Pfizer Moving Into Gene Therapy Is A Welcome Move
In an interesting move, Pfizer (NYSE:PFE) has struck a deal with Spark Therapeutics to establish a gene therapy platform. King’s College Professor Michael Linden, who is an expert in gene therapy research, will lead the effort. Under the agreement, Pfizer will make an upfront payment of $20 million to Spark Therapeutics and $260 million in additional milestone-based payments. [1] In return, Pfizer will handle late stage clinical trials, approval and commercialization of the product. Spark is currently investigating the efficacy of gene therapy for hemophilia B, and its program will enter early phase trials next year. Gene therapy has been under scientific research for over 2 decades, but viable therapies have yet to gain commercial acceptance due to safety and delivery-related issues. However, Pfizer’s move and some other recent developments in the industry suggest that the therapy may be coming off age. There is another implication of this move. Even if successful, Pfizer is still a long way away from a commercialized gene-derived therapy. It is thus just a single step in its program to reverse its revenue decline in coming years. Other actions are possible, or even likely, including an outright acquisition of a substantially larger company, considering that most deals announced thus far are focused on early stage compounds.
Our price estimate for Pfizer stands at $35, implying a premium of about 20% to the market price.
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Establishing a gene therapy platform is a welcome move, and points towards Pfizer’s willingness to innovate and take risks. Gene therapy involves treating a disease through modification of defective or absent gene. Such modification can include replacing, altering or supplementing existing genetic material. The approach offers the potential to treat rare hereditary diseases and open new doors in curing cancer. Although it is too early to estimate the revenue potential of this industry, a successful launch can pave way for big pharmaceutical firms to revive their declining businesses provided they jump on the bandwagon at the right time. Although Spark’s gene therapy platform initially will focus on treatment of hemophilia B, there exists the potential for developing similar therapies for the treatment of cancer. This is where Pfizer is showing special interest. Its oncology drug sales jumped 16% globally in Q3 2014, sustaining the growth rate observed in the second quarter and representing a growth acceleration compared to the first quarter. [2] For the first nine months, the segment’s revenue growth stood at roughly 13%. The figure is the highest among the company’s primary business segments, with vaccine sales racing past that of oncology drugs only in the third quarter. We expect the company to continue to push for deals and possibly, acquisitions, that can strengthen its oncology pipeline.
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Pfizer Gets Drug Approval For Hot Flashes, Targets 33 Million Women In The U.S.
October 8th, 2013 by Trefis Team
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.
- “Pfizer Bets on Gene Therapy as Technology Comes of Age“, Reuters, Dec 8 2014 [↩]
- Pfizer’s SEC Filings [↩]