Is Pfizer's Revolutionary Drug Another Blockbuster?

On August 29, Pfizer PFE announced that it had received FDA approval for a non-small cell lung cancer drug called Xalkori. The first medication of its kind, Pfizer may have paved the way for significant cancer treatment protocols for the future.

To understand more about the announcement's implications, Benzinga reached out to Argus Research's president, John Eade. Eade's firm recently upgraded Pfizer to a 'Buy' rating.

Eade stated that the market may recognize the drug's potential which may allow "Pfizer to keep paying out dividends and gaining earnings momentum."

Pfizer has a portfolio of blockbuster drugs, including Viagra and Lipitor. Later this year, Lipitor's patent protection expires, leaving a vulnerable Pfizer with potential revenue losses running into the billions of dollars.

According to Eade, "Pfizer has to continue overall growth somehow. With potential revenue losses looming, new drugs have to be successfully created. Xalkori could very well be the drug that saves Pfizer this year from losses stemming from Lipitor."

Pfizer's new drug could be revolutionary, as it is the first drug for lung cancer to be approved by the FDA. However, the drug is based upon new technologies that have yet to be refined in the biomedical sciences fields. Traditionally, drugs are biochemical in nature, meaning that they target a particular molecule and directly affect its activity. Pfizer's Xalkori actually targets the ALK gene in human DNA rather than a molecule. The problem with this sort of gene therapy is that only patients with a defect in the ALK gene will be able to benefit from Xalkori's action.

In the case of non-small cell lung cancer, ALK appears to be the culprit for approximately 3-5% patients. According to Pfizer's website, about 40,000 patients are diagnosed with ALK-linked lung cancer per year.

Screening costs may be immense for consumers, who may have to pay about $80,000 per year for the medication. If all newly diagnosed patients proceeded with treatment, Pfizer could stand to garner $3.2 billion in sales per year. And that's not even counting existing patients. However, if the $80,000 price tag is accurate, it will be interesting to see how many people can afford the medication.

The government is also not going to be able to subsidize these costs as much as they have in the past due to entitlement reductions and health care reform. Pfizer will have to adapt to changing fiscal policies to maximize its user base for the drug.

As Eade put it, Pfizer may have "another blockbuster on its hands." The drug is certainly a breakthrough in gene therapy, but investors will have to wait and see if the business side enjoys the scientific success. Pfizer will have to tread across the health care landscape carefully over the next several years in order to maximize its outreach and client base for Xalkori.

Pfizer is currently trading at about $18 and is up about 8% for the year.

Posted In: Analyst ColorFDAEventsEconomicsMarketsMovers
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