Pfizer’s Plan B In Immuno-Oncology: Collaboration With Smaller Companies

by Trefis Team
+9.89%
Upside
31.94
Market
35.10
Trefis
PFE
Pfizer
Rate   |   votes   |   Share

Pfizer (NYSE:PFE) recently signed a contract with Cellectis, a French biotech company. [1] The deal involves a research collaboration between the two to develop cancer drugs that leverage the body’s immune system to fight cancer cells. Under the contract terms, Pfizer will pay Cellectis an initial amount of $80 million and also finance its research and development. [1] In addition, the biotech firm may also receive additional payments on achieving development, regulatory approval and commercialization-related milestones. The deal underscores the importance of immuno-oncology drug development. Competitors such as Merck (NASDAQ:MRK) and Bristol-Myers Squibb appear to have more promising immuno-oncology drugs under development, and that could impact Pfizer in the near future. It makes sense for Pfizer to enter such collaborations, and perhaps even acquire smaller innovative biotech companies, given its recent falling out with AstraZeneca. Pfizer had initially tried to acquire AstraZeneca in order to gain access to its promising cancer drug development.

Our price estimate for Pfizer stands at $34, implying a premium of about 15% to the market price.

See Full Analysis For Pfizer

Immuno-Oncology Drug Research Is Big

The race for immuno-oncology drugs is on. According to some estimates, the market could be as big as $35 billion. There is a huge opportunity to profit from successful drugs given that small-molecule R&D productivity has declined during the last decade. Given their focus on biologics and relatively strong immuno-oncology pipelines, Merck (NYSE:MRK), Britol-Myers Squibb (NYSE:BMY) and Roche Diagnostics stand to gain. We expect a strong focus from each of these companies on both in-house research and development, as well as co-development partnerships, to allow each to stay ahead of the curve and try to tap the market as early as possible.

Bristol-Myers Squibb has collaborated with CytomX Therapeutics to develop immuno-oncology drugs. The company will make an upfront payment of $50 million, fund the research and make additional payments of up to $298 million for achieving key milestones. [2] Roche has developed several biologics that induce the immune system to treat cancer. Three of its major biologics, Rituxan/MabThera, Avastin and Herceptin,  are used for treating a variety of cancer forms including blood cancer, breast cancer and colorectal cancer. The combined sales from these drugs stood at over CHF 19.28 billion in 2013, or roughly $21.8 billion at the current exchange rate. The company is also testing a new PDL1 inhibitor drug MPDL3280A for  the treatment of advanced melanoma, lung cancer and kidney cancer.

MK-3475 (or pembrolizumab) is Merck’s investigational PD-1 specific monoclonal antibody for the treatment of advanced malignancy. The drug essentially enables a patient’s immune system to detect cancerous cells that are otherwise extremely hard to identify. T cells can then target and kill these exposed tumor cells. In June 2013, Merck reported that 38% of the cancer patients under trial responded positively to this drug. Investors have welcomed the company’s decision to investigate the drug’s effectiveness in combination with other investigational agents. The drug is currently being studied in 17 clinical trials estimated to enroll over 4,000 patients across more than 30 types of cancer. [3] MK-3475 is a new class of drug and could well be the future of cancer treatment. Bristol-Myers Squibb has a similar drug in clinical trial under the name Nivolumab and is could garner as much as $6 billion in peak sales.

Why This Is Important For Pfizer?

Pfizer’s revenues have declined from $67.8 billion in 2010 to $51.6 billion in 2013 due to the loss of patent exclusivity of some major drugs including Lipitor. Last quarter’s results were disappointing as well, due to the continued impact of generic competition as well as the expiration of certain co-promotion agreements for drugs such as Enbrel. Pfizer had pinned its hopes on some recent drug launches, but the market adoption has been rather slow. For example, its kidney cancer treatment drug Inlyta and lung cancer treatment drug Xalkori have seen less than expected sales over the last three years. Additionally, its rheumatoid arthritis drug Xeljanz and blood thinning medicine Eliquis have not performed as well as many expected. Acquiring companies rich in oncology drug pipelines or entering research and marketing collaboration could help Pfizer get back on the growth track.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology

Pfizer Gets Drug Approval For Hot Flashes, Targets 33 Million Women In The U.S.

by Trefis Team

+14.03%
Upside
29.43
Market
33.56
Trefis

PFE
Pfizer
Rate | votes | Share

The FDA recently granted approval for Pfizer’s (NYSE:PFE) Duavee, which has been developed by its wholly-owned subsidiary Wyeth in collaboration with Ligand Pharmaceuticals Inc. [1] The drug introduces a novel approach to treating hot flashes in menopausal women, and is also approved for the treatment of postmenopausal osteoporosis (common bone disease due to low estrogen levels). Unlike other drugs in the market, Duavee pairs conjugated estrogen (CE) with an estrogen agonist/antagonist (also known as a selective estrogen receptor modulator). The drug has the advantage of protecting uterus lining against hyperplasia, which increases risk of cancer of uterine lining and can happen with estrogen-only treatments. [1]

Given the reduction in cancer risk, we expect the drug to gain traction. There are approximately 33 million women in the U.S. between the ages of 45-59 (menopausal), and most of them experience hot flashes. [1] The quality of life can get significantly affected if this common condition is left untreated. Pfizer’s existing drug Premarin, which primarily consists of conjugated estrogen, earned over $1 billion in revenues in 2012. We expect Duavee to cannibalize some of Premarin’s sales starting from the first quarter of 2014. Furthermore, given that Pfizer is a well diversified company with several other major drugs, Duavee’s success will lead to only a small incremental value add.

Notes:
  1. French biotech Cellectis surges as Pfizer signs cancer drug deal, Reuters, June 18 2014 [] []
  2. Bristol-Myers Squibb Partners With CytomX, Incyte in Immunotherapy, The Wall Street Journal, May 27 2014 []
  3. Merck’s Q1 2014 Earnings Transcript []
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!