A Blockbuster in the Making

The Food and Drug Administration approval of Pfizer's (NYSE: PFE  ) rheumatoid arthritis drug tofacitinib was mostly expected. The clinical trial data was strong, and the drug received a solid 8-2 recommendation from the FDA advisory committee.

The big question was where in the progression of the disease the FDA would place tofacitinib, which is now known by its branded name Xeljanz. As confusing as the name is -- the X is pronounced like a Z and the Z is pronounced like an S -- the label for the drug is pretty straightforward.

Xeljanz is approved for use after methotrexate, typically one of the first drugs that rheumatoid arthritis patients are prescribed. The drug can be used by itself or in combination with methotrexate. That's about the best label Pfizer could have hoped for. Given doctors' extensive experience with methotrexate, Xeljanz wasn't going to get used before doctors tried methotrexate, even if it was approved that early. And the monotherapy indication will allow Pfizer to capture patients that can't tolerate methotrexate.

There was a second, higher dose that Pfizer had applied for, but the FDA decided the risk profile of the higher dose didn't warrant approval without further data. Most patients would start on the lower dose and move to the higher one if it wasn't working, so the lack of a higher dose won't affect Pfizer's ability to capture the patients, although having the higher dose approved might help keep the patients longer before they try something else. It appears that the FDA is open to approving the higher dose later if Pfizer can come up with additional data to support its use.

Now the question is: Will doctors actually use Xeljanz that early in the disease progression? Doctors are pretty comfortable with the TNF inhibitors -- Abbott Labs' (NYSE: ABT  ) Humira, Pfizer and Amgen's (Nasdaq: AMGN  ) Enbrel, and Remicade sold by Merck (NYSE: MRK  ) and Johnson & Johnson (NYSE: JNJ  ) -- as witnessed by their multibillion-dollar sales. Xeljanz has the distinct advantage that it can be taken orally, while the TNF inhibitors need to be injected or infused. But Pfizer needs to get doctors comfortable with the new class of drug, which will likely take some time.

That's time Pfizer might not have. Two drugs in the same class -- one from Incyte (Nasdaq: INCY  ) and Eli Lilly (NYSE: LLY  ) , and another from Rigel (Nasdaq: RIGL  ) and AstraZeneca (NYSE: AZN  ) -- are working their way through the clinical development process.

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