Pfizer (PFE) filed a supplemental New Drug Application for Xeljanz which is its rheumatoid arthritis drug. The company is seeking to expand its label to include inhibition of progression of structural damage. The FDA accepted the application and should make a decision in early 2014. This doesn't seem like significant news just reading it, but it will play an important role for the revenue stream the company expects the drug to make. This in turn is important for investors.
The drug was originally approved in November 2012 to treat adults who had moderate to severe RA. Those who received the drug usually had no response or were intolerant to the widely used methotrexate. This particular drug has been around for a while and was originally developed for use in chemotherapy to treat various types of cancers like breast, leukemia, head/neck, and lung cancer. But the drug also was found safe in the treatment of autoimmune diseases like rheumatoid arthritis in smaller doses. Women who breast-feed or might get pregnant who are pregnant should not use it which opened the door for Xeljanz are a good alternative.
Xeljanz is also the first rheumatoid arthritis drug approved in a new class of medicines known as Janus kinase (JAK) inhibitors. This is popular for the treatment of RA because it restricts hematopoietic tissue expression preventing tissue inflammation which is a problem with rheumatoid arthritis.
Why is Pfizer interested in doing this?
On the back to its ORAL Start (A3921069), a 24 month phase 3 clinical trial, we can come up with our answer. Instead of rehashing out the entire study let me summarize its highlights:
- Ongoing two-year study in methotrexate (MTX)-naïve patients with moderate-to-severe active RA
- Patients received tofacitinib 5 or 10 mg twice-daily (BID) as monotherapy or MTX, met its primary endpoints at both the 5 and 10 mg BID doses.
- Tofacitinib was found to be superior to MTX with statistically significant changes shown in inhibiting structural damage
- Measurments were taken from a change from baseline in modified Total Sharp Score (mTSS), and in reducing signs and symptoms of RA
- Both primary endpoints assessed tofacitinib versus MTX at six months.
This study supports Pfizer's desire to have the label explain how it inhibits structural damage better than MTX. This will ad to the value of the drug because it will put it on the same playing field as competitors.
The Pfizer drug has competition, in the form of widely used TNF-alpha inhibitors such as Remicade, from Johnson & Johnson (JNJ). Remicade, when combined with MTX, also reduces signs and symptoms of rheumatoid arthritis inhibiting progression and structural damage the disease can cause. It also has been known to improve physical function in patients with moderate to severe rheumatoid arthritis. Investors are beginning to see why the label that Pfizer wants to change is important. As the company seeks to compete with these other drugs, it has to maintain a sense of competitiveness by being able to receive treatment for the same things but with better results if it's going to pick up the strong market share that is expected to.
Evidently the company believes this will add to the value of the drug that is expected to be a multibillion-dollar revenue stream. Over a 20 year period the company spent $1 billion in research and development on Xeljanz. It was the first new "oral-disease modifying therapy" introduced to adults with moderate to severe rheumatoid arthritis in the last 10 years. Originally listed at just over $2002 for 30 day supply or $24,000 a year, the drug is expected to hit $3 billion a year in sales. So the investment is well worth it.
The stock has been in a textbook bearish peak and valley trend since the end of April 2013. At that time the RSI indicator was over bought and the MACD indicator also peaked. From that time the stock has moved down and has been using the upper and lower Bollinger bands as support and resistance. There is a slight positive divergence in the RSI indicator, but it's not significantly supported by the MACD. For this reason I don't give it a whole lot of substance. The stock is definitely in a downward trend right now.
Pfizer continues to position this new drug on the market for rheumatoid arthritis. The recent request for a label change may not seem a significant move on the surface, but it is very important in the long term marketing efforts for the drug. Since it is in a new class of drugs, it has to show that it can be used for the same things as competitive drugs that are already on the market and possibly perform even better! If and when the FDA makes its decision the approval will be a significant win for Pfizer and investors as the drug journeys on its road to a three billion-dollar year revenue stream!