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Watch Out Amgen, Here Comes Mylan


Neulasta has been one of Amgen 's (NASDAQ: AMGN) crown jewels for years, but following FDA approval of Mylan 's (NASDAQ: MYL) Neulasta biosimilar this week, Amgen could see Neulasta's revenue slow to a trickle. Is Mylan about to deliver a big blow to Amgen's market share? Read on to find out what's at stake for these companies and their investors.

Some background

Chemotherapy kills cancer cells, but it can also kill neutrophils, a type of white blood cell, and that can result in neutropenia, a life-threatening condition that puts patients at risk of infection.

A man in a suit with fists raised as if to fight.

Image source: Getty Images.

In 1991, Amgen's Neupogen won approval to prevent neutropenia by stimulating the production of neutrophils, but while Neupogen is an effective treatment, its use requires daily injections that increase patient burden.

To address Neupogen's shortcomings, Amgen developed Neulasta, a long-lasting formulation of Neupogen that's dosed every chemotherapy cycle instead of daily. It was approved in 2002. One single dose of Neulasta is comparable to an average 11 daily injections of Neupogen, according to two phase 3 studies.

Neupogen's patent expired at the end of 2013, and Neupogen biosimilars have been available since Teva Pharmaceutical  launched Tevagrastim in Europe in 2013 and Novartis (NYSE: NVS) launched Zarxio in the U.S. in 2015. The availability of Neupogen biosimilars has caused Amgen's Neupogen sales to tumble, but it's had little effect on demand for Neulasta.

In 2013, Amgen's Neupogen sales were $1.4 billion and Neulasta's sales were $4.4 billion; in 2017, Neupogen's sales were $549 million and Neulasta's sales were $4.5 billion, or 20.6% of Amgen's total revenue.

A chart shows annual sales of Neupogen have fallen since 2013 and slightly increased for Neulasta.

Data source: Amgen. Chart by author.

A Neupogen-like reckoning coming?

Neulasta's long-standing dominance could be coming to an end. Its patent expired at the end of 2015, and Amgen has been locking horns in court with generic-drug makers to prevent Neulasta biosimilars ever since.

One of the companies closest to challenging Neulasta's market share is Mylan. Last October, the Food and Drug Administration issued a complete response letter to Mylan's application for a Neulasta biosimilar, but in January, Mylan told investors it had addressed the FDA's questions and that an approval of its biosimilar, Fulphila, could be granted this year.

That FDA approval came this week, and Mylan expects to begin selling Fulphila within the next few weeks. When that happens, Fulphila will become the first biosimilar to Neulasta available in the United States.

Mylan hasn't announced what Fulphila's price will be yet, but since it needs to convince payers to encourage its use, you can expect the cost will be significantly lower than Neulasta's. According to GoodRx, the price for one 6mg/0.6ml syringe of Neulasta is $6,364.43. Amgen could respond with its own price cuts to maintain market share, but even if it does that, Neulasta revenue has likely peaked.

That's because although Mylan's Fulphila will be the first Neulasta copycat to win U.S. approval, it isn't likely to be the only one to get the nod. After receiving a complete response letter in 2016, Novartis' plan is to refile its Neulasta biosimilar for approval in 2019. Pfizer  and Coherus  are also in the hunt with Neulasta biosimilar programs, and Coherus expects to secure an FDA green light for its biosimilar as soon as late this year.

A big shift = big opportunity

Over the past 30 years, generic alternatives to traditional small-molecule drugs have reshaped the prescription drug market, and now, the accelerating approval of biosimilars could similarly disrupt the market for biologic drugs  and, in the process, generate billions of dollars annually in sales.

While generic small-molecule drugs account for about 90% of all prescriptions written in the U.S., biosimilars have only captured single-digit market share in the U.S. so far. As more biosimilars become available and price wars drive prices lower, their market share should improve. Between 2010 and 2015, biologics accounted for 70% of U.S. spending growth on prescription medicines, and given there's a significant need to rein in healthcare spending, there are strong tailwinds supporting the use of biosimilars, including Mylan's Fulphila.

The potential to capture sales away from biologics, including Amgen's Neulasta, makes biosimilar drugmakers incredibly intriguing investments to own, but don't count Amgen out altogether. In an if-you-can't-beat-them-join-them move, Amgen's got its own pipeline of biosimilars advancing to market. But Amgen will be hard-pressed to offset declining sales of Neulasta. That's why, even though I own shares in both Amgen and Mylan, I think Mylan's the better of the two stocks to buy right now.

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Todd Campbell owns shares of Amgen, Mylan, and Pfizer. His clients may have positions in the companies mentioned.
The Motley Fool recommends Mylan. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: MYL , AMGN , NVS



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