Big Pharma Vs. Washington – An Opportunity To Buy Pfizer

As I discussed on my final Weblog Put up, blood clot drug Eliquis, bought by each Bristol Myers Squibb

BMY
and Pfizer (PFE), is more likely to face value controls underneath the Inflation Discount Act (IRA). Recall that Bristol and Merck have every sued Uncle Sam over a Medicare value renegotiation program within the IRA that was handed final August, calling this system a sham, an extortion and unconstitutional.

Although not as a lot of a possible danger to Pfizer as to Bristol Myers, Eliquis was answerable for almost a tenth of non-Covid associated income a yr in the past. Furthermore, Eliquis value the U.S. authorities greater than $12 billion in 2021 in response to the Facilities for Medicare & Medicaid Providers.

WEIGHT-LOSS DRUG SETBACK

Pfizer has additionally been within the race to develop a diabetes/weight reduction remedy to compete with at present accredited injectable medicine produced by Novo Nordisk (Wegovy & Ozempic) and Eli Lilly (Mounjaro), together with one other injectable from Amgen
AMGN
making its method by way of the pipeline. Up till this week, Pfizer had two oral GLP-1 receptor agonist candidates in testing (danuglipron and lotiglipron)

On the corporate’s Q1 earnings name in Might, Pfizer Chief Scientific Officer Mikael Dolsten stated of each medicine, “We’re very enthusiastic about our two oral GLP, the 1532 and danuglipron, 1532 known as lotiglipron. And we’re on the lookout for a differentiated profile that will likely be a mixture of speedy onset, excessive management of HbA1C, bringing it down, and physique weight reduction at varied doses to be very aggressive and a extra simply titrable drug that may optimize a most popular profile versus injectable on the subject of nausea and different well-known results. So, we glance ahead very a lot to information possibly later this yr or probably early subsequent yr and cherry decide the winner right here.”

Sadly, judging by the unfavourable share value response on June 26, Pfizer has simply made the choice to discontinue scientific growth of lotiglipron, based mostly on “pharmacokinetic information from Part 1 drug-drug-interaction research and laboratory measurements of elevated transaminases in these Part 1 research in addition to the continued Part 2 research. None of those members reported liver associated signs or uncomfortable side effects, there was no proof of liver failure, and none wanted remedy.”

Pfizer added, “Transferring ahead, the corporate will proceed advancing the scientific program for danuglipron (PF-06882961), topic to outcomes from the continued Part 2 trial…The corporate expects to finalize plans for the danuglipron late-stage program by the tip of 2023 and likewise is growing a once-daily modified launch model.”

PFE Senior VP William Sessa, Ph.D., defined, “Constructing on Pfizer’s small molecule design experience, we have been growing two promising GLP-1-RAs which have proven proof of idea, with the intent of choosing one to advance into additional scientific research. We stay up for analyzing the danuglipron Part 2 outcomes and choosing the dose and titration schedule that may maximize the therapeutic profit and security and tolerability. If profitable in scientific trials and accredited, danuglipron may very well be in a main place to distinguish based mostly on profile, together with full receptor agonism, which we imagine has the potential to translate to sturdy efficacy.”

PFIZER SHARES ARE UNDERVALUED

A number of unknowns, clearly, however there’s nonetheless purpose for optimism in my opinion for PFE shares. Regardless of the obvious setback for Pfizer, the potential market measurement for these medicine is very large, whilst present projections are that it will likely be a couple of years earlier than the corporate is ready to file for approval. Novo’s business success within the area has left it struggling to match provide with burgeoning demand for its two merchandise, whereas Wall Road initiatives Lilly’s Mounjaro will generate north of $10 billion in gross sales by 2026.

And all the higher ought to Pfizer capitalize on bringing a secure and efficient oral remedy to market versus the present injectable choices. Nonetheless, long-term security information is a significant unknown for the category and the danger of payer restrictions stays, noting that Medicare has not but accredited protection of both Mounjaro or semaglutide (Wegovy/Ozempic) for weight problems remedy.

Little doubt, uncertainty abounds within the pharma and biotech area, however that is par for the course, whereas Pfizer’s a number of of 11 instances earnings projected for 2023 and enormous dividend yield of 4.5% make for a really cheap value to pay for the corporate’s scale, various portfolio of present merchandise and drug pipeline.

As of early-Might, 23 therapies have been in part 3 trials throughout a number of oncological indications along with vaccinations and uncommon illness medicine. Additionally, whereas income from Pfizer’s Covid franchise have probably peaked, loads of demand stays, with the suite of medicine forecast to generate north of $20 billion of income this yr and subsequent.

I simply don’t suppose high-quality PFE shares deserve the 29% beating they’ve suffered so far in 2023.