Drugmaking behemoth Pfizer Inc. (PFE) had some important information hidden in between the layers Of its first quarter conference call, said a columnist at The Motley Fool on Wednesday, and investors would be wise to take a closer look before parsing out the company’s value.
Pfizer had two major updates that could significantly impact its bottom line going forward, argued columnist George Budwell, and both should be front and center when investors drill deeper into data.
First is Pfizer’s “forgotten experimental pain medicine,” tanezumab, which should become “one of Pfizer‘s next megablockbuster products.”
“The market for severe pain treatment is ginormous. In the U.S. alone, opioid sales for severe pain already top $11 billion a year, despite the fact that best-selling drugs such as morphine and OxyContin are only partially effective analgesics,” wrote Budwell.
“Pfizer and Eli Lilly and Company (LLY) think their experimental monoclonal antibody that selectively targets nerve-growth factor could become an important step forward, given that it provides quick and long-lasting pain relief, according to the clinical trial data so far.
Unfortunately, the drug’s development has been stalled since 2012 due to a partial clinical hold placed on all anti-nerve growth-factor agents by the U.S. Food and Drug Administration (FDA).”
But after that hold was lifted in March, Pfizer now has a sunnier outlook, saying during its first quarter call that it is back on track with tanezumab.
“We know a lot about this medicine,” said Pfizer‘s President of Global Innovative Pharma Geno Germano. “We’ve completed quite a number of studies and we’re anxious to see it advance through this next phase of development and enter the market.”
Secondly, investors would be wise to keep a close eye on how Pfizer will handle the increasingly looming specter of biosimilar competition.
“Most conspicuously, Pfizer‘s potential biosimilar, PF-06439535, an imitation of the megablockbuster cancer drug Avastin that loses all exclusivity in 2019, wasn’t brought up until the question and answer section of the conference call,” wrote Budwell.
“Per a question from an analyst at Merrill Lynch, though, we learned that Pfizer believes that the FDA would approve its Avastin biosimilar for all of the same indications, if the drug meets the pre-specified primary endpoints in its ongoing late-stage trial,” he pointed out.
“That’s key because a biosimilar that can grab even 10 percent of the total Avastin market should generate sales of around $700 million a year,” wrote Budwell. “So depending on how the biosimilar marketplace for Avastin shakes out, Pfizer could easily grab even more substantial market share and have another blockbuster product on its hand.“
The company has been in the headlines lately for its attempts to broaden its pipeline, as well. Last week Pfizer Inc. (PFE) was confirmed to be the mystery suitor for Swedish Orphan Biovitrum AB.
Sobi, as the Stockholm-based company is known, develops medications for rare diseases. In its latest filings the company reported a market value of about $4.3 billion, which made it a ripe target for large pharmaceutical companies looking to bolster its pipeline.
Analysts speculated that likely bidders were either Pfizer Inc. or Biogen, Inc..
Earlier in the week Sobi’s board of directors confirmed a company was in talks to acquire the Swedish company, but did not disclose which company was courting them.
“There can be no certainty that an offer will be made, nor as to the terms of any such offer. A further announcement will be made when appropriate,” the board said in a statement.
Following Sobi’s revelation Monday, shares of the company that was founded in 2001 soared 19 percent on the Swedish stock exchange.
Pfizer and Sobi, which was founded in 2001, have a marketing deal for Sobi’s hemophilia drug ReFactor AF. In addition to the hemophilia drug, Sobi also manufactures arthritis drug Kineret and Orfadin, a drug used to slow the effects of hereditary tyrosinemia type 1.
Sobi has been rumored to have been entertaining suitors for a while now, with Bloomberg reporting last week that the company “has held on-and-off again talks with potential buyers since last year as its stock trades at an all-time high.” The news agency also reported that Sobi had brought in experts from Goldman, Sachs & Co. to help facilitate the deal.
The past year about $193 has been spent on major and minor pharmaceutical company acquisitions, more than double than the previous year, and Pfizer has been in the thick of many of the deals.
Pfizer has been actively seeking acquisitions and partnerships, especially since the proposed $119 billion acquisition of AstraZeneca PLC (AZN) fell through. In February Pfizer entered into merger agreements with Illinois-based Hospira, Inc. for $17 billion. Earlier this week rumors swirled that Pfizer was once again making a play for AstraZeneca PLC (AZN) as well as GlaxoSmithKline (GSK).
Part of the reason the company is itching to make a deal is due to funds it has parked in overseas banks, about $40 billion – money that cannot be brought back to the United States due to the taxes the company would have to pay on overseas earnings. One reason Pfizer has eyed British companies is so the pharmaceutical giant can move its headquarters to England to take advantage of better tax rates.
Pfizer reports paying an effective rate as high as 27.5 percent recently and in Britain would pay no more than 20 percent, about one billion dollars in savings annually. In February Ian Read, Pfizer’s chief executive officer, decried the tax structure in the United States, saying the higher taxes puts U.S-based companies at a disadvantage. The U.S. federal corporate tax rate is 35 percent with an average of 4.1 percent added by states, makes the rates the highest in the world. Loopholes in the law can lower some of the rates for companies.