Is the tap running dry for Pfizer Inc. (PFE)? Pfizer's tap sprung a leak in 2011 when U.S. patent protection for two of its biggest drugs, Lipitor and Protonix, ended. Generics were quickly waiting in the wings to start a new flow of cash away from Pfizer. Other major drugs will face similar demise into the generic watershed over the next few years.
Pfizer is a biopharmaceutical company, focusing on the discovery, development, manufacturing and sale of drugs for people and animals globally. Pfizer's market cap of $177.59 billion and P/E ratio of 20.1, higher than the industry average of 17.6, makes it a worthy stock to investigate. The company provides a solid stock price performance, growth in earnings per share and net growth that is compelling.
Is Pfizer's pipeline of possible replacement drugs large enough to open the waterfall of investments? Currently, Pfizer has 87 drugs in its pipeline in either early or mid-stage trials. Eleven drugs, however, are reaching registration. Nineteen are approaching registration in Phase 3 trials.
Pfizer is smart enough to have a broad range of drugs in the pipeline. The basket mix breaks out with a balanced blend of drugs - Vaccines 5%, Inflammation and Immunology 14%, Cardiovascular and Metabolic Disease 17%, Neuroscience and Pain 20%, Oncology 26% and other drugs complete the pipeline at 18%.
This strategy appears to have Pfizer out in front over its rivals. Eli Lilly and Company (LLY) is also gazing into a bucket of loss of revenue due to patent expiration. Eli Lilly finds itself with a similar pipeline of 62 drugs in phase 1 through phase 3 stages. Bristol-Myers Squibb Company (BMY) has 46 drugs in exploratory stages and seven in registration. Merck & Co Inc. (MRK) asserts it has 35 drugs in Phase 2 or Phase 3 trials with two under review. Johnson & Johnson (JNJ) is placing hope in 18 drugs that are in Phase 3 clinical trials or under FDA review for approval.
Pfizer is counting on one or two big windfalls from its mix of drugs. Most likely to succeed are Bosutinib, Tofacitinib, and Eliquis. Lipitor leaves big shoes to fill.
Bosutinib recently finds FDA approval favorable for treating chronic myeloid leukemia (CML). CML represents 15% of all leukemia diagnoses around the globe. CML is a white blood cell cancer. It is one of the four most common types of leukemia. Around 5,000 new cases receive diagnoses each year. Other drugs and treatments are available for CML. But, some patients suffer serious side effects or do not respond well to those treatments. Bosutinib could offer potential options for these patients.
Tofacitinib could be a big winner. The drug is reaching registration for treating rheumatoid arthritis (RA). What makes this drug unique? When it finds approval, it will be the first for rheumatoid arthritis in a new class of medicines known as Janus kinase (JAK) inhibitors. In addition, it is the first time in 10 years a new oral disease-modifying antirheumatic drug comes to market.
JAK drugs disrupt the signaling pathway that sends extra-cellular messages into the cell nucleus that influence DAN transcription. In non-medical terms, this means it helps patients improve by inhibiting the production of inflammation in joint tissue. It causes swelling to reduce.
Pfizer is seeking drug approval in Japan and Europe as well. The drug is also in Phase 3 trials for treating ulcerative colitis and psoriasis. Some analysts peg a potential $2 billion annual market for this drug.
Eliquis, a blood thinner, is looking extremely promising as a watershed drug. However, Pfizer has hit a snag with the FDA. The agency is requesting Pfizer provide more information about managing and verifying data from a larger study that compared Eliquis with warfarin, the current treatment for millions of people with the heart rhythm problem arterial fibrillation. Cardiologists are not pessimistic about the FDA decision. Physicians have been following this drug closely and are supportive of the drug as a replacement for warfarin, which is inexpensive but demands careful monitoring to prevent dangerous side effects. While the FDA's decision was surprising, the support of cardiologists and further studies should move this drug forward. One analyst predicts the market for this drug could easily approach $2.5 billion annually.
In Europe, Pfizer is finding approval from the European Commission for its renal cell cancer drug, Inlyta. The EU approval provides advanced renal cell carcinoma patients with additional treatment options. In addition to Inlyta, Pfizer has two additional drugs coming on the market for kidney cancer - Sutent and Torisel.
Pfizer is working with privately held VLST, a biotechnology company. Pfizer and VLST will join forces on a potential immune therapy for cancer. VLST will begin testing the drug, known as CP-870. The drug is in early stage trials. $5 million is set aside to finance the mid-stage studies. Pfizer and VLST will share the rights to develop and market the drug as a cancer vaccine or a therapy that will stimulate the immune systems of those fighting cancer.
Pfizer and Athersys, Inc. (ATHX) are also collaborating to develop stem cell therapies to treat inflammatory bowel disease. The drug is currently in stage 2 trials. The technology shows promise in reducing inflammation, protecting damaged tissue and forming new blood vessels. Pfizer is covering the costs of the study. If successful Athersys will benefit from utilizing the information for other applications treating heart attack, stroke, traumatic brain injury and blood diseases.
This drug pipeline could have Pfizer beating earnings estimates and propel the stock price 20% to $30 a share by the end of next year. I would not count Pfizer out of the race. The Lipitor cash cow may be drying up, but new drugs in the pipeline could just prove to be the gusher Pfizer is after.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.