In mid-January, Pfizer (PFE +0.11%) announced that the U.S. Food and Drug Administration (FDA) gave the nod to Cibinqo as a treatment for patients with moderate to severe atopic dermatitis (eczema) whose disease wasn't adequately controlled with other treatments.
Why did the FDA approve Cibinqo for moderate to severe eczema patients? And what could this mean for pharma stock Pfizer's revenue? Let's take a look at the clinical trial results for Cibinqo and the U.S. eczema market to address these two questions.
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An impactful treatment option for a challenging condition
Eczema is a common inflammatory skin condition with symptoms including redness, dryness, and itching. If eczema is left untreated, it can result in sleep issues and lower a patient's quality of life.
That's why it's important for patients to establish a treatment plan with a doctor. Initial treatment options generally include steroid creams and ointments or light therapy. Unfortunately, 55% of patients with moderate to severe eczema report inadequate disease control.
The good news is that with Cibinqo now approved as a treatment in the U.S. (not to mention Japan and the U.K.), more patients may be able to finally get their moderate to severe eczema under control. So, what data is behind the most recent approval in the U.S.?
Two phase 3 clinical trials randomized patients to receive either 100 mg or 200 mg once-daily oral Cibinqo pills (abrocitinib) or placebo. Cibinqo was demonstrated to be far superior in helping a greater proportion of patients achieve clearer skin than placebo. Eczema can be measured using the Eczema Area and Severity Index (EASI), which examines the surface area and severity of eczema. A significant improvement from a patient's pre-treatment baseline during treatment signals that a treatment is effectively managing the condition. The gold standard of whether a treatment is effective is the amount of patients whose skin clears at least 75% as measured by EASI during treatment, which is referred to as EASI75.
Patients receiving the lower dose of Cibinqo achieved at least 75% clearer skin (or EASI75) at a maximum rate of 44.5% across the two clinical trials, whereas placebo patients topped out at just 11.8% of patients attaining EASI75. Patients were able to achieve EASI75 at a much higher rate on the 200 mg dose, which topped out at 62.7% across the two clinical trials.
An indication with blockbuster potential
There are 6.6 million adults in the U.S. with moderate to severe eczema. While 55% of those adult patients report that their condition isn't appropriately controlled on their current treatment, I'll estimate that 20% would be eligible to start treatment with Cibinqo, to err on the side of caution. This would equate to a patient pool of approximately 1.3 million.
Since there are other drugs on the market like Sanofi and Regeneron's Dupixent and AbbVie's Rinvoq, I'll conservatively assume that Cibinqo can start by capturing 5% of these patients, or 66,000 individuals.
The reason for my lowball forecast of Cibinqo's potential market share has to do with the fact that the drug is part of the Janus kinase (JAK) inhibitor drug class along with Rinvoq. Because this drug class carries a heightened risk for cancer, serious heart-related events, and blood clots, the FDA could restrict the higher dose of Cibinqo in a worst-case scenario. A restriction to only a lower dose of Cibinqo would take away the competitive advantage of the drug in a crowded market.
While pricing information for Cibinqo in the U.S. isn't yet publicly available, the Institute for Clinical and Economic Review recommends an annual list price of between $30,000 and $40,000 for the drug. I'll use an annual list price of $30,000. And adjusting for patient assistance programs and health insurance negotiations over the price of the drug, I'll predict an annual net price of $15,000 per patient for Cibinqo.
This works out to essentially $1 billion in annual sales potential for Cibinqo in the U.S. Even though Pfizer is expecting $81.5 billion in revenue for 2021 at the midpoint, $1 billion in additional sales is enough to move the needle. That's especially the case when considering that this would be a 2.2% bump in non-COVID vaccine revenue for the company.
Pfizer is a strong buy for 2022
Pfizer is down 6% year to date as a result of the downturn in the broader market. This begs the question: Is Pfizer a buy right now?
Pfizer is trading at a forward P/E ratio of 7.8, which is well below other drug manufacturers -- the general industry average is 11. This is despite the fact that Pfizer's forecasted annual earnings growth rate of 19% through the next five years is much higher than the 10% industry average.
Pfizer offers investors above-average growth at a below-average price. And if that wasn't enough, investors can get paid a 3% dividend yield while they wait for the stock to go higher.
