On April 25, AstraZeneca's (AZN 0.18%) biologics license application for its tremelimumab and Imfinzi drug pairing was accepted by the U.S. Food and Drug Administration (FDA) to treat patients with advanced, unresectable liver cancer.
With the FDA expected to make a decision by the fourth quarter of 2022, it's worth asking the following question: How much in sales could the drug combo generate for the pharma stock if approved? Let's take a glance at the clinical trial results for the drug pairing and the U.S. liver cancer market to get an answer.
A potent treatment for a deadly disease
Liver cancer is a type of cancer that originates in the cells of the liver. The liver is an organ with the primary role of filtering blood that circulates through the body.
Liver cancer often presents with no initial symptoms or generalized symptoms like fatigue, fever, chills, or night sweats. In later stages, the disease is usually characterized by jaundice (i.e., yellowing of the skin and whites of the eyes), loss of appetite, and nausea.
Because the disease typically flies under the radar in the early stages, more than half of patients are diagnosed at advanced stages. Thatmeans the condition has spread from its initial site to the lymph nodes or more distant organs.
Unfortunately, this type of cancer comes with a poor prognosis. That's because there are few treatments available, and the tumors are generally unable to be surgically removed. These are referred to as unresectable tumors.The good news is that advances in scientific research are gradually yielding more viable treatments for the disease.
The tremelimumab and Imfinzi drug combo from AstraZeneca looks especially promising. It was observed during clinical trials that patients treated with tremelimumab and Imfinzi experienced a 22% reduction in their risk of death compared to the standard-of-care treatment called sorafenib. As a testament to the efficacy of the drug pairing, 31% of patients receiving it were still alive at three years. This was substantially higher than the 20% of patients taking sorafenib who were still alive at three years.
Image source: Getty Images.
The sales potential could be needle-moving
The tremelimumab and Imfinzi drug combo has proven to be quite effective for advanced liver cancer patients. But how much could it add to AstraZeneca's sales?
First, there are approximately 26,000 patients in the U.S. diagnosed with advanced, unresectable liver cancer each year. Since the drug pairing was more effective than the current standard of care, I believe it's reasonable to assume that it will gradually become the new go-to treatment once it is approved. This is why I will factor in a 20% market share for the drug combo, which is 5,200 patients.
Tremelimumab doesn't yet have an annual list price since it isn't currently approved for any indications. But I'll assume that the annual list price would be similar to the $200,000 price tag for Imfinzi. Considering downward adjustments in price from negotiations with health insurers and patient assistance programs, I will use a net annual price of $100,000 per patient. And since the treatment is two drugs, this would generate for AstraZeneca approximately $200,000 in annual revenue per patient (split in some manner among the patient, insurer, and potentially a patient assistance program).
This would just top $1 billion in annual sales for AstraZeneca. Given that analysts expect the company to report $43.8 billion in sales in 2022, this would be a meaningful 2.4% boost to AstraZeneca's total revenue base.
An attractive stock to buy for the long haul
Aside from the tremelimumab and Imfinzi drug combo for advanced liver cancer, AstraZeneca has more than 180 projects in different stages of clinical trials. It's anticipated that this strong drug pipeline will translate into 15.4% annual earnings growth over the next five years for AstraZeneca.
For context, this is more than double the 7% annual earnings growth that analysts expect for the pharmaceutical industry. And yet, AstraZeneca is trading at a forward price-to-earnings (P/E) ratio of 17.2. This is an intriguing valuation considering the industry is priced at a forward P/E ratio of 11.7. This is why AstraZeneca appears to be a good stock to buy and hold.
