Pfizer’s Pipeline: Drugs To Watch Post Lipitor

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Pfizer‘s (NYSE:PFE) blockbuster cholesterol drug Lipitor lost its patent late last year, and this has urged the company to keep hunting for new drugs that can match Lipitor’s commercial success. Lipitor recorded $9.5 billion sales in 2011, but we expect the sales to fall sharply this year. Pfizer has lately tried to focus more on its pharmaceutical business by divesting its baby nutrition business. The animal health business would also be up for sale soon. The rationale is that pharmaceuticals offer better profit margins and leave more cash to invest in research and development. Lately, competition in the pharmaceuticals space has increased manifold with several companies coming out with drugs for similar indications. Here we try to explore Pfizer’s product pipeline and prospects of its recently approved drugs. The company competes with Abbott Labs (NYSE:ABT), Merck (NYSE:MRK), Roche (PINK:RHHBY) and Johnson & Johnson (NYSE:JNJ).

We maintain a $25 price estimate for Pfizer. The price estimate derives 32% value from diversified legacy drugs and alliances, which covers baby nutrition and animal health, among other things.

See our complete analysis for Pfizer

Drugs to watch out for

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Inlyta was approved for the treatment of advanced kidney cancer, a.k.a renal cell carcinoma (RCC) in January 2012. Pfizer already has a RCC drug named Sutent, and Inlyta is more like a follow-on drug to Sutent. The RCC drug market is crowded with many well-developed products like Bayer’s Nexavar, Novartis’ Afinitor, Roche’s Avastin, GSK’s Votrient and Aveo’s Tivozanib. Hence we think this is a difficult space for Pfizer to sustain an edge. However with a range of drugs such as Intyla, Sutent and Toricel, it is well equipped to defend its turf. Oncologics form nearly 10% of Trefis price estimate for Pfizer.

Tofacitinib, an auto-immune drug, is a niche oral medication for Rheumatoid Arthritis, among other drugs that are injectable. According to the FDA’s recent verdict, Tofacitinib should be prescribed to patients who do not show encouraging results to other medications. That means, Tofacitinib has a market of its own and is expected to gross revenues in the range of $1-1.5 billion.

Lyrica, a central nervous system drug, could have been the drug to partially replace Lipitor, but Pfizer recently suspended its Phase III trials for neuropathic pain in HIV patients. However, Lyrica is a successful drug approved by the FDA for several other indications, such as neuropathic pain associated with diabetic peripheral neuropathy, post herpetic neuralgia and epilepsy. There are around 1 million HIV patients in the U.S. alone and the number is growing, and the drug’s failure among HIV patients was a major let down.

Eliquis is another drug that is registered for the FDA’s approval for the prevention of stroke and systemic embolism in patients with atrial fibrillation (AF). In May 2011, Pfizer announced regulatory approval for Eliquis in 27 countries of the European Union (EU) for the prevention of venous thromboembolic events (VTE) in adult patients that have undergone elective hip or knee replacement surgery. However, the AF market is more fetching, and the cardiovascular drug is under review in Europe for AF indication. Eliquis could be a multi-billion dollar drug and could gain market share, if the candidate is approved for AF indication.

Pfizer’s R&D focus in oncologics is conspicuous, but a failure to come up with a solid drug has raised questions. Nonetheless, it has nearly 12 drugs under registration and another 20 odd drugs in phase III trails. We expect Pfizer to be able to roll out at least a few successful drugs in near future. However, we are skeptical about its ability to make up the revenue loss from Lipitor’s patent expiry.

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