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Pfizer Stock Is Fine, But What Just Happened to Mine?

By Rich Duprey - Apr 12, 2013 at 12:52PM

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These stocks bounced higher yesterday, but are they about to make a return trip to Earth?

While the Dow Jones Industrial Average continues to climb to new heights on little more than a central bank-induced asset levitation scheme and closing the day at 14,865, at least one of its components, pharmaceutical giant Pfizer (PFE 0.50%), saw its stock spike 2.5% higher. It's still riding the news that the Food and Drug Administration granted its breast cancer treatment palbociclib a breakthrough therapy designation, meaning that it gets expedited development and review. The drug is in late-stage testing and could be a life-saving treatment for women who suffer from the often-fatal disease.

Interim data showed that median progression free survival among women taking palbociclib along with Femara from Novartis more than tripled to 26.1 months from 7.5 months. Palbociclib is in phase 3 trials to study the drug combination as a first-line treatment compared to Femara alone. It has the potential to be a blockbuster development for Pfizer.

Shortcut to approval
It was FDA action that also caused ACADIA Pharmaceuticals (ACAD 4.92%) to rocket 64% higher and become the best performing stock on the market. It was allowed to bypass a second late-stage trial for its Parkinson's disease psychosis treatment pimavanserin. As the Fool's Brian Orelli notes, while ACADIA still has to perform tests for drug-drug interaction and chemistry and manufacturing -- so it won't be submitting its new drug application before next year -- the elimination of the confirmatory trial speeds up the time to market dramatically.

Clinical trials ACADIA has already run show that patients receiving the therapy are responding quite well to it, and because there's an unmet need in treating Parkinson's psychosis -- there are only off-label therapies at the moment -- the regulatory agency is apparently keen on getting a specified treatment out there. Not that the expedited process guarantees approval, but it's apparent that the FDA likes what it sees so far.

We're still a long way away from the NDA filing and in the interim there are those other tests it must still complete, and certainly yesterday's price action diminished future upside potential, so I'd have to agree with Dr. Orelli that there's no reason to rush in at this point.

Not necessarily a prescription for growth
There's something satisfying about being profitable, and after wandering in the wilderness for six years Rite-Aid (RAD 1.07%) is right to be proud of recording its second consecutive quarter profit and its first annual profit since 2007. The stock jumped 18% on the news.

The pharmacy recorded net income of $107.5 million, or $0.12 per share, for 2012 on revenues of $25.4 billion. Sales were actually down year over year from $26.5 billion, as generics ate at the top line, but they also helped bolster the bottom line, leading to the overall outperformance. Particularly hopeful for Rite-Aid investors was the pharmacy saying it liked being profitable so much that it plans on doing it again for its fiscal 2014 year. Its forecast revenues would fall once again, but profits could nearly double to as much as $200 million (though it said they could be cut in half, too, and fall as low as $45 million).

However, I'd recommend investors take a wait-and-see approach. Three quarters of last year covered a period when Express Scripts wasn't filling prescriptions at rival Walgreen because of a feud between the two. That rift has since been patched, and while CVS Caremark has in the past said it expected to be able to retain half of the customers it gained from the exodus, the weaker and smaller Rite-Aid might not be able to match such bravado.

Since the pharmacy has provided a fairly wide range of outcomes for the coming year, I'd want to see just how that pans out over the next few quarters.

 

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$50.65 (0.50%) $0.25
Rite Aid Corporation Stock Quote
Rite Aid Corporation
RAD
$5.65 (1.07%) $0.06
Acadia Pharmaceuticals Stock Quote
Acadia Pharmaceuticals
ACAD
$16.83 (4.92%) $0.79
Express Scripts Holding Company Stock Quote
Express Scripts Holding Company
ESRX
CVS Health Corporation Stock Quote
CVS Health Corporation
CVS
$93.14 (-0.94%) $0.88
Walgreens Boots Alliance, Inc. Stock Quote
Walgreens Boots Alliance, Inc.
WBA
$40.61 (-1.36%) $0.56
Novartis AG Stock Quote
Novartis AG
NVS
$88.65 (1.11%) $0.97

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