The Centers for Disease Control and Prevention (CDC) has recommended one of the Pfizer‘s (NYSE:PFE) blockbuster drugs, Prevnar 13, for adults aged 19 years or older with impaired immune system. Prevnar is a vaccine currently used for preventing invasive pneumococcal diseases in infants and young children. The recommendation will give a mild boost to Prevnar’s franchise sales as health plans usually wait for the recommendations from the CDC’s Advisory Committee on Immunization Practices (ACIP) to cover a vaccine’s use. ((CDC Advisory Panel Recommends Pfizer’s Prevnar 13 for Immunocompromised Adults, Fox Business, June 20 2012)) The news certainly brings a breather for the company, which has been hunting for new drugs that can match Lipitor’s commercial success post the latter’s patent expiry.
Our price estimate for Pfizer stands at $25, implying a premium of 10% to the current market price.
The company will however have to wait to realize the full sales potential of Prevnar as the ACIP is yet to recommend a much broader use of the vaccine, for adults aged 50 years and above. While the FDA approved Prevnar for adults 50 and older last December, the ACIP is waiting for the efficacy results of an ongoing clinical study of Prevnar 13 before deciding on broader recommendation. Pfizer expects to complete the trials by 2013.
We expect the Prevnar sales to jump in a few years following the broader recommendations even as the vaccine would be competing with Merck‘s (NYSE:MRK) Pneumovax. In 2011, Prevnar generated about $3.7 billion in sales.
According to the World Health Organization estimates, nearly 1.6 million people die each year from pneumococcal infections. ((Panel Recommends Pfizer’s Prevnar for Immune-Weakened Adults, Bloomberg Businessweek, June 20 2012)) Pfizer commands nearly 20% market share in anti-infectives drug market, and we expect it to penetrate further with help from a range of products such as Prevnar/Prevenar, Zyvox, Vfend and Zosyn. If Pfizer doesn’t get the much awaited broader recommendation from the APIC, it could have a significant impact on the company’s value as Prevnar & Prevenar division contributes nearly 12% value to our $25 price estimate.
By tweaking the chart below, you will see how a change in Prevnar & Prevenar’s market share in anti-infectives drug market impacts our price estimate for the stock.