Biogen’s Tecfidera, Amgen’s Enbrel tell a tale of pricing power and weakness

Amgen

Drug pricing may be a secretive affair in the U.S., but every quarter, earnings reports offer a peek behind the curtain. This time around, the numbers show pricing power dwindling away in some categories--but holding strong in others.

Take this tale of two drugs, both specialty meds, both big earners for their companies: Biogen’s multiple sclerosis med Tecfidera and Amgen’s TNF-alpha anti-inflammatory Enbrel. Biogen says it reaped most of its Tecfidera sales growth off price increases this year. Amgen says Enbrel's days of growing through price hikes are over.

Tecfidera came storming out of the launch gate in 2013, as doctors wrote thousands of prescriptions for the promising new pill. But growth has since slowed, partly because of safety concerns common to MS meds, partly because of competition with other oral meds from Novartis (Gilenya) and Sanofi (Aubagio). So how did Tecfidera post third-quarter growth of 10%, with U.S. sales of $845 million?

U.S. price increases, that’s how, according to the company’s quarterly filing with the Securities & Exchange Commission, highlighted on Twitter by @AndyBiotech. 

Deep in that document, Biogen disclosed that, compared with 2015, Tecfidera’s U.S. growth “was primarily due to price increases,” partly offset by discounts. That applies not only to Q3, but to the first nine months of 2016, the company said. Volume in the U.S. actually dropped.

Sales outside the U.S. barely ticked upward for the quarter, and what increase there was mostly came from volume growth, the company said.

When asked on the Q3 earnings call whether the pricing-fueled growth was sustainable, Biogen EVP Michel Vounatsos didn’t say yes or no; he did say commercial payers continue to put a squeeze on Tecfidera, and he doesn’t expect that to change. Growth? Vounatsos focused on the company’s plans to boost market share while the overall MS market in the U.S. appears to be shrinking. Tecfidera is Biogen’s “No. 1 priority,” he said. “We have a plan.”

Meanwhile, Amgen straight-up said that it’s bidding farewell to the days when price increases could fuel Enbrel sales. To keep formulary positions for Enbrel in 2017, the company struck some aggressive contracts with commercial payers, executives said, and they don’t expect Enbrel to benefit at all from price increases next year.

As Bernstein analyst Ronny Gal said in a Friday note, new entrants into the anti-inflammatory field, such as Novartis’ psoriasis drug Cosentyx, have likely “changed the dynamics in buyers and sellers,” and flat pricing in 2017 could go negative in coming years.

This is serious news for Amgen, Leerink Partners analyst Geoffrey Porges pointed out in a Friday note. Enbrel price hikes--net of discounts--accounted for about $500 million of the product’s revenue each quarter over the past two years, Porges calculated. That’s about one-third of its quarterly total. 

Plus, more than 80% of the company’s operating income growth for the past six quarters came from Enbrel price increases, he pointed out. “The end of the 20%+ price tailwinds for this $5bn+ franchise unwinds one of the company’s last remaining defenses against revenue and earnings erosion from biosimilar and branded competitors,” Porges said.

Meanwhile, Enbrel biosimilars are on their way, and though Amgen is fighting in court against a launch by Novartis’ Sandoz unit, that can only delay the pain so long. And volume is already on the decline, the analyst said “There is no reason to expect the volume trend to increase in coming periods,” Porges said, “and absent net positive price, Enbrel’s trajectory, and profit contribution, will be inexorably negative.

Amgen can take heart from the fact that it’s not alone. Novo Nordisk Friday cut its long-term growth forecasts, citing pressures on its diabetes meds. Pricing pressure took a big bite out of Eli Lilly’s sales of its insulin mainstay Humalog. And if analysts are right about discounting pressure in the MS market, Biogen may find that 2017 puts an end to its pricing-fueled Tecfidera growth, too.

Special Report: Top 20 drugs in 2020 - Enbrel - Tecfidera

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