Pfizer Patent Cliff: A Look At The Oncology Drugs Division

The pharmaceutical industry is staring at a revenue loss of around $300 billion due to patent expirations this decade. ^[1] After the patent on a drug expires, generic manufacturers can replicate and sell the product at much cheaper prices, generally leading to a steep decline in the drug’s revenues. As we continue to analyze the impact of patent expiries on pharmaceutical companies in our coverage universe, below we discuss the impending patent cliff and the prospects of Pfizer‘s (NYSE:PFE) oncology drugs division.

See our complete analysis for Pfizer

No Significant Threat From Patent Cliff …..

Currently Pfizer has a relatively limited presence in the oncology drugs market with a few successful products, including Sutent and Aromasin, generating most of the sales. Sales from this division were close to $2.3 billion, a meager 5% of total revenues in 2011. Nonetheless, this division has been vulnerable to the patent cliff as Aromasin has already lost its patent protection in 2011. The drug garnered nearly $350 million in sales, around 15% of its total oncology sales in 2011. But, despite seemingly significant dependence on the drug, we expect robust growth in Pfizer’s oncology division going forward due to its current drugs and an impressive pipeline.

….As Current Drugs and Promising Pipeline Expected To Bolster Growth

We expect Pfizer’ established oncology drug Sutent (sunitinib), mainly used to treat metastatic-renal cell carcinoma or “mRCC” (an advanced kidney cancer), to exhibit continued growth in sales. The drug is also approved to treat rare types of pancreatic and stomach cancer. While the drug faces competition from Bayer, GlaxoSmithKline (GSK), Novartis and Roche Holdings (PINK:RHHBY) in a crowded market, most physicians prefer Sutent over Bayer Nexavar and Roche’s Avastin for the indication. ^[2] The drug that poses a threat to Sutent as a first-line treatment for advanced RCC is GSK’s Votrient. However, the drug has shown equal efficacy as Sutent in a recently concluded COMPARZ trial. ^[3] And, we believe Sutent may continue to dominate the RCC market due to its strong brand recall and historically proven track record. We currently expect Sutent’s sales to double from $1.1 billion currently to cross $2 billion by the end of our forecast period.

In addition to Sutent, the drug maker now has another arrow in its quiver, Inlyta, which is making inroads into the mRCC segment as a second-line treatment after FDA and European approvals in 2012. Inlyta has helped delay the occurrence of the indication and increase the progression-free survival significantly by 2 months (total 6.7 months) over Bayer’s Nexavar. ^[4] The drug is prescribed to patients who have failed to respond to treatments with Pfizer’s Sutent and thus, it would help to tap additional revenues from patients who have failed to respond to Sutent. However, the drug faces stiff competition from several other drugs including Novartis’s Afinitor and an investigational drug Tivozanib. ^[4] We, therefore, have pegged the peak sales at $500 million.

Crizotinib, which is marketed as Xalkori, for treatment of non-small cell lung cancer is another major drug in Pfizer’s offings. The drug received US FDA approval for non-small cell lung cancer in August 2011 and has seen a strong uptake since then. ^[5]  Further, it received conditional approval from the European Medicine Agency in October 2012 for use in adult cancer patients who have received at least one treatment for lung cancer. A recent American Society of Clinical Oncology’s study also found the drug to completely eradicate indications of three deadly tumors relating to nerves, blood and soft tissue in some children. ^[6] Despite a small number of eligible patients currently, we expect the drug to generate sales of nearly $1 billion by 2015 with its steep price tag of close to $9,000 per month and addition of new indications.

But, what could trigger an upside is its experimental drug, PD-0332991, for treatment of most common form of advanced breast cancer (60% of breast cancer cases), which exhibited strong efficacy and safety in a mid-stage trial last week. 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. ^[7] A period of 18 months is a 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 in multi-billion dollars in revenues. This could lead to upside in our price estimate as we have not considered potential revenues from the drug in our model and approval could only come by 2017 or later.

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1. BIO 2012: Implications of the ‘Patent Cliff’, The Life Science Report, June 19 2012 [↩]
2. IN THE UNITED STATES, NEARLY ALL SURVEYED PHYSICIANS PRESCRIBE PFIZER’S SUTENT AND A SIGNIFICANT MAJORITY PRESCRIBE BAYER/ONYX’S NEXAVAR FOR THE TREATMENT OF RENAL CELL CARCINOMA, Decision Resources, Aug 2 2011 [↩]
3. GSK’s Votrient non-inferior to Pfizer’s Sutent, trial shows, Pharmatimes, Oct 1 2012 [↩]
4. Pfizer Wins U.S. FDA Approval for Advanced Kidney-Cancer Treatment Inlyta, Bloomberg, Jan 28 2012 [↩] [↩]
5. For the Treatment of Non-Small-Cell Lung Cancer (NSCLC), Three-Quarters of Surveyed U.S. Oncologists Prescribe Pfizer’s Xalkori Just 10 Months After the Drug’s Launch, Decision Resources, June 19 2012 [↩]
6. Pfizer Lung Drug Stops Deadly Child Cancers in Study, Bloomberg, May 18 2012 [↩]
7. Pfizer breast cancer drug delays progression 18 months, Reuters, Dec 5 2012 [↩]