2012 is shaping up to be a patent nightmare for most of the largest pharmaceutical companies. Nearly $29 billion in annual sales are at risk as patents are set to expire on some of the world's best-selling drugs -- including Pfizer's (NYSE: PFE ) Lipitor, the world's best-selling drug that lost patent exclusivity in November, and is currently responsible for 15% of the company's third-quarter global sales. Pfizer, along with nearly every other Big Pharma out there, is looking for pathways to replace an aging pipeline.
Pfizer isn't going to just roll over and die now that its top-selling drug is no longer exclusive; it's also using its clout to bring new drugs to market. On Friday, the FDA approved Inlyta, a second-option twice-a-day pill for those who have kidney cancer that has spread to other parts of the body. Under normal circumstances a new drug approval might be cause for celebration -- in this instance I'm simply going to reserve a golf clap for Pfizer.
First off, kidney cancer is a brutally overcrowded field, with seven drugs having been approved since 2005. Of those seven, five are a primary line of treatment, including Roche's (OTC: RHHBY) Avastin, GlaxoSmithKline's (NYSE: GSK ) Votrient, Onyx Pharmaceuticals' (NYSE: ONXX ) Nexavar and Pfizer's own Sutent. Pfizer is also up against Novartis' (NYSE: NVS ) Afinitor as a second-line kidney cancer treatment. Even with a balance sheet as large as Pfizer's, it could be difficult to make a dent against these already firmly planted Big Pharma names. It is always wise to make sure a new drug doesn't disrupt the current pecking order, but if you are an investor in any of Pfizer's competitors, Inlyta's approval should not keep you up at night.
Secondly, the market for kidney cancer simply isn't that large. That doesn't mean that drug companies shouldn't seek cures -- that would be misconstruing what I'm saying. But according to estimates from the American Cancer Society, 64,770 people in the United States will be diagnosed with kidney cancer. From a sentimental perspective, that's 64,770 more cases than I'd like to see. From an investment perspective, this represents just 0.02% of the entire U.S. population, which seems a ridiculously small slice of pie from which seven companies are expected to eat.
Will Inlyta contribute to the bottom line? It depends on whether Pfizer can get it approved as a first-option treatment (which it is currently working toward). In the meantime, Inlyta's approval isn't likely to move the needle much in regard to Pfizer's profitability -- but feel free to give Pfizer a golf clap nonetheless.
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