Pfizer’s Bet On Oncology

by Trefis Team
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Pfizer’s (NYSE:PFE) Oncology segment accounts for less than 20% of the company’s value, according to our estimates. For most other major pharma companies, their oncology portfolios are larger contributors to their top lines, and it appears that Pfizer has a ways to go in order to catch up. In fact, Pfizer hasn’t seen significant growth in its Oncology segment until recent years with Ibrance. Most of the Pfizer’s value can be attributed to its legacy pharma and consumer segments. In this note we focus on the company’s Oncology segment and its future implications for Pfizer.

Pfizer’s current oncology portfolio primarily consists of Ibrance, which accounts for over 50% of the segment’s revenues, while the rest can be attributed to Sutent, Xalkori, and Inlyta. Looking at Ibrance, the drug was first approved by the FDA in 2015 for the treatment of breast cancer, and since then it has received two other approvals related to breast cancer. We forecast the drug’s sales to grow from $2.1 billion in 2016 to north of $4.5 billion by the end of our forecast period. We believe this estimate is reasonable given the prevalence of breast cancer, as it accounts for 12% of all new cancer cases and 25% of all cancers in women. It should also be noted that the drug is currently being tested/registered in phase 3 for high risk early breast cancer, early breast cancer in adjuvant setting, and HER2+ breast cancer.

However, Ibrance alone won’t be enough for Pfizer to match its rivals in the oncology market. Sutent, which generated sales of $1 billion in 2016, will see its patent expire in 2021, and with competition from biosimilars, we expect the sales to fall to around $600 million by the end of our forecast period. Meanwhile, Xalkori could potentially generate $1 billion in annual sales, which is significant but won’t make a huge difference overall for the company. However, one drug which could be meaningful for Pfizer’s future oncology growth is Bavencio.

Bavencio’s Potential

Pfizer has co-developed Bavencio, an anti-PD L1 cancer drug, with Merck KGaA. It received its first FDA approval earlier this year for the treatment of metastatic merkel cell carcinoma and later for urothelial carcinoma. The drug was also approved by the EU in September. Bavencio appears to be a milestone drug for Pfizer, and the expected peak sales have been touted to be in the range of $4-6 billion, translating into potential sales of $2-3 billion for Pfizer. This seems fairly high, but we believe it is possible if it gets approval for additional indications for which it is being tested, including gastric cancer, ovarian cancer and non-small cell lung cancer. While we currently estimate roughly $3 billion in annual sales from Pfizer’s pipeline drugs by the end of our forecast period, this could change meaningfully depending on approvals.

The company expects more anti-PD L1 drug launches in the coming years. This, combined with Ibrance and Bavencio sales, will likely drive the segment’s growth in the coming years. In fact, we estimate the average annual revenue growth for the Oncology segment to be north of 12%, which is substantially above what we expect for Pfizer as a whole. Overall, by the end of our forecast period, we expect Oncology to contribute around 20% of the company’s overall revenues, compared to just 8% in 2016.

We currently have a price estimate of $35 for Pfizer, which is close to the current market price.

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