In 2007 Pfizer (PFE) formed a partnership with Bristol-Myers Squibb (BMY) to develop the anti-coagulant drug "Eliquis" that reduces blood clotting. In this partnership, Pfizer and Bristol-Myers share the profits 60:40 respectively. The FDA approved this drug in late 2012 and both companies are now moving ahead to develop supplements to treat patients more effectively.
Anti-Coagulant drug-the future blockbuster drug
After receiving the approval for Eliquis, Pfizer and Bristol-Myers Squibb in July, 2013 also received the acceptance by the FDA for review of Eliquis Supplemental New Drug Application, or sNDA. This is an application that enables the company to innovate or make changes in a drug that has already been approved. The FDA will be giving its decision regarding this application on March 15, 2014. Eliquis is used to treat venous thromboembolism, or VTE patients and its sNDA will enable it to prevent the probability of deep vein thrombosis, or DVT, a blood clot in veins, in the adult patients who are operated for their hip or knee replacement surgery.
It is also able to treat pulmonary embolism, or PE, a blood clot blocking in the main artery of the lung, which can be fatal. After the six month Phase III AMPLIFY trial of this drug on 5,395 patients, the company found Eliquis to be up to 69% more efficient compared to "warfarin" therapy, which is used for reducing a major bleeding problem in adult patients who have undergone hip or knee replacement surgery. The AMPLIFY trial is a randomized, multicenter trial to evaluate the efficacy of Eliquis in treating VTE and PE patients
On August 31, 2013, the sub-analysis of 30-day Eliquis Phase II ARISTOTLE trial results were declared, which evaluate the safety and efficacy of Eliquis in preventing strokes in comparison to warfarin. This trial Phase showed consistent reduction in strokes with less bleeding and a reduction in overall fatalities. The patients dosed with warfarin had a two times higher rate of major bleeding and death during the 30-day period compared to Eliquis.
Additionally, Eliquis also reduces the probability of strokes by 21%, major bleeding by 31%, and mortality by 11%. It is expected that VTE is prevalent in nearly 40%-60% patients who have undergone knee or orthopedic surgery. We expect Eliquis will enable both companies to build their presence in the VTE market and can be considered as a blockbuster drug. Biotechnological analysts expect Eliquis has a peak sales potential of $4.2 billion by 2017. After reporting such significant results, we believe Eliquis is capable of achieving higher than expected sales and will improve the companies' financials. Eliquis also received approval for treating hypertension patients. We expect these dual benefits will foster the earnings for both companies and will increase their stock prices too.
On the other hand, in June 2013, the FDA issued "complete response letter" for the sNDA of Johnson & Johnson's (JNJ) "Xarelto" anti-coagulant drug. The FDA issues a complete response letter after the complete evaluation of a drug, and FDA will recommend actions that are necessary to receive final approval. The company received the response letter for this sNDA based on the success of trial Phase III results on 15,526 patients, where Xarelto was able to reduce Cardiovascular Death by over 30%.
ACS occurs when a blood clot blocks the coronary artery, which results in the reduction in blood supply to the heart. This is uncommon, but may result in heart attack or even death. It is estimated that nearly 1.2 million patients in the U.S. are diagnosed with ACS annually. XARELTO® is approved in the U.S. for three indications encompassing six uses:
1. to reduce the risk of strokes and blood clots in people with atrial fibrillation not caused by a heart valve problem
2a. to treat people with deep vein thrombosis and 2b. with pulmonary embolism, and 2c. to reduce the risk of recurrence of DVT or PE;
3a. to reduce the risk of blood clots in the legs and lungs of people who have just had knee replacement surgery and 3b. those who have just had hip replacement surgery.
To date more than 5 million patients globally are treated with Xarelto and more than 2 million have been prescribed for Xarelto in the U.S.
JNJ has also received approval for Xarelto in the U.S. to treat DVT and PE, and it is able to reduce strokes and the recurrent DVT and PE, as the thickening of blood and blood clots cause heart attacks and can be fatal. In May 2013, Xarelto was approved in the European Union to reduce cardiovascular death and strokes in the patients suffering from ACS. The company reported Xarelto sales of $347 million in the first half of 2013 compared to $76 million in the same period last year.
Concluding with fundamentals
Enterprises Value, or EV
Book value per share, or BVPS
Johnson & Johnson
Pfizer's stock has hovered around $29 per share over the last six months with an EV of $192.3 billion and a trailing EV/EBITDA of 7.8, the lowest among the three. This ratio represents the relationship between the company's market value, after adjusting for its cash balance and debt level, compared to its earning capacity. In comparison to the other two companies, Pfizer looks weak. However, we can't ignore the growth opportunities present in the company with its new developments.
Additionally, Pfizer has repurchased shares of worth $8.7 billion since the beginning of the year as of July 2013. It also raised its repurchase authorization by $10 billion, which is in addition to the remaining $3.1 billion authorization. Backed by this repurchase plan, Pfizer increased its EPS guidance from $1.44-$1.59 to $3.07-$3.22. We expect this share repurchase plan, coupled with the expected approval of its new drug application, will boost investors' confidence and may drive the stock price higher than the current level.
On the other hand, Bristol-Myers is topping on all the valuation metrics with an EV/EBITDA of 18.62 and a ROE of 23.14. Bristol-Myers has a strong BVPS of 56.8 times, representing the strong fundamentals present in this company. Meanwhile, J&J has the largest EV and relatively strong fundamentals in terms of EV/EBITDA and ROE and can be considered as an addition to investors' portfolios.