Pfizer Focuses, Investors Should Cheer

The culling of the pipeline continues at Pfizer (NYSE: PFE). While that's bad news for partners that signed on with the company or with Wyeth before the merger -- tiny Trubion in this case -- it's a good move for Pfizer. And Pfizer investors should be pleased.

Trubion said yesterday that Pfizer had decided to nix TRU-015, its lead drug in their partnership to develop a treatment for rheumatoid arthritis. Pfizer is still looking at a second compound as part of the partnership it inherited via its acquisition of Wyeth.

Pfizer has to be focused and disciplined, bringing only the best drugs into phase 3 development, especially in a competitive rheumatoid arthritis market. The company already sells one treatment, Enbrel, with Amgen (Nasdaq: AMGN), so it's not like Pfizer is missing out on the market if it fails to develop something from the partnership.

CD20, the molecule that TRU-015 targets, is also the target of Roche and Biogen Idec's (Nasdaq: BIIB) Rituxan, so any second-generation drug would have to be able to beat Rituxan to gain any reasonable market share. Spending a lot of money on a phase 3 trial to find out it only works as well as Rituxan would be costly.

The decision is further complicated by the fact that TRU-015 and its backup compound are both injected. Rituxan, Enbrel, and the other blockbusters in the space -- Merck (NYSE: MRK) and Johnson & Johnson's (NYSE: JNJ) Remicade and Abbott Labs' (NYSE: ABT) Humira -- also need to be taken via a needle, but oral treatments for rheumatoid arthritis are right around the corner. Rigel Pharmaceuticals and AstraZeneca's R788, Eli Lilly (NYSE: LLY) and Incyte's INCB28050 are in development. Even Pfizer has one in the works.

There's no guarantee that any of the oral drugs will make it to market, but Pfizer does have to factor in their potential when deciding about pressing forward with other compounds. Pfizer's best-of-the-best strategy should pay off in the long run even if it makes its pipeline smaller right now.