The good times cannot go on forever. Pfizer (NYSE: PFE) I just found this out the hard way.
Almost everything seems to have worked out for Pfizer in the past three months. Pfizer and its partner BioNTech (NASDAQ: BNTX) reported fantastic results for their COVID-19 BNT162b2 vaccine. This set the stage for the vaccine to become the first to achieve Emergency Use Authorization (USA). Pfizer and BioNTech have closed several important supply deals, and the Biden administration appears to be trying to reach an agreement with partners to supply an additional 100 million doses.
Last week, however, Pfizer announced some bad news about one of its best-selling products. Will this wipe out a big part of the profits from the pharmacist’s COVID vaccine?
Image source: Getty Images.
Bad news from Pfizer
Its famous drug for autoimmune diseases, Xeljanz, was approved by the Food and Drug Administration in 2012 for the treatment of rheumatoid arthritis. But the FDA demanded that Pfizer conduct a safety study after this approval to determine the long-term effects of Xeljanz on serious infections, cancer and heart disease.
On January 27, Pfizer reported the results of that safety study. The company compared Xeljanz with a TNF inhibitor (a class of drugs for autoimmune diseases that includes Humira and Enbrel). The hope was that Pfizer’s drug would compare well with established drugs in terms of how often patients had major adverse cardiovascular events (MACE), such as heart attacks, stroke and malignant cancer (excluding non-melanoma skin cancer). That hope was dashed.
Xeljanz failed on both co-primary endpoints in the study. In participants at higher risk for MACE and cancer, Pfizer reported higher rates of cardiovascular events and malignancies in all Xeljanz treatment groups compared to participants who received TNF inhibitors.
Pfizer did not report complete results from the safety study, including how Xeljanz fared on secondary outcomes, such as pulmonary embolism. The company’s medical director, Tamas Koncz, said Pfizer plans to conduct “additional extensive analyzes of this study data”. Pfizer is also working with the FDA and other regulatory agencies to review all data as it becomes available.
A potential impact on growth?
Any discussion of Pfizer’s growth prospects will definitely include Xeljanz. Since obtaining FDA approval for the treatment of rheumatoid arthritis in 2012, the drug has obtained additional approvals for the treatment of psoriatic arthritis, ulcerative colitis and juvenile idiopathic arthritis with an active polyarticular course. Pfizer expects to obtain FDA approval for Xeljanz in the treatment of ankylosing spondylitis (an inflammatory disease) in the first half of this year.
But the big question now is: how will the disappointing results of the Xeljanz security study affect Pfizer’s overall growth? At this point, don’t expect Pfizer to speculate on what the effect might be.
No one seems to be assuming that a doomsday scenario will happen in which the FDA requires Xeljanz to be withdrawn from the market. But it is possible that the FDA may require changes to the drug’s label, which may decrease the likelihood that some doctors will prescribe it.
All of this makes Pfizer’s success with its COVID vaccine all the more important for the company’s growth prospects. The bad news for Xeljanz will certainly not completely offset the positive impact of BNT162b2 (now marketed as Comirnaty). But there is a real chance that the final impact on Pfizer’s total sales of its safety study could decrease the profits of its highly successful instant vaccine, at least a little.
What doesn’t change
There is one thing that does not change at all with Xeljanz’s disappointing results: Pfizer remains one of the most attractive dividend stocks in the healthcare industry. A great positive aspect with the purchase of shares in a large pharmaceutical company like Pfizer is that a setback does not fundamentally change the investment premise for the shares.
I hope that Pfizer’s growth prospects are still very good, assuming that the doomsday scenario mentioned above does not happen. The company expects revenue growth of 6% and 10% growth in adjusted earnings per share in the coming years. But these projections are risk-adjusted. Good news from its pipeline could put Pfizer back on track.