Pfizer May Extract More From Tofacitinib, Drug Further Delayed

Pfizer‘s (NYSE:PFE) under clinical trial drug Tofacitinib was proven to be effective for the treatment of Ulcerative Colitis (UC) in phase II studies while the U.S. Food and Drug Administration (FDA) delayed approval for the drug’s use in primary target Rheumatoid Arthritis (RA) by three months. ^[1] The company will soon begin phase III studies to verify the drug’s efficacy and safety in UC patients and plans to test higher doses of the drug. The expansion of Tofacitinib to new indications could douse concerns relating to the drug’s prospects after the FDA raised serious questions over the side effects of the drug on RA patients. Below we take a look at how Tofacitinib’s fate could impact the company’s value.

See Full Analysis For Pfizer here

Ulcerative Colitis is a severe inflammatory disease of the large intestine and rectum that causes abdominal pain and diarrhea, among other symptoms. The disease affects nearly 500K people in the U.S., according to the Crohn’s & Colitis Foundation of America with many even pegging the total affected at 700k. Therefore, the extension of the drug to UC patients will certainly bring in more revenues. But, it may not be sufficient if the drug fails to get the FDA approval for RA or conditional approval as the UC drug market is expected to remain much smaller (about $2 billion in 7 large countries) compared to RA drug market (about $18 billion) by 2020.

Any further delay on the final verdict on Tofacitinib’s approval for RA treatment would have a huge impact on the drug’s sales and, consequently, on Pfizer’s value. The drug’s prospects were negatively impacted when the FDA raised safety concerns in May 2012 relating to infections and cancer associated with the drug’s use in RA patients. Now it is expected to be used in patients who do not respond to any other RA drugs, which are either injected or infused and are made by manufacturers such as Abbott’s Humira, JNJ and Merck’s Remicade, and Amgen and Pfizer’s Enbrel. RA has a few medications and Tofacitinib, if approved, would be the first drug after the success of Abbott’s Humira in this segment.

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.

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1. Pfizer’s tofacitinib shows promise in ulcerative colitis trial, PharmaTimes, August 16 2012 [↩]