Most investors in pharmaceutical stocks these days have vaccines on the brain. It's understandable. U.S. deaths attributed to COVID-19 are now eclipsing all but the worst tragedies in our country's history every single day. Before the COVID-19 pandemic, the vaccine leaders were working on drugs to treat other illnesses, and the future for most of them will be tied to that original pipeline more so than to a potential coronavirus vaccine.
For instance, Pfizer (PFE 1.28%) listed 34 commercialized drugs in its 2019 annual report, but the COVID vaccine candidate was mentioned 25 times in the company's latest earnings call, far more than any program. Everyone is interested in its progress, understandably. But if recent regulatory actions are any indication, its most-mentioned approved product, Ibrance, could impact Pfizer's shareholders even more than the much-anticipated vaccine.
A big missed opportunity
Ibrance is a drug for metastatic breast cancer, which is cases in which the cancer has spread to other parts of the body. The drug was approved in 2015, and its use was expanded to more women, and then men, in the years since. In 2017, Pfizer announced the drug had been approved as a first-line treatment -- the standard demonstrating the best results -- for this advanced stage of breast cancer.
Although the types of breast cancer it was approved for make up more than two-thirds of overall cases, the approval only applies to the 6% to 10% of those that are initially diagnosed as metastatic and the 20% to 30% of early-stage diagnoses that eventually become metastatic. Sales of the drug have taken off since its approval.
Because the drug was effective in later-stage breast cancer, it stood to reason (or so the company thought) that Ibrance could help patients earlier in the disease's progression. Unfortunately, this hasn't been the case. The first trial readout in June showed no statistical difference in the outcomes of stage 2 and stage 3 patients who received the drug. In October, the company's second study of the drug produced a similarly disappointing result. In 2017, a Morgan Stanley analyst pegged the revenue opportunity for these earlier stages of breast cancer around $8 billion annually.
What is the vaccine worth?
In early November, Pfizer and partner BioNTech (BNTX 0.51%) announced that their coronavirus vaccine candidate that takes a novel mRNA approach was at least 90% effective at preventing COVID-19. A few weeks after that, it updated the efficacy figure to 95%. In early December, the drug was granted approval for emergency use in Canada and the U.K. Now that the vaccine is being distributed, and broader clearance is imminent, it's fair to start calculating the true value to the company.
The basic calculation is simple. What the companies will generate in sales is the number of doses sold multiplied by the average selling price. It starts getting complicated when you realize the partners have some arrangement about what each company's share of those sales will be, and that not every buyer will pay the same price. Ultimately, analysts think sales of the Pfizer/BioNTech vaccine will reach between $13 billion and $14 billion in 2021.
As more vaccines are approved -- including from companies that have pledged not to make a profit on the vaccine during the pandemic, like Johnson & Johnson (JNJ 0.32%) and AstraZeneca (AZN 0.35%) -- pricing will likely come under pressure, and sales will fall off precipitously.
What has more impact?
There is no doubt Ibrance for advanced breast cancer treatment and the COVID vaccine will continue to have a significant impact for Pfizer shareholders. Even though the vaccine may bring in $14 billion in revenue (keeping in mind we don't know how Pfizer and BioNTech plan to split the profits), the benefit is likely to be short-term as competition heats up and the pandemic eventually ends. The failure of Ibrance in the early-stage breast cancer trial means shareholders miss out on the opportunity for an annual $8 billion of revenue. Long term, it seems clear the disappointing Ibrance news is more impactful.
Pfizer has said it will mine the data from the Ibrance studies to look for potential groups the drug helped, but that's trying to make lemonade out of a lemon. Those holding shares of Pfizer for the COVID vaccine might want to pay close attention to where future sales will need to come from once the pandemic is behind us. One promising source just got crossed off the list.