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4 Large Drug Stocks to Watch as IBD Market Gains Traction

In recent years, there has been a surge in the prevalence of gastrointestinal disorders, particularly inflammatory bowel disease (IBD). It includes two conditions, Crohn's disease (“CD") and ulcerative colitis (“UC”), both characterized by chronic inflammation in the gastrointestinal tract.

There has been a consistent rise in ulcerative colitis and Crohn's disease cases due to genetic factors, environmental factors and lifestyle changes. In addition, immune system irregularities, higher diagnosis rates, increased focus on early diagnosis and favorable reimbursement policies in developed countries are driving demand for IBD treatments. According to a report by Fortune Business Insights, the global IBD market is expected to witness a CAGR of 5.7% from 2023 to 2030.

Several big drugmakers have products to treat UC and CD and are also developing new medicines with novel mechanisms of action to help patients achieve long-term clinical remission. Some of the key players are AbbVie ABBV, J&J JNJ, Eli Lilly LLY, Pfizer PFE, Novartis, Merck, Sanofi, Gilead and Amgen. Some of these companies have also in-licensed rights to IBD candidates with improved clinical profiles from smaller drugmakers in the past 2-3 years.

For example, in June, Merck acquired small biotech Prometheus Biosciences, which added MK-7240 (formerly PRA023) to its pipeline. MK-7240, a novel TL1A inhibitor, is being developed for the treatment of immune-mediated diseases, including UC, CD and other autoimmune conditions. In October, Sanofi in-licensed rights to jointly develop and commercialize Teva Pharmaceutical’s IBD candidate, TEV’574, also an anti-TL1A therapy. TEV’574 is presently being evaluated in a phase IIb study for UC and CD.

Out of the abovementioned companies, we are discussing four big drugmakers in detail. We believe these have the potential to make the most of the prospects in this growing healthcare segment.

AbbVie has one of the strongest portfolios of immunology drugs and pipeline candidates. Its newer immunology products, Skyrizi and Rinvoq, are performing extremely well, bolstered by approval in new indications, which should support top-line growth in the next few years. Rinvoq is approved for both CD and UC. While Skyrizi is approved for CD, regulatory applications for UC are under review in the United States, with approval anticipated in 2024.

With approvals for many new indications, sales of these drugs could be higher in future quarters. These have the potential to replace blockbuster drug Humira, which has started facing generic erosion in the United States since early 2023. Skyrizi and Rinvoq are expected to collectively exceed the peak revenues achieved by Humira by 2027. AbbVie expects combined sales (risk-adjusted) of Skyrizi and Rinvoq to be more than $17.5 billion by 2025 and more than $21 billion by 2027

J&J also boasts a strong immunology portfolio with drugs like Stelara and Tremfya. Stelara, a much older drug, is already approved to treat CD and UC. Stelara is also being studied for pediatric ulcerative colitis and pediatric Crohn's Disease in phase III studies. Stelara generated sales of more than $8 billion in the first nine months of 2023.

J&J’s other successful and rather newer immunology drug is Tremfya, which recorded sales of $2.2 billion in the first nine months of 2023. Tremfya, now approved for psoriasis, is in phase III development for CD and UC. J&J expects Tremfya to be a $5 billion product with potential approvals in CD and UC.

Eli Lilly gained FDA approval for Omvoh (mirikizumab) in October for the treatment of moderately to severely active UC in adults. It was the first Lilly drug to be approved for a type of IBD in the United States and is important for the growth of its immunology portfolio.

Omvoh is expected to be launched in the United States in a few weeks.It has already been launched in Japan and the EU for the UC indication, with planned additional launches in the EU later this year.The drug is in late-stage development for Crohn's disease,with regulatory applications expected to be filed in 2024.

Pfizer gained FDA approval for its oral, once-daily, selective sphingosine-1-phosphate (S1P) receptor modulator called Velsipity (etrasimod) to treat moderately to severely active UC in October. Etrasimod is also in late-stage development for CD. Etrasimod was added to Pfizer’s inflammation and immunology portfolio with the March 2022 acquisition of Arena Pharmaceuticals.

Other than these four companies, Amgen is developing efavaleukin alfa for UC in mid-stage studies and Gilead plans to initiate a phase II study on an oral first-in-class TPL-2 inhibitor for ulcerative colitis later this year.

Conclusion

Investors keen on opportunities in the healthcare space should closely monitor the growth trajectory of the IBD market as it holds great promise. The evolving treatment landscape, driven by innovative therapies and a focus on early diagnosis, positions the market for sustained growth in the coming years. As the demand for effective and patient-centric IBD treatments rises, investment in this dynamic sector could prove to be rewarding.

AbbVie, J&J, Lilly and Pfizer have a Zacks Rank #3 (Hold) each currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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