Can Pfizer's New Drug Clip Abbott's Top-Selling Humira?

by Brett Chase, Minyanville staff writer

As the world awaited results from the US presidential election, Pfizer (NYSE:PFE) scored its own victory Tuesday with the approval of a pill that treats rheumatoid arthritis.

With Xeljanz, Pfizer is believed to have a potential blockbuster -- a drug that potentially generates a few billion dollars a year in revenue, according to Wall Street analysts. Speculation by analysts also focuses on how much market share Pfizer can take from existing injected rheumatoid arthritis drugs, including Amgen’s (NASDAQ:AMGN) Enbrel, Johnson & Johnson’s (NYSE:JNJ) Remicade and the big gorilla, Abbott Laboratories’ (NYSE:ABT) Humira. (Pfizer is unwinding a sales partnership with Amgen for Enbrel.)

Humira is poised to become the world’s biggest-selling drug.

RBC Capital Markets analyst Glenn Novarro predicts Humira sales will top more than $9 billion this year and more than $10 billion in 2013. He does not plan to immediately change his forecast for the drug based on the approval of Pfizer’s Xeljanz.

“We do not expect the convenience benefit of an oral to outweigh Humira's long-term efficacy and safety track record,” Novarro says in a note to clients Wednesday. He has a buy rating on Abbott’s stock.

Indeed, Pfizer’s drug carries a number of warnings, including risk of infections, tuberculosis and cancer. As part of its drug approval, Pfizer is required to carry out a plan to evaluate and mitigate the risks to patients. At almost $25,000 a year, the Pfizer drug is priced at a slight discount to the injected therapies.

Xeljanz, also known as tofacitinib, is part of a class of drugs known as JAK inhibitors. The Pfizer drug is approved by the Food and Drug Administration to treat patients with moderate to severe rheumatoid arthritis who are intolerant or can’t be treated with an older drug, methotrexate.

Other companies are studying JAK inhibitors. Eli Lilly (NYSE:LLY) and Incyte (NASDAQ:INCY) are studying a drug to treat rheumatoid arthritis. Incyte’s JAK inhibitor Jakafi was approved by the FDA last year for the blood cancer myelofibrosis. YM Biosciences (NYSEAMEX:YMI) is in the early stages of testing a JAK inhibitor for inflammatory diseases, including rheumatoid arthritis, and cancer. The drugs are designed to inhibit a family of enzymes known as Janus kinases, which are linked to certain diseases.

Considered a promising new therapy, Pfizer’s drug is approved at a crucial point for the company. For years, Pfizer relied on the cholesterol drug Lipitor, which has been the world’s top-selling drug until recent generic competition. Pfizer desperately needs new blockbusters to fill the void of Lipitor and other older drugs.

Shares of Pfizer fell about 1% to $24.30 in morning trading Wednesday as the broader market also dipped. The stock is up more than 12% in 2012. Abbott, which plans to break into two separate companies later this year, fell almost 2% to $63.77. The company’s shares are up more than 13% this year. Incyte gained 1% to $17.89 and Lilly fell 1% to $48.43.

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