Pfizer Stubs Toe Without Celebrex

Pfizer (NYSE: PFE) remains committed to maintaining a leadership position in global pain-treatment markets, despite the upcoming loss of market exclusivity for Celebrex. Foolish investors should remain wary of management promises.

Mar 3, 2014 at 12:06PM

Pfizer (NYSE:PFE) remains committed to maintaining a leadership position in global pain-treatment markets, despite the upcoming loss of market exclusivity for Celebrex – which contributed 6% to reported biopharmaceutical revenue of $47.8 billion in 2013. Reformulating old molecules in the pain pipeline, however, won't offset sales erosion of the drugmaker's fourth best-selling product – which still managed 6% global growth year-over-year – to generic competitors.

What is Celebrex and why is it important to Pfizer?
Celebrex is used to primarily treat inflammation and pain accompanying osteoarthritis and rheumatoid arthritis. Around 72% of the $2.92 billion in global sales generated in 2013 is at risk, however, once the drug loses exclusivity. Originally set to expire in the U.S. last November, Pfizer successfully fought off patent challenges from several generic drug specialists, including Teva, Mylan, and Actavis, delaying the introduction of generics until December 2015. Patent challenges in Canada and Europe, however, have either been withdrawn or allowed to elapse, which means the drug could face generic competition in November of this year.

Growing its pain portfolio
Pfizer's management stated during the fourth-quarter 2013 earnings call last month that a move toward opioid analgesics and a promising anti-nerve growth factor (NGF) drug in its pipeline, a monoclonal antibody called tanezumab, could help to mitigate the impact Celebrex's loss of market exclusivity will have on sales going forward.

Looking to capitalize on the growing need for abuse-deterrent formulations, Pfizer is looking to entrench itself in the $5.1 billion market for extended-release (ER) opioid formulations prescribed by physicians to chronic pain sufferers (30% of the $18.1 billion in annual sales for all opioid-based therapies). Chief executive Ian Read confirmed on the conference call that Embeda, an ER morphine/naltrexone formulation that was voluntarily benched in 2011, would be back on pharmacy shelves in second-quarter 2014 after the FDA approved both an updated manufacturing process and a risk evaluation and mitigation strategy (REMS) – which is now required for all ER and long-acting opioid medications.

A slow sales start hasn't stopped generic manufacturers from preying on Embeda, however. Actavis is seeking FDA-approval of lower-cost versions of the drug at all dosage forms and strengths. Litigation challenging the naltrexone sequestering manufacturing process and composition patents went to court during the drug's abeyance. Embeda must also confront a market dominated by Purdue Pharma's $3 billion controlled-release oxycodone derivatives, OxyContin and its reformulated, tamper-resistant cousin OxyContin OP. Embeda could also find itself taking a back seat to Opana ER, a generic version of oxymorphone sold by Impax Labs as per a licensing agreement with Endo Health Solutions.

Likewise, I'm not sure that Pfizer's decision to move forward with the development of another problematic drug called Remoxy ER Capsules CII will truly help the company grow. Using a tamper-resistant technology, called ORADUR, licensed from Durect that envelopes a long-acting oral formulation of oxycodone in a high-viscosity matrix – preventing accelerated drug release following crushing or chewing, combined with difficulty in separating the active drug via dissolution – the drug was originally intended to compete against OxyContin back in 2008.

It makes little strategic sense to continue development here, however, since the drugmaker has sold all rights for development of other ORADUR-based opioid drug candidates (hydrocodone, hydromorphone, and oxymorphone) back to its co-developer Pain Therapeutics.

Previously rejected by the FDA, and with OxyContin firmly entrenched, I think a better strategy would be to instead focus on more promising programs, such as its growing oncology pipeline.

Financial strength
Despite operational pressures from Celebrex and other at-risk patents – like the antibiotic Zyvox – credit rating agency Fitch believes the company's financial metrics remain healthy, opining that total debt leverage will remain steady (between 1.5 times and 1.7 times stockholder equity) due to further decreases in Pfizer's overall debt level; most of the $31 billion in long term debt doesn't come due before 2017, too.

Though organic revenue growth is expected to be relatively flat this year, significant free cash flow of $15.9 billion demonstrates that investors willing to be patient could still be rewarded despite some misfires in its pipeline.

Promising anti-nerve growth factor in pipeline
Pfizer, in collaboration with Eli Lilly (NYSE: LLY) is developing a promising anti-nerve growth factor (NGF) called tanezumab. At present the monoclonal antibody is subject to a partial clinical hold, due to safety concerns (small subset of subjects on the NGF had a worsening of disease requiring joint replacements in a late-stage trial in patients with osteoarthritis).

The FDA review of the partial clinical hold could come early next year. Notwithstanding developmental risks, analytics firm Decision Resources is forecasting that the NGF class could command 19%, or $4.1 billion, of major-market sales for chronic pain therapies by 2022.

Pfizer is currently stumbling as it looks to retain a leadership position in global pain-treatment markets. However, should the drug maker get back on track with this nerve-blocking drug, stockholders could be ultimately rewarded.

More high-yield dividend stocks to watch now
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it’s true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor’s portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

David Phillips has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers