The good times cannot keep rolling forever. Pfizer (NYSE: PFE) just discovered that the hard way.
Almost everything seems to have gone Pfizer’s way for the past three months. Pfizer and its partner BioNTech (NASDAQ: BNTX) reported fantastic results for their COVID-19 vaccine BNT162b2. That paved the way for the vaccine that was the first to win an Emergency Use Authorization (EUA). Pfizer and BioNTech have entered into several significant supply agreements, and Biden’s government appears to be looking to negotiate a deal with the partners to deliver an additional 100 million doses.
Last week, however, Pfizer announced bad news about one of its best-selling products. Will this wipe out much of the drug maker’s COVID vaccine profits?
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Pfizer’s bad news
Its blockbuster autoimmune disease drug Xeljanz was first 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 investigation. The company compared Xeljanz to a TNF inhibitor (a class of drugs for autoimmune diseases that includes Humira and Enbrel). The hope was that the Pfizer drug would perform well against established drugs in terms of how often patients experienced serious adverse cardiovascular events (MACE), such as heart attacks, strokes, and malignant cancer (excluding non-melanoma skin cancer). That hope was gone.
Xeljanz flopped on both co-primary endpoints of the study. In participants at higher risk of 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 has not reported full results of the safety study, including how Xeljanz fared on 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 certainly include Xeljanz. Since receiving 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 polyarticular juvenile idiopathic arthritis. Pfizer hopes to receive FDA approval for Xeljanz for 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 safety research results for Xeljanz affect Pfizer’s overall growth? At this point, don’t expect Pfizer to speculate on what the effect might be.
No one seems to believe there will be a doomsday scenario in which the FDA demands that Xeljanz be taken off the market. But it’s possible that the FDA may require label changes for the drug, making some doctors less likely to prescribe it.
All of this makes Pfizer’s success with its COVID vaccine even more important to the company’s growth prospects. The bad news for Xeljanz will certainly not fully offset the positive impact of BNT162b2 (now marketed as Comirnaty). But there’s a real chance that the ultimate impact on Pfizer’s overall sales of its safety study could at least eat some of the profits from its instant blockbuster vaccine.
What does not change
One thing doesn’t change at all with the disappointing results for Xeljanz: Pfizer remains one of the most attractive dividend stocks in healthcare. A big plus of buying stock from a massive drug company like Pfizer is that one setback doesn’t fundamentally change the investment principle for the stock.
I expect Pfizer’s growth outlook to still be very good too, assuming the aforementioned doomsday scenario doesn’t happen. The company expects revenue growth of 6% and a growth of 10% in adjusted earnings per share in the coming years. But those projections have been adjusted for risk. A little bit of good news from its pipeline could put Pfizer back on track.