Analysis: Investors overplay Pfizer threat to Abbott's Humira
NEW YORK (Reuters) - Abbott Laboratories and its top selling rheumatoid arthritis drug Humira are strong enough to withstand looming competition from a new pill developed by Pfizer Inc, despite investor fears that have hobbled Abbott's shares.
Abbott's reliance on Humira -- an injectable biotech treatment whose annual sales of $6.5 billion account for roughly 20 percent of company revenue and more than 40 percent of its profit -- have left investors uneasy.
Abbott's shares have fallen 13 percent in the past year, versus a 3.8 percent decline for the drug sector, even as its earnings have solidly outperformed most rivals.
But doctors and analysts do not believe Abbott will be badly hurt by the easier-to-use Pfizer pill from a new class of medicines on the horizon known as JAK inhibitors.
They contend that patients being helped by Humira will be loathe to abandon it simply for the convenience of a pill, that a large portion Humira sales come from other inflammatory conditions -- including Crohn's disease -- and that Abbott has enough products in development to lessen dependence on its biggest drug.
"The market is afraid Humira sales will decline as a result of the JAK inhibitor, but I don't think Miles White should be losing any sleep," Barclays Capital analyst Tony Butler said, referring to Abbott's chief executive.
Butler predicted Humira's annual sales will continue to grow, likely exceeding $8 billion, even if the Pfizer drug becomes a blockbuster in its own right.
For a graphic on rheumatoid arthritis drugs in development, see: r.reuters.com/vyt68r
Joel Ray, an analyst for Davenport & Co, said investor jitters and Abbott's depressed shares translate into a compelling buying opportunity.
Ray called Abbott a very well-run company with strong cash flow that consistently raises its dividend.
"They've got a healthy pipeline of new products both in the pharmaceutical and the nutritional and medical device areas. And you're going to continue to be rewarded as an investor in spite of the nervousness that some others may have," Ray said.
Rheumatoid arthritis -- a potentially crippling condition in which the body's own immune system attacks the joints -- and related inflammatory diseases have been one of the most lucrative therapy areas for drugmakers.
An estimated 1.3 million Americans suffer from rheumatoid arthritis, according to the Arthritis Foundation. About 1 percent of the worldwide adult population has the disease.
Humira belongs to a class of biotech drugs called TNF inhibitors that block a protein called tumor necrosis factor associated with inflammation. Other blockbuster drugs in the increasingly crowded category include Johnson & Johnson's Remicade ($4.6 billion in 2010) and Amgen Inc's Enbrel ($3.53 billion in 2010).
Pfizer's tofacitinib is a traditional chemical pill that works by blocking signals from entering cells that would activate immune and inflammatory responses.
"The early studies on the JAK inhibitors are encouraging. So far they look pretty good," said Dr. Steven Abramson, director of rheumatology at NYU Hospital for Joint Diseases.
Analysts have expressed concern about side effects seen with the Pfizer drug, such as raised cholesterol and liver enzyme levels. But researchers say the safety profile is acceptable so far, given the benefits and a need for new medicines.
Saeed Fatenejad, who heads inflammation research for Pfizer, expressed confidence that the safety data will satisfy health regulators. "So far we haven't seen a signal that would indicate long-term cardiovascular risk. We haven't seen any increase in the rate of heart attacks and so forth," he said.
There are 12 JAK inhibitors from 11 companies being developed for rheumatoid arthritis, according to Thomson Reuters Pharma, with Pfizer's by far the furthest along.
Pfizer has already released results from two Phase III trials and is expected to unveil by mid-year data from three more late-stage trials, including a closely watched study comparing the drug to Humira.
Pfizer has not said when it plans to seek approval, but if all goes well its drug could be on the market in 2013.
Tofacitinib could become the first really big drug to come from Pfizer's own labs since Viagra more than a decade ago. The company has been criticized for a lack of in-house productivity despite a huge research budget.
"A single new drug doesn't mean there's been a turnaround in their research labs. Blind squirrels get acorns once in a while," quipped Barclays' Butler, who forecast annual tofacitinib sales reaching $2.5 billion within seven years.
Pfizer also plans to test the drug for conditions including inflammatory bowel diseases, psoriasis and dry eye.
Abramson said he would welcome a new oral drug option for patients, although he does not believe its convenience will prompt many current patients to switch treatments.
"The remarkable thing is patients get such benefit from these biologics, generally speaking, that you rarely get pushback about needles," he said.
But there remains an unmet need as some 30 to 40 percent of patients fail to benefit from standard injectable treatments, either from the start or over time, doctors said.
"I would be comfortable having this (Pfizer drug) among the several choices for people who aren't doing well," Abramson said.
Dr. Yusuf Yazici, a rheumatologist and assistant professor at New York University Langone Medical Center, believes many doctors will shy away from the JAK inhibitors as an initial treatment choice "until more data are accumulated, which could take roughly two to three years."
For tofacitinib to really challenge the top sellers, it must show that it not only helps patients feel better but slows joint damage as do the biologics. Pfizer is conducting studies to demonstrate that its drug does delay disease progression.
Pfizer does have one potential way it could differentiate its drug -- by undercutting the price of the biologic treatments, which cost roughly $20,000 a year.
Doctors say tofacitinib should be less expensive than more difficult to produce biotech drugs, and that a significantly lower price could tip the balance in its favor.
"If the JAK data looks very good, and it's cheaper, that could be a driving factor," Yazici said. "It should be cheaper, but they're never cheaper."
(Reporting by Bill Berkrot and Ransdell Pierson; Editing by Michele Gershberg and Maureen Bavdek)
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