The good times can not keep rolling forever. Pfizer (NYSE: PFE) just figured it out the hard way.
It seems like almost everything has been running away from Pfizer over the past three months. Pfizer and its partner BioNTech (NASDAQ: BNTX) fantastic results for their COVID-19 vaccine BNT162b2 reported. This was the basis for the vaccination of the vaccine that won the first emergency use authorization (EUA). Pfizer and BioNTech have entered into several major offering deals, and the Biden government apparently wants to reach an agreement with the partners to deliver another 100 million doses.
Last week, however, Pfizer announced bad news about one of its top-selling products. Will it wipe out a large portion of the drug manufacturer’s COVID vaccine profit?
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Pfizer’s bad news
The latest drug Xeljanz for autoimmune diseases was approved in 2012 by the Food and Drug Administration for the treatment of rheumatoid arthritis. But the FDA required that after this approval, Pfizer conduct a safety study to determine the long-term effects of Xeljanz on serious infections, cancer and heart disease.
On January 27, Pfizer reported the results of the safety study. The company compared Xeljanz to 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 experience serious adverse cardiovascular events (MACE), such as heart attacks, strokes and malignant cancers (excluding non-melanoma skin cancers). That hope is shattered.
Xeljanz jumped on both of the co-primary endpoints of the study. In participants at higher risk for MACE and cancer, Pfizer reported higher cardiovascular events and malignancies in all Xeljanz treatment groups compared with participants receiving TNF inhibitors.
Pfizer did not report the full results of the safety study, including how Xeljanz fared with secondary endpoints such as pulmonary embolism. The company’s chief medical officer, Tamas Koncz, said Pfizer plans to “conduct extensive additional 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 hit for growth?
Any discussion of Pfizer’s growth prospects will definitely include Xeljanz. Since the FDA approval for the treatment of rheumatoid arthritis in 2012, the drug has received additional approvals for the treatment of psoriatic arthritis, ulcerative colitis, and active follicular course juvenile idiopathic arthritis. Pfizer hopes to get 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 results of the disappointing security study for Xeljanz affect Pfizer’s overall growth? Do not at this point expect Pfizer to speculate on what the effect might be.
No one seems to assume that a doomsday scenario will take place in which the FDA will require Xeljanz to be snatched from the market. But it is possible that the FDA may need label changes for the drug, which will make some doctors less likely to prescribe it.
All of this makes Pfizer’s success with its COVID vaccine even 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’s a real chance that the ultimate impact on Pfizer’s total sales from its safety study could at least contribute to the benefits of its immediate instant vaccination.
What does not change
There’s one thing that does not change at all with the disappointing results for Xeljanz: Pfizer remains one of the most attractive dividend stocks in healthcare. A big positive point with buying shares of a major drug manufacturer like Pfizer is that one setback does not fundamentally change the investment condition for the stock.
I expect that Pfizer’s growth prospects will also be very good, if the condemnation of the day of judgment above does not take place. The company expects 6% in revenue growth and 10% growth in adjusted earnings per share over the next few years. But these projections are risk-adjusted. A bit of good news from its pipeline could get Pfizer back on track.