Source: Pfizer via Facebook.
Pharmaceutical giant Pfizer has handily outperformed the S&P 500 over the past five years (133% gain vs. 93% gain), but that doesn't mean its product portfolio isn't in flux.
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Pfizer dives off the patent cliff Despite its robust share price growth, which has been fueled by a nearly unparalleled shareholder yield in the pharmaceutical sector -- nearly $65 billion in cumulative dividends and share buybacks between 2011 and 2014 -- Pfizer is dealing with unprecedented patent woes.
Typically pharmaceutical products are protected from generic competition for a period of 20 years. The clock starts ticking the moment the Food and Drug Administration gives a drug developer the green light to begin human clinical trials for an experimental therapy. Thus years, or perhaps even more than a decade, can be lost in patent protection during the drug development process.
Pfizer has seen a number of core therapies fall off the proverbial patent cliff. Arguably none has hurt more than cholesterol-lowering drug Lipitor, which was a $13 billion drug at its peak. Although it's still considered a blockbuster by today's standards with roughly $2 billion in sales (thanks largely to China), it's a far cry from where Lipitor began the decade. Also facing generic competition are arthritis drug Celebrex and COPD therapy Spiriva, to name a few.
The resulting loss of sales from these and other products has resulted in what could amount to a $23 billion haircut in revenue between 2010 and 2015.
Pfizer dives headfirst into cancer and immuno-oncologyWhile this clearly isn't good, not all hope for Pfizer is lost thanks to one critical focus within its pipeline: oncology.
Pfizer's short-term future is pegged to the early success of recently-approved advanced breast cancer drug Ibrance, which practically doubled progression-free survival in the PALOMA-1 study to 20.2 months from 10.2 months for the control group. With multiple label expansion opportunities, this could be a $3 billion-plus drug when all is said and done.
But it's not just Ibrance or bust for Pfizer. This pharma giant has also gone all in on immuno-oncology. Immuno-oncology drugs, or cancer immunotherapies, as they might be better known, are vaccines that teach or enhance a patient's immune system to more efficiently or effectively locate and/or destroy cancer cells. Cancer cells have an uncanny ability to avoid detection by the immune system, so these therapies look to turn off that suppressant quality of cancer cells or jump-start T-cells, the foreign cell destroyers within our immune system, to better fight cancer.
According to Pfizer's presentation at the American Society of Clinical Oncology's annual event, which ended a little over a month ago,Pfizer's plans have it studying close to three-dozen immuno-oncology programs by 2016. Its six immuno-oncology targets include PD-1, PD-L1, 4-1BB, OX40, CCR2, and VIBR.
Most of these programs, as you might imagine, are still in their early stages. There are phase 1 studies involving an OX-40 agonist antibody and a 4-1BB ligand-targeting therapy which are both aimed at activating T-cells to better detect and attack cancer cells. Some exciting combo therapies being tested that involve activating the 4-1BB ligand on T-cells include phase 1 studies with cancer blockbuster Rituxan and another with immunotherapy Keytruda.
Pfizer's immuno-oncology bread and butter However, the key to Pfizer's still wet-behind-the-ears immuno-oncology pipeline is avelumab, a drug that's being co-developed with Merck KGaA.
Avelumab is an anti-PD-L1 antibody that inhibits the binding of PD-L1 and PD-L2 ligands, which are responsible for the immunosuppressant quality of cancer cells. It's also suspected that anti-PD-L1 may have a T-cell-attracting factor as well, but their primary focus is to enhance the immune system's ability to recognize cancer cells.
In the case of avelumab, Pfizer is currently studying the vaccine as a second-line treatment for non-small cell lung cancer in a phase 3 study, and as a treatment for merkel cell carcinoma in a midstage study. Additionally, Pfizer has planned phase 3 monotherapy and combo therapy trials involving avelumab for first-line non-small cell lung cancer, ovarian cancer, gastric cancer, and various solid tumors. Pfizer lists up to 20 new programs ready to be initiated in 2015 (which is why Pfizer's immuno-oncology pipeline has well over two-dozen ongoing studies). On top of these planned phase 3 trials, Pfizer is also examining avelumab in phase 1 trials for indications such as mesothelioma, renal cell carcinoma, and adenoid cystic carcinoma, just to name a few.
An open label phase 1b study involving avelumab in advanced non-small cell lung cancer patients demonstrated an objective response rate of 13.6% and a disease control rate of 50.5% (complete responses + partial responses + stable disease), and delivered a median overall survival of 8.4 months, including one patient who has surpassed 65 months of overall survival and is still receiving treatment. Clearly later-stage studies are going to be eagerly monitored by consumers, physicians, and investors.
Although peak sales estimates vary wildly (as they should for a drug that's mostly still being examined in phase 1 studies), avelumab could have a $4 billion potential if it succeeds in improving survival or slowing disease progression in a number of important indications.
Putting things in perspectivePfizer's work in immuno-oncology is clearly exciting, but investors are going to want to keep a few things in mind before diving headfirst into Pfizer simply because of its immunotherapies in development.
To begin with, Pfizer's immuno-oncology platform is still very young, as I mentioned above. Phase 1 studies aren't there to establish vaccine efficacy. They're there to establish a maximum tolerated dose and to gauge safety. Investors should therefore hold their reservations about avelumab and its other vaccines until we have a larger pool of data to grasp onto.
Source: Centers for Disease Control and Prevention via Facebook.
Secondly, immuno-oncology is rapidly becoming a crowded field. Among the handful of small- and mid-cap biotech stocks engaged in immunotherapy research, practically every Big Pharma and blue-chip biotech has latched onto the idea with immuno-oncology programs of their own, either through organic research, collaborations, or acquisitions. Pfizer's certainly not breaking down any barriers in terms of being first-in-class with its immunotherapies, so look for the competition to be fierce.
Lastly, understand that Pfizer is still facing ongoing weakness from patent expirations. The upcoming loss of exclusivity on best-selling drug Lyrica in 2018 and the eventual introduction of generic Viagra in the U.S. in 2017 could cancel out, or more than cancel out, any sales growth from Ibrance or its immuno-oncology pipeline.
I view Pfizer's immunotherapy work as necessary to keep up in a crowed and evolving drug development space, but I also don't see any need to rush into owning shares of what's been a struggling Big Pharma stock based on its top- and bottom-line.
The article Pfizer Goes All In on Immuno-Oncology originally appeared on Fool.com.
Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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