Pfizer (PFE) is facing several problems at the moment. First, its patent on Lipitor is expiring. Second, it terminated the latest trial for Lyrica. Lyrica, which is intended to treat painful diabetic peripheral neuropathy, failed in its Phase III study. Lyrica was supposed to be the replacement drug for Lipitor, in terms of revenue for the company.
Lyrica was meant to be a drug that would treat neuropathic pain in patients with HIV, which is characterized by a form of nerve damage that results in burning pain usually beginning in the feet. The termination of the trial was the result of a decision made by the external Data Monitoring Committee (E-DMC) that performed an interim study of the trial. At this stage, it appears that the trial was not stopped for safety reasons.
The trial followed "A Randomized, Double-Blind, Placebo-Controlled, Parallel-Group, Multicenter Trial of Pregabalin Versus Placebo in the Treatment of Neuropathic Pain Associated with HIV Neuropathy" format. This basically means that half of the subjects were given Lyrica and the other half were given a placebo without knowing what they were receiving. The reason that the E-DMC elected to stop the trial was because there were virtually no differences in the results that were experienced by the real test subjects as opposed to those who were only taking the placebo drug.
As there are no treatments at present to deal with this form of neuropathic pain that is so closely associated with HIV, Pfizer has really missed its chance to make an impact on the pharmaceutical arena and will have to start looking elsewhere for success. Lyrica is approved in many countries as well as in the U.S., but not for the treatment of neuropathic pain in HIV sufferers.
The company also performed a "Multicenter, Double-Blind, Randomized Withdrawal Efficacy and Safety Study of Pregabalin in the Treatment of Patients with Inadequately Treated Painful Diabetic Peripheral Neuropathy" in order to see if the same drug, Lyrica, would be effective in treating the highly painful neuropathy experienced by diabetics. However, like with the trial to test the use of Lyrica in neuropathy associated with HIV, the results were not statistically significant.
The bottom line is that Lyrica has fallen short of expectations in no less than two pain studies. The company, which is trying so desperately to find a way to recover from the losses it's experiencing due to the expiration of several patents, now has to deal with two more failures. Lyrica would have provided the company with new growth avenues for the drug, which could have potentially combated the losses that it is experiencing due to the expiration of its patent on Lipitor. As things stand, the company will have to consider taking another direction. Despite this, Lyrica sales did increase by 16% in the first quarter, although this is not enough to account for the losses involved in no longer having the Lipitor patent.
Pfizer now will need to adapt in order to remain as profitable as possible now that it has lost the valuable patents for its main drugs. Lipitor, the company's most profitable drug and the best selling drug in pharmaceutical history, is now no longer the favorite as cheaper patents are introduced to the market. Clearly the company needs to do something in order to counteract this problem.
Pfizer's response to the situation is seemingly to downsize. The company is attempting to shed unnecessary expenses by selling such things as its baby formula company to companies like Nestlé. It also plans to sell its animal medicine business next year. In addition, Pfizer is choosing to slash its budget and focus only on those areas of healthcare science that show the most promise, namely Alzheimer's and cancer treatments. Stockholders can only hope that this attempt to reinvent itself will be what puts Pfizer back in the game.
An examination of Pfizer's competitors shows that the competition is quite strong. Abbott (ABT), for example, recently bought a potential kidney medication for a $110 million from a privately held Danish company, Action Pharma. The main purpose of the drug is to protect patients who are undergoing cardiac surgery from suffering severe kidney injuries that can arise from a lack of blood flow during surgery.
Merck (MRK) has recently teamed up with Trevena in a project aimed at "exploiting the latter's technologies to screen for biased ligands against a specified receptor." The idea is to develop drugs that increase specificity, as well as enhance efficacy and reduce side effects. Should the trials that are currently under way be successful, it will mean good things for both Merck and Trevena, marking both as good horses to bet on.
Novartis (NVS) is not having as much luck. Recently it was discovered that a cheaper drug than the Lucentis drug marketed by Novartis is just as effective at combating age-related macular degeneration. The cheaper drug, Avastin, is not yet licensed. Doctors nevertheless are increasingly prescribing the cheaper drug over the more expensive one in an attempt to make the treatment for age-related macular degeneration more affordable for the many patients suffering from it. Novartis will need to come up with an answer for the sloping sales.
Sanofi (SNY) is maintaining a consistently pessimistic outlook for the coming year even though it experienced an increase in profits in the first quarter. The company expects that its profits will continue to slide over the coming months. Like Pfizer, the company is suffering from the fact that its best-selling medications are being undermined by cheaper generics, and this is causing sales to decrease significantly with an unfortunate backlash for the company.
There's a clear split, currently, with the top drug companies. Pfizer, consistently a company at the top tier of the industry, faces the possibility of being on the losing side right now. It needs, more than ever, to respond to the loss of Lipitor revenue. If it can't, it may be doomed until it comes up with something -- and that timeline could be very long indeed.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.