Pfizer's New Drug Failure Only Minor Setback
Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Pfizer (NYSE: PFE) has experienced a significant setback recently, as its tafamidis meglumine drug was not approved by the FDA, even though it is already approved for use in Europe where it is sold under the name Vyndaqel. This will limit the success of the drug and have a negative impact on the company. While I think it is still in a decent position, I expect the stock to be dropping a little as a result of this event.
The drug is geared at treating a rare-but-deadly genetic disease called TTR-FAP or Transthyretin Familial Amyloid Polyneuropathy. Unfortunately, it does not meet the FDA's approval standards. The regulatory body has requested that Pfizer conduct further tests in the form of a second clinical trial and provide more information on the drug. Essentially, what the FDA wants is clarity on the exact degree to which the drug is effective. It seems that the drug has not yet shown convincing results, at least as far as the regulating agency is concerned.
It is certainly good that Pfizer has been given a second chance though. This drug has the potential to be a significant breakthrough for the company. If it is approved, it will be the first approved drug for TTR-FAP that has been proven to work. That may be why the FDA wants to double check the results, as it does not wish to give false hope to those who have the disease. It is a terrible illness involving the loss of use of your limbs from the feet up. In addition, you literally waste away in a matter of years, as the disease is characterized by a shutdown of the digestive system.
I am still unclear, however, on the FDA's reasons for rejecting the drug. The agency ruled that the drug met its primary aim, so it is an effective treatment for the specified disease. It rules that the drug failed to produce sufficient results on another measure though. Even if this measure refers to adverse side effects, can the side effects really be much worse than the illness itself? I think that the drug will eventually be approved, but I cannot begin to guess when this will actually happen.
Pfizer is determined to find a way forward with the medication, as this drug might be a significant breakthrough for the 3,000 patients with this illness in the United States. A spokeswoman has stated that the company intends to "request a meeting as soon as possible with the agency in order to discuss a potential path forward." At the moment, the only treatment for the disease is a liver transplant. Pfizer's medication would obviously be a cheaper, and in most cases, it would also be a more realistic alternative for patients.
In order to better understand Pfizer's position in the market, I will focus on four of its closest competitors. One of Pfizer's competitors seems to be moving in a good direction. Investors like to see a company that intends to provide shareholders with a decent return. This is something we can see from the recent developments with Eli Lilly (NYSE: LLY). The company is responding to the recent loss of its Zyprexa patent and its significant loss in profits. Eli Lilly is now attempting to boost shareholder returns through a share buyback scheme, which will involve shares worth a total of $420 million. This should keep shareholder trust and help the stock maintain a consistent price.
Another competitor is also making good moves. Merck (NYSE: MRK) and Geisinger Health System recently announced a deal that aims to ensure that patients take their prescribed medication. A shockingly high percentage of people do not take the medications that are prescribed to them, and this new alliance will help address this problem. Although we don't know the finer details of the situation at the moment, I think it is safe to say that it is a good move for the company. I believe it will have a small-but-positive effect on the stock.
Johnson & Johnson (NYSE: JNJ) has purchased Synthes for $19.7 billion in cash and stock, and this may help the company bounce back from recent issues. Due to a large number of recalls and other problems, Johnson & Johnson has been struggling lately. The company hopes that this acquisition will boost its revenue and profits by giving it a stronger presence in the orthopedic section of the pharmaceutical industry. For the sake of the stockholders, I do hope that this is how it will play out. At the moment, this seems like a decent move. Due to the larger problems that have been facing the company, however, this should only have a slightly positive effect on the stock.
GlaxoSmithKline (NYSE: GSK) has recently had some good fortune, as the Supreme Court recently ruled in its favor in a case regarding whether or not sales representatives who worked for the company in the past should receive overtime. GlaxoSmithKline won, and as a result, it does not have to pay out the substantial amounts of money it would otherwise have been liable for. This does not just refer to the cost of paying out the overtime costs, furthermore, as the company would have also had to hire additional staff to make the payments possible. The positive court outcome should help the stock go up, as investors no longer have to worry about this case.
Some of Pfizer's competitors have been receiving good news recently, but I would still pay close attention to Pfizer's stock. Although recent events have set it back, I think there is a relatively good chance that the drug will ultimately get approved. Something as innovative as this cannot be kept off the market if it works. The market for the drug may be small, but the reputation of the company will improve significantly if it is the first to have a legal treatment for TTR-FAP in the United States. This would also highlight the fact that Pfizer is an innovator in the market and a company worth backing in the future. Its stock price will likely be dropping as a result of the delay, but Pfizer does seem to have much potential in the long term.
jordobivona has no positions in the stocks mentioned above. The Motley Fool owns shares of GlaxoSmithKline and Johnson & Johnson. Motley Fool newsletter services recommend GlaxoSmithKline, Johnson & Johnson, and Pfizer. 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.