Government, Health Care, and Manufacturing

Pfizer's new arthritis drug promises relief . . . to Pfizer

Sales of Xeljanz will offset losses due to expiring patents such as Lipitor.

November 14, 2012
| By Pete Daly |
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Pfizer's new arthritis drug promises relief . . . to Pfizer
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The new rheumatoid arthritis drug from Pfizer — Xeljanz — which has just been approved by the Food and Drug Administration, is predicted to yield sales of more than $2 billion a year in a few years. That good news for Pfizer, however, is offset by the fact Pfizer is facing near-term challenges due to expiring patents, resulting in new competition from generic drugs.

Pfizer, based in New York but one of the largest employers in the Kalamazoo region, announced last week that Xeljanz has been approved for adults with moderately to severely active rheumatoid arthritis who have had an inadequate response or intolerance to methotrexate.

Bloomberg reported speculation by a Boston analyst that Xeljanz may generate $2.3 billion in annual sales by 2018.

“I would agree with Bloomberg, but with the information we have today, that will be offset by loss of Lipitor revenue to generic competition,” said Dirk Racette, CEO and portfolio manager at Calder Investment Advisors in Grand Rapids.

The Lipitor patent expired late last year and Pfizer will lose patent protection on several other blockbuster drugs in the next three years, according to an analysis by Morningstar. Those include Geodon, Celebrex and Detrol.

Racette noted that Pfizer had gotten FDA approval for only the 5-milligram dose, but had also requested approval of a 10mg dose because clinical studies had showed the 10mg dose was more effective. That FDA denial also will eat into Pfizer’s revenues.

However, Morningstar said effective use of the drug by earlier-stage RA patients will tend to counter the negative impact of only the low-dose approval.

Racette said his firm’s clients have had a “significant holding” in Pfizer for at least five years now, and he noted that Pfizer “does have a good pipeline of drugs (in development) for future growth prospects also, which bodes well for the company.”

“We do not see a significant change to their fair value, which is in the $27 to $30 range, but is attractive for its close to 4 percent dividend yield,” he said.

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