After AstraZeneca: 3 Other Opportunities For Pfizer

Pfizer (NYSE: PFE  )  on Monday formally abandoned its attempts to acquire AstraZeneca (NYSE: AZN  ) , the second-largest pharmaceutical company in the U.K. AstraZeneca rejected Pfizer's final £69.4 million ($117 milion) bid last week, dashing the company's hopes of lowering its corporate tax rate and expanding its oncology pipeline.

Source: Wikimedia Commons.

Looking beyond the AstraZeneca deal, Pfizer still has three major opportunities for growth that investors shouldn't overlook.

Three cancer drugs to watch
Pfizer's cancer pipeline might not be as impressive as AstraZeneca's, but the company has several treatments worth watching.

Sales of Xalkori, a treatment for a mutation of non-small cell lung cancer known as ALK, jumped 129% year over year to $282 million in 2013. Pfizer notably reported in March that the drug was more effective than chemotherapy in a phase 3 trial of previously untreated patients. Based on that new data, analysts at Cowen believe Xalkori could hit peak yearly sales of $1 billion by 2020.

Inlyta, a treatment for advanced kidney cancer that launched in the second half of 2012, generated $319 million in sales last year. Inlyta faces stiffer competition than Xalkori, but Barclays believes the drug could generate peak annual sales of $600 million by 2016.

Palbociclib, Pfizer's experimental treatment for ER+ (estrogen receptor positive), HER2- (human epidermal growth factor receptor 2 negative) breast cancer, is the third cancer drug to watch. Approximately 75% of all breast cancer cases fall into these two categories.

Palbociclib belongs to a new class of drugs known as CDK inhibitors, a category that also includes Novartis' LEE011 and Eli Lilly's LY2835219. Palbociclib is the most advanced of the three -- it is in phase 3 trials, and Pfizer plans to submit a new drug application to the FDA based on the drug's phase 2 data. Peak sales projections for palbociclib fall between $2 billion (Bernstein) and $6 billion (ISI).

One cholesterol drug to watch
Investors should also pay close attention to the three-way race in next-generation cholesterol treatments between Pfizer, Amgen (NASDAQ: AMGN  ) , and Sanofi (NYSE: SNY  ) /Regeneron (NASDAQ: REGN  ) . All of these companies are focused on bringing a new class of cholesterol drugs, known as PCSK9 inhibitors, to the market.

In the past, statins stopped the liver from producing LDL "bad" cholesterol, but could raise levels of PCSK9, an enzyme that degrades liver-based LDL receptors that regulate LDL levels. PCSK9 inhibitors attempt to lower levels of that enzyme so LDL receptors can do their job.

Pfizer's RN-316, Amgen's AMG 145, and Sanofi/Rengeneron's alirocumab are all in phase 3 trials. Expectations for the three drugs are high, with most peak sales estimates falling between $1 billion to $6 billion.

The importance of these three drugs can be seen in the sheer size of their trial groups. Pfizer and Sanofi/Regeneron's late-stage trials each consist of 22,000 patients, while Amgen's trials involve more than 4,000 patients. Although top-line data from these late-stage studies won't be known for some time, Pfizer reported in March that RN-316 in a phase 2b trial significantly reduced LDL cholesterol in statin-treated adults with high cholesterol.

One business division to watch
Pfizer's weakest business has always been its generics segment, which is now part of its newly formed global established pharmaceuticals, or GEP, operation. The GEP segment consists of generic drugs, biosimilars, patented drugs that will lose exclusivity in the near term, and partnerships with other generic-drug makers.

Last quarter, sales at the GEP segment fell 13% year over year to $6 billion, due primarily to generic competition for Detrol LA and Lipitor in the U.S. and Viagra in Europe. The termination of collaborations in Japan and Europe exacerbated the decline.

There has been speculation that Pfizer merged its generics business with additional businesses to make it more attractive to potential buyers. In January, Reuters reported that Valeant, Mylan, and Actavis were all interested in acquiring the GEP business, which accounted for 53% of Pfizer's first-quarter revenue.

Pfizer could use cash from selling the GEP business to invest in higher-growth areas, such as its aforementioned oncology and cholesterol treatments. It could also spin off the business and profit from an IPO, as it did with Zoetis.

The Foolish takeaway
Pfizer still has rich opportunities for top-line growth, even though its stock has remained flat over the past 12 months. New cancer treatments, a new cholesterol drug, and the possible sale of the GEP business could each generate billions of dollars.

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