The past week was handful of events for the pharmaceutical sector. The world’s largest drug maker Pfizer (NYSE:PFE) announced fresh rounds of job cuts for its sales representatives as it grapples with a decline in sales amidst patent expirations. But, recent impressive results in mid stage clinical trials for its experimental breast cancer drug come as a boost to the company’s stock price. In addition, the company has completed sale of its nutritional business to Nestle in a bid to focus on core pharmaceutical business. Meanwhile, Merck (NYSE:MRK) announced phase II clinical trials of new type of Alzheimer drug, moving to front-line in quest for a complete cure for Azheimer’s disease.
Pfizer was in the news for a variety of reasons. Its experimental drug, PD-0332991, for the treatment of most common form of advanced breast cancer (60% of breast cancer cases), exhibited strong efficacy and safety in a mid-stage trial. The drug when taken with Letrozole (a conventional drug for the disease, manufactured as Femara by Novartis) delayed the worsening of symptoms in breast cancer patients by more than 18 months over those with Letrozole alone.  The 18 month is statistically significant difference, boosting the drug’s prospects as a potential blockbuster. While there is still a long way to go for regulatory approval as Pfizer is yet to begin late-stage trials, the drug, if approved as a first-line treatment, could bring multi-billion dollars in revenues for the struggling drug maker. This could lead to an upside in our price estimate as we have not considered the potential revenues from the drug in our model. The expected approval could only come by 2017 or later.
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- Estimating Value Of Pfizer’s Consumer Health Business Amid Rumours Of Sale/Spin-off
In a separate event, Pfizer announced another round of lay-offs in its sales representative staff, mostly related to primary care even as the number of staff being let go, is not announced yet. The move comes as the drug maker strives to manage its costs in a flurry of patent expiries. Pfizer lost patent protection for its largest selling drug Lipitor in Nov 2011, putting at risk about $10 billion even as it is slated to lose another $10 billion in next 2-3 years due to upcoming patent expiries. Due to these patent expiries, the company took several other measures including increase its focus on core pharma business and improve pipeline along with reducing staff.
The sale of nutritional business and divestment in the animal business are part of that strategy, and the company this week completed sale of nutritional business for a $11.9 billion cash deal. However, in countries where regulatory approvals have been delayed (Kenya, South Africa and five Latin American countries), Pfizer will continue to operate the business on an interim basis. The company could spend this cash on its buy-back program and to reduce debt. 
Merck started phase II trial to determine the efficacy and safety of its MK-8931, a BACE inhibitor, in patients with mild to moderate Alzheimer’s disease.  A BACE inhibitor is a new type of treatment for Alzheimer as it blocks beta amyloid plaques in the brain (high-level of it results into Alzheimer) to treat Alzheimer. Any success in clinical trials could significantly impact Merck’s stock due to huge unmet demand in the Alzheimer drug market.
Nearly 36 million people worldwide are estimated to be suffering from Alzheimer’s disease or other dementia, and without any effective treatment, the number could surge to nearly 66 million and 115 million by 2030 and 2050, respectively. In the U.S. alone, approximately 5.4 million people suffer from Alzheimer’s and this is projected to increase to 15 million by 2050. 
There is no complete cure available for Alzheimer’s presently, and the current treatment only improves a patient’s condition by a little. Further, no significant competition is present with the exception of Roche Holdings (PINK:RHHBY) after competitors either failed late stage clinical trials or saw inconclusive results (Read Pfizer and Johnson & Johnson Dump Alzheimer Drug After Failed Clinical Trials).
Roche has emerged as the leader in the development of Alzheimer drug . Roche has the strongest drug pipeline for Alzheimer’s with two of the most promising pipeline drugs, Crenezumab and Gantenerumab.Notes:
- Pfizer breast cancer drug delays progression 18 months, Reuters, Dec 5 2012 [↩]
- Nestle SA Completes Acquisition Of Pfizer Nutrition, Reuters, Dec 3 2012 [↩]
- Merck becomes bigger Alzheimer’s player, with new trial, Reuters, Dec 3 2012 [↩]
- The Facts on Alzheimer’s Disease, American Health Assistance Foundation [↩]