Allergan's Pipeline Is An Overlooked Benefit To Pfizer

| About: Allergan plc (AGN)
This article is now exclusive for PRO subscribers.

Summary

Pfizer's acquisition of Allergan will bring more than tax and synergy benefits.

Allergan and Pfizer's pipelines have little overlap.

Allergan has two possible blockbusters in its pipeline.

Pfizer is a company that likes acquisitions. It has spent over 190 billion acquiring pharmaceutical giants Warner Lambert, Wyeth, and Pharmacia. In its latest acquisition, or merger Pfizer (NYSE:PFE) is joining forces with Allergan (NYSE:AGN) in a move mostly done to decrease tax liabilities. As a shareholder of Pfizer I wanted to dig a little deeper and see if there was any other value to the deal besides a lower tax rate and rights to Botox. What I found was that while Allergan doesn't have a large research and development department they have a few drugs that could end up adding to the bottom line. Rapastinel and Relamorelin in particular I believe have blockbuster potential. Also because Allergan's pipeline has a relatively small footprint I don't think Pfizer will have the problems integrating it as it did with its past major acquisitions.

Rapastinel (GLYX-13)

  • Being studied for the treatment of Major Depressive Disorder, works as a NMDA receptor modulator
  • Given fast track designation by FDA in January of 2016
  • Phase III studies to start in 2016
  • Phase II studies showed the drug was well tolerated and produced statistically significant rapid and sustained antidepressant effects in patients who were not responding to their current medications
  • Produced effects in patients in as little as one day
  • Given once weekly as an IV infusion
  • Competition includes Johnson and Johnson's Esketamine and Vistagen with AV101
  • An oral version called NRX-1074 is entering phase II trials

Relamorelin (RM-131)

  • Currently being studied for the use of diabetic gastroparesis and constipation
  • Relamorelin is a novel pentapeptide that acts on the ghrelin receptor agonist
  • Current mainstay treatment of diabetic gastroparesis is metoclopramide which can have several severe side effects
  • Currently being studied in Phase IIb trials
  • Has been granted fast track status by the FDA for treatment of diabetic gastroparesis

Vraylar (Cariprazine)

  • Used to treat schizophrenia and bipolar disorder in adults
  • Recently approved in late 2015
  • Lots of competition from other more established medications
  • Sales will most likely never reach blockbuster status

Viberzi (Eluxadoline)

  • Approved at the end of 2015 for the treatment of irritable bowel syndrome with diarrhea
  • Works by peripherally acting on receptors in the GI tract, acting as a μ and κ opioid agonist and a δ opioid receptor antagonist
  • Is a class IV controlled substance
  • Current treatments for IBS with diarrhea are limited
  • A recently published study showed that patients taking Eluxadoline reached the primary end point 23.9% of the time while taking the 75mg dose while 25.1% of patients did with the 100mg dose versus 17.1 for placebo. Both doses were statistically significant.

Biosimilars

This is one area where the two companies do have significant overlap. Allergan has been developing its biosimilar pipeline with Amgen and three of its four therapies overlap with Pfizer's biosimilar program. These three are biosimilars for Herceptin (trastuzumab), Avastin (bevacizumab), and Rituxan (rituximab). Separetly Pfizer is working on a biosimilar for Humira (adalimumab) and Remicade (infliximab) while Allergan/Amgen are working on a biosimilar for Erbitux (cetuximab). Once officially merged Pfizer and Allergan will have to decide what to do with these duplicate biosimilars. It is possible one company is considerably ahead the other or one companies technology is superior and they will push ahead with only one biosimilar. It is also possible that management will try to capture as much market share as possible and market two biosimilars for the same drug. It will be interesting to see how this shakes out as the company goes forward.

In summary Allergen's pipeline is not often mentioned when discussing its merger with Pfizer but I believe it has potential to help push the share price higher. Both of the drugs I feel have the most potential have been fast tracked by the FDA and could add to the bottom line relatively soon. Combine these novel medications with Allergans biosimilars and you have a often overlooked but very valuable piece of the Allergen Pfizer merger.

Disclosure: I am/we are long PFE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.