Pfizer's New Biosimilar Is Off and Running

Pfizer, Inc.(NYSE: PFE) launched Inflectra, its biosimilar to Johnson & Johnson's (NYSE: JNJ) Remicade, late last year, and fourth-quarter earnings reports from the two companies provide us with insight into Inflectra's market potential. Can Inflectra become a top seller? Read on to find out how big the market could be for this new biosimilar.

An important market

Remicade is a widely used autoimmune disease drug that's approved to treat a variety of indications, including rheumatoid arthritis.The drug is marketed in the U.S. by Johnson & Johnson, and it's sold in Europe by Merck & Co. (NYSE: MRK).

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Johnson & Johnson and Merck & Co. reported Remicade sales of $6.56 billion and $1.8 billion in 2015, respectively. However, sales slipped in 2016 as biosimilars launched, first in Europe, and then, in November, in the United States.

Merck's Remicade sales fell 29% year over year to $1.27 billion in 2016, and Johnson & Johnson's U.S. Remicade sales skidded to a decline in the fourth quarter from growth in the third quarter. In Q4, Johnson & Johnson's sales of Remicade dropped 1.7% from a year ago, while in Q3, sales had jumped 9.4% year over year.

What management is saying

In Johnson & Johnson's fourth-quarter earnings report, management's prepared comments suggest that Inflectra isn't making much of a dent on its prescription market share yet.

However, Remicade's year-over-year sales decline, and a sequential deceleration in year-over-year growth last quarter, suggest Remicade's price may be being discounted in order to maintain market share.

Furthermore, management conceded in the Q&A segment of Johnson & Johnson's earnings call that Remicade's market share could slip 10% to 15% this year. If so, price cuts and declining unit volume could equate to hundreds of millions of dollars shifting from Johnson & Johnson to Pfizer.

Pfizer's fourth-quarter earnings similarly suggest there's a big market opportunity for Inflectra. In the quarter, Pfizer's biosimilars revenue jumped 48% from a year ago, mostly because of Inflectra's U.S. launch. Inflectra racked up $61 million in sales in Q4, up from $30 million a year ago.

Pfizer's biosimilars include Inflectra, which is also sold as Remsima internationally, Nivestem, a biosimilar to Neupogen, and Retacrit, a biosimilar to Epogen and Procrit.Overall, the company's biosimilar sales were $91 million in the quarter, up from $63 million in the same quarter of 2015.

Looking ahead

Merck & Co.'s experience battling Remicade biosimilars overseas may be the best indication of what's in store for Johnson & Johnson. In 2014, Merck & Co.'s sales of Remicade totaled $2.37 billion, or roughly twice what the company hauled in from the medicine in 2016.

The biosimilars market is more mature outside the U.S., so it may take Inflectra a bit longer to make as big of a dent in Johnson & Johnson's U.S. sales. However, investors might not want to discount just how eager payers are for lower-priced options that can keep runaway drug spending in check. If insurers support Inflectra, then it could wind up winning away more than the 10% to 15% in market share that Johnson & Johnson is modeling. Given that there's $4.4 billion in U.S. sales up for grabs, the stakes are very high for both companies.

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Todd Campbell owns shares of Pfizer.His clients may have positions in the companies mentioned.The Motley Fool recommends Johnson and Johnson. The Motley Fool has a disclosure policy.