS, reduced the number of brain lesions in MS patients.

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Should Biogen Be Afraid of This Upstart?