Pfizer Looks Elsewhere In Derm, Finds Anacor

| About: Pfizer Inc. (PFE)

Pfizer (NYSE:PFE) lost its chance at a scooping up the number four player in dermatology when its $160 billion Allergan acquisition fell apart under US government pressure. Now the group is spending a tiny fraction of that to get a small collection of skin-disorder products with the takeout of Anacor Pharmaceuticals (NASDAQ:ANAC).

The $5.2bn price tag on the deal puts a firm valuation on the company’s two most promising projects, the eczema cream crisaborole now before US regulators and the phase II psoriasis agent AN2898. Yet it will do very little to satisfy Pfizer investors’ hunger for a major strategic move – either a big megamerger or a breakup that could change the story from stagnant growth.

Anacor blimey

New York-based Pfizer will spend $99.25 a share on Anacor, representing a 55% premium on the California-based target’s close on Friday. Pfizer said it expects the deal to be dilutive until 2018 – its shares opened down, but less than 1%, this morning.

In splashing for Anacor, Pfizer picks up some low-risk assets – first is the nail fungus treatment Kerydin, marketed by Novartis’s Sandoz division, and crisaborole, now dubbed Eucrysa and awaiting an FDA decision by January 7, 2017. EvaluatePharma forecasts the former to pull in $66m in royalties in 2022, while crisaborole should earn $1.8bn – Pfizer estimated peak sales could reach $2bn.

Crisaborole will be breaking into a swiftly changing market, in which the Sanofi/Regeneron Pharmaceuticals project dupilumab is looming large – currently carrying a $1.3bn forecast in that indication, according to EvaluatePharma forecasts.

The shape of the marketplace should be affected by the method of delivery – small molecule crisaborole in a topical cream could be favored by payers over the injected biological dupilumab.

The Anacor project showed a statistically significant improvement over placebo in the percentage of patients reaching an investigator’s score of “clear” or “almost clear” after 29 days of treatment in its phase III trial (Anacor shows the power of positive phase III data, July 14, 2015).

With 33% and 31% of crisaborole patients in the two phase III trials achieving a score of clear or almost clear with a minimum two grade improvement, it should be fairly competitive with dupilumab’s 37% and 38% in a 300mg weekly or every two week dose (Dupilumab grabs atopic dermatitis head start, April 1, 2016). A rolling biologics license application for dupilumab is underway and should be complete in the third quarter.

Get it on the formulary

Pfizer might have missed out on the fourth-biggest dermatology player, but Anacor is forecast to be the fifth biggest. Anacor is expected to have a total of $1.8bn in dermatology sales in 2022, trailing Allergan by only $200m.

Thanks to new psoriasis drug Cosentyx, Novartis is expected to dominate this space with more than $4bn in sales, and new psoriasis competitors in Eli Lilly’s (NYSE:LLY) Taltz and Johnson & Johnson’s (NYSE:JNJ) guselkumab are also expected to play a big role.

Pfizer, on the other hand, has zero prescription sales in dermatology, and should perhaps be grateful that Anacor has planned to hire 400 sales representatives to support a dermatologist-focused launch.

Even if crisaborole has an edge on dupilumab and the next generation of eczema agents, either as first-mover or on price, a careful pricing strategy will still need to be employed as genericzsed steroids are the standard of care. Maximizing crisaborole sales to justify the $5.2bn payout will be essential – a disappointing launch would be another problem Pfizer does not need.