Pfizer (NYSE:PFE) has a reason to cheer as Bosutinib, a rare disease drug for the treatment of chronic myelogenous leukemia (CML), has received the U.S. Food & Drug Administration (FDA) nod. CML is a cancer of white blood cells. The drug blocks rapid growth of abnormal white cells in the patients. The event lends support to our expectation about Pfizer grabbing a larger share of the global oncologic drugs market, going forward.
The drug approval comes at an opportune time and brings some breather to the company after a series of setbacks. While the FDA delayed approvals for some of its most promising drugs including Eliquis and Tofacitinib several times, it rejected Tafamidus, Pfizer’s central nervous system rare disease drug, seeking more data and clinical trials to prove the efficacy of the drug. In addition, the company had to dump its Alzheimer drug Bapineuzumab.
The drug market for individual rare disease, more commonly known as orphan disease, is not as large as other conventional drug markets due to a limited number of patients per disease. For the same reason, the area has historically not been the main focus for big pharmas. However, with looming patents expiry, pharmaceutical companies are leaving no stone unturned to offset revenue losses. Orphan drugs have historically grown faster than other drug markets, and the trend is expected to continue. This has led to more and more pharmaceutical companies focusing on orphan disease drugs as they realize the potential. Further, better patent protection and government support, including tax rebates, have also caught their eyes. We will discuss more about the rare disease market in a separate note.
While the revenue potential of the drug is yet to be seen, the drug will strengthen Pfizer’s evolving oncologics segment by adding an additional revenue stream. We expect the company to more than double its revenues and gross profits in the oncologic division. Consequently, oncologic drugs contribute nearly 10% to our $25 price estimate for the company even as the 2011 revenue from oncologic drugs are about 5% of total revenues. Much higher sales from the drug could also lend support to gross margins due to higher premium commanded by orphan drugs.
We currently have a $25 price estimate for Pfizer, which is 5% above the current market price. We are in the process of revising our price estimate to reflect the recent developments and the earnings.