Pfizer Loses Its Cash Cow!

Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Some cholesterol is bad, but not all.  HDL, high-density lipoprotein, for example, is good cholesterol.  It travels through the bloodstream and cleans the walls of blood vessels.  In fact, high levels of HDL can help to prevent atherosclerosis – hardening of the arteries.

What does HDL help to clean?  LDL – low-density lipoprotein.

High levels of LDL are dangerous because they can lead to plaque formations along arteries.  What are ways to reduce LDL?

Diet (reducing saturated fat and upping fibers) is one wayExercise is another.  Yet a third way to decrease dangerous LDL levels is to take Pfizer’s (NYSE: PFE) blockbuster drug Lipitor.

New Game in Town

Lipitor is a statin drug – one that blocks the production of cholesterol in the liver – and has been a huge profit center for Pfizer.  In fact, Lipitor is the pharmaceutical industry’s “biggest-selling drug ever.” However, Lipitor’s patent expired about one year ago, encouraging a flurry of new drug development and activity.

Among the companies in the game are Amgen (NASDAQ: AMGN), Regeneron Pharmaceuticals (NASDAQ: REGN), and Merck (NYSE: MRK).

Amgen and Regeneron are focusing on the PCSK9 protein.  This protein “interferes with the body’s ability to clear LDL.” In fact, Amgen posted data that shows that its new PCSK9 inhibitors dropped LDL levels by as much as 50%.

This is material because the company that can successfully roll out a new inhibitor – whether it is Lipitor-maker Pfizer or a new challenger – is capable of earning a large share of the bustling market.  For example, 10% of patients cannot be treated by statins, creating a window of opportunity for the successful pharma company.

Regeneron’s drug contains antibodies, consistent with the other firms’ development, and Regeneron is seeing results that are similar to Amgen's and Pfizer's.  Also, the Regeneron product is similar to the others in that it is a shot.  Patients will need a shot every two to four weeks, which could create a hurdle for potential customers.

To compete, Merck launched Zocor, whose patent is now expired.  Merck also markets its Zetia product.  According to Zetia’s website:

Adding ZETIA to a statin is proven to help reduce cholesterol more than a statin alone. Unlike some statins, ZETIA has not been shown to prevent heart disease or heart attacks.

A statin works mainly with the liver. ZETIA works in your digestive tract. Adding ZETIA to a statin treats 2 sources of cholesterol. In a clinical study, people who added ZETIA to their statin medicine lowered their LDL (bad) cholesterol on average by an additional 25%. Individual results may vary.

Risks

One risk is customer adoption – consumers may not want to take constant shots.  Another risk is the firms not being able to conduct studies that successfully link lower LDL levels produced by the drug to lower risk of heart attack.  For example, the firms launching the new product must be sure that other side serious side effects are lower, along with LDL levels.

Finally, shots have the potential to be more expensive to make than pills.  To be successful, the firms must ensure that the customer demand is present before layering on additional production costs.

Conclusion

Currently, AstraZeneca (NYSE: AZN) is the only drug company with a patent on a brand name statin.  Other drug-maker’s patents have expired, giving AstraZeneca an advantage.  AstraZeneca’s Crestor still has its patent, and the drug works by inhibiting the liver from producing cholesterol.

However, the rest of the marketplace is scrambling to produce the new PCSK9 inhibitors, which could produce billions in annual profits for the sector.

Without the drugs, however:

Mean annual sales of 15 different categories of heart drugs are set to fall by more than a quarter by 2017, from $83 billion in 2011 to $60 billion, according to consensus analyst forecasts compiled by Thomson Reuters Pharma.

In conclusion, there is a major struggle for drug-makers to produce a hit new drug that could lower LDL.  For the company that rolls out a successful product – Pfizer, Amgen, Regeneron, or even Merck – the new profits will be huge.

Dive In, Investors

For nearly 100 years, Merck’s cutting-edge research has led to a number of medical breakthroughs. Today, however, this pharma stalwart is staring down a steep patent cliff and facing generic competition for its top-selling drug. Will Merck crumble under its own weight, or will it continue to pay dividends to investors for another century? To find out if this pharma giant has the stamina to keep its Bunsen burners alight, grab your copy of The Motley Fool’s brand new premium research report today. Senior Biotech Analyst Brian Orelli, Ph.D. walks you through both the opportunities and threats facing Merck, and the report comes with a full 12 months of updates. Claim your copy now by clicking here.


ChrisMarasco has no positions in the stocks mentioned above. The Motley Fool owns shares of AstraZeneca plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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