Healthcare Business

3 Big Pharma Stocks With Credible Threats to Their Blockbusters

A pharmaceutical company could face a threat to one of its products for a number of reasons, ranging from an improved formulation, a new drug approval to simply a patent expiry and the opening of the floodgates for generic competition. AbbVie Inc.’s (NYSE: ABBV) issue with mega-blockbuster Humira’s upcoming U.S. patent expiry in December is well known, but here are three Big Pharma companies currently facing threats that may have escaped attention in the Humira frenzy.

Pfizer

Pfizer Inc. (NYSE: PFE) may have one of its blockbuster drugs challenged by Exelixis Inc. (NASDAQ: EXEL). Exelixis just picked up a Food and Drug Administration (FDA) approval for cabozantinib, its lead renal cancer candidate. With the approval out of the way, Exelixis is conducting a Phase 2 trial that compares the efficacy and safety of cabozantinib directly with one of Pfizer’s best-selling oncology products, Sutent (sunitinib), which sold $1.12 billion in 2015, 2% of its top line. 2018 revenues are projected at $1.55 billion.

If Exelixis can demonstrate improved efficacy, or at least equivalence combined with an improved safety profile in the ongoing comparison trial, the FDA could approve the drug as a first-line treatment in stage III, stage IV and clear cell renal cancer. This would pose a huge threat to Pfizer’s ability to meet its projected revenue targets for Sutent, as physicians would have a more effective or safer alternative to offer patients, assuming the price is roughly equivalent.

There’s still a while to go before the threat becomes reality. Primary completion for the comparison trial is slated for 2017, and the FDA may require another trial beyond the current Phase 2 before it will accept a supplemental New Drug Application (NDA). Before the close of the decade, however, cabozantinib might well be redirecting a large portion of Pfizer’s Sutent sales toward the Exelixis balance sheet.


AstraZeneca

AstraZeneca PLC (NYSE: AZN) generated $704 million from its breast cancer drug Faslodex (fulvestrant) during 2015, about 3% of its annual revenues. The FDA approved the drug in 2002, and just last month approved an extended indication that will see the drug used in combination with palbociclib for the treatment of women with HR+, HER2-, advanced or metastatic breast cancer. Despite the agency’s willingness to approve the drug, however, it has a major drawback. It can’t be taken orally. For this reason, patients must undergo administration by intramuscular injection, usually once a month. This has obvious drawbacks, including cost, inpatient requirement and the poor drug toxicity associated with systemic administration.

So where’s the threat? A company called Atossa Genetics Inc. (NASDAQ: ATOS) is developing an alternative formulation of fulvestrant designed for administration directly into mammary ducts. According to Atossa, this type of intraductal delivery can reduce the number of drug administrations currently required from three to one and increase the potency of the drug that actually reaches the cancerous tissue by 20,000 times. Further, the company believes it can produce and sell the drug at a much reduced cost to the current intramuscular injection Faslodex, which comes in at around $140,000 a year on average.

Merck

Merck & Co. Inc. (NYSE: MRK) is coming up against a patent expiry for one of its best-sellers, Zetia. The drug is a cholesterol lowering medicine designed to block cholesterol absorption, and it generated $2.53 billion in 2015 (see page 1). A few competitors have sprung up in the past five years, but none have posed a threat. A generic version probably will though.

Incidentally, Mylan N.V. (NASDAQ: MYL) got into a patent dispute with Merck back in 2012 with the court ruling for Merck. The court said that Mylan could not market a generic Zetia before Zetia’s patent expiry slated for December or April, depending on which element of the drug’s patent protection is dominant. Come 2017, however, there’s little doubt that Mylan will have a generic equivalent to Zetia ready to go, and it can quickly eat into Merck’s Zetia revenues in the next few years.

By Matt Winkler

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