A Quick Look at Pfizer Inc.'s Drug Development Pipeline

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The stock market offers plenty of industries for investors to choose from, but when it comes to looking deep into the future and basing a company's valuation more on promise than on its present-day products, healthcare takes the cake.

Pharmaceutical companies, for example, are substantially reliant on their drug development pipeline to fuel future growth. While Wall Street and investors certainly enjoy when product sales rise and profits roll in, branded drugs only come with a finite period of patent protection, meaning big pharma always needs to be on the forefront of innovation. With a significant portion of a pharmaceutical stocks' value being placed on its drug development pipeline, it's only prudent as an investor to keep a close eye on what coming down the pipeline.

Today, we're going to do just that by taking a quick look at Pfizer's (PFE 1.00%) drug development pipeline, as well as highlight what few drugs in development investors will really want to watch the closest.

Pfizer's drug development pipeline
As you might imagine, being one of big pharma's most preeminent companies Pfizer has a large drug development pipeline. Based on its latest update at the beginning of August, Pfizer was working with 34 drugs in phase 1, or early stage studies, 23 in phase 2 studies, 20 in phase 3, or late-stage studies, and had six drugs up for registration (a fancy way of saying the company filed a new drug application and is awaiting approval or rejection). This would appear to indicate a healthy pipeline, which Pfizer reminds investors may not include some earlier-stage confidential programs.

Source: Pfizer

But Pfizer will also need every ounce of its drug development pipeline to perform well if the company has any hope of growing in the wake of huge patent exclusivity losses. Within just the past few years Pfizer has lost its exclusivity on cholesterol drug Lipitor, still the world's best-selling drug of all time, as well as Detrol, the "little blue pill" Viagra, Effexor, and Spiriva in some countries. Later this year arthritis drug Celebrex, which generates about $3 billion in annual revenue, will become exposed to generic competition, while its current best-selling drug, Lyrica, a nerve and muscle pain medication, will lose its exclusivity in 2018.

Pfizer's most important experimental drugs
"How will Pfizer cope with these patent losses" you ask? I suspect two developing drugs are going to play a key role in making or breaking Pfizer's chances of surviving the patent cliff.

Perhaps none of its developing products is more important than first-line, estrogen-positive, HER2-negative breast cancer drug palbociclib. This breakthrough therapy-designated experimental drug stunned everyone in 2012 when it was reported, in a midstage interim analysis, that palbociclib in combination with Novartis' (NVS 0.80%) Femara more than tripled progression-free survival to 26.1 months compared to the Femara monotherapy arm's 7.5 months.

Pfizer presentation slide. Source: Pfizer

The final analysis from the PALOMA-1 study wasn't quite as rosy, with progression-free survival of 20.2 months compared to 10.2 months for Femara by itself. Still, this near doubling in PFS is highly expected to be more than enough to earn palbociclib an approval from the Food and Drug Administration. Current estimates on Wall Street for palbociclib's peak sales are wide-ranging, but generally within the $2 billion to $5 billion range. In short, it's a critical pipeline product for Pfizer.

Also, in spite of its weak performance thus far in the moderate-to-severe rheumatoid arthritis indication, I'd suggest investors keep their eyes on Xeljanz and its potential label expansion into treating psoriasis. Psoriasis is a chronic condition that affects 7.5 million people in the U.S. and about 125 million worldwide, so the potential patient pool is huge ... if Xeljanz gets the nod from the Food and Drug Administration, that is.

According to the company's phase 3 study, known as OPT Compare, the 10 mg dose of Xeljanz met the primary endpoint of demonstrating non-inferiority to Enbrel and significantly reduced patients' lesions after 16 weeks. Unfortunately, the lower dose of 5 mg didn't reach a level of noninferiority. The concern, as noted by FiercePharma in October 2013, is that Xeljanz's 10 mg dose for rheumatoid arthritis wasn't approved by the FDA because of possible safety risks. Pfizer needs a psoriasis label expansion if it has any hope of Xeljanz reaching blockbuster status, so this is a crucial outcome to watch. 

Down, but not out
Clearly Pfizer has some challenges to face in the coming years that might make it difficult for the company to grow its top and bottom line. The company has done a good job of repurchasing its own shares and trimming costs in order to give the perception of strong profits, but digging past the surface reveals a company that'll need its drug development pipeline to dig it out of the loss of exclusivity trenches. I'm personally expecting Pfizer to continue to focus on making a large deal happen in order to rejuvenate its growth, but I would strongly suggest investors keep their eyes peeled on these two aforementioned late-stage studies as they'll be critical to the success of the company moving forward.