Back in April, I started a series of columns relaying information from discussions that Matt and I had with three representatives from Pfizer (NYSE: PFE) -- James Gardner, VP Investor Relations; Ron Aldridge, Director of Investor Relations; and Rick Hoddeson, VP of Operations Planning & Analysis. In the first two articles (linked below) the discussion centered on financial concerns. Tonight, I'll continue the series with the second half of our conversation, which involved the more qualitative side of Pfizer's business, specifically Pfizer's product pipeline and research and development (R&D) efforts.
This column should also shed some light on why we continue to hold our Pfizer shares, even though we have some concerns about the way Pfizer manages the financial side of its business. Our questions are in italics, followed by a synopsis of Pfizer's response along with some Foolish commentary.
Will biotechnology begin to impact R&D efficiency in any meaningful way?
(Note: Jim Gardner used to be Senior Director of Strategic Planning for Pfizer, which makes him quite well-qualified to answer this question.) Yes, biotech has a very beneficial impact on R&D efficiency. Each of Pfizer's development teams is, in effect, a biotech company. "Biotech is in Pfizer right now, and it is impacting the way we discover and develop products."
The company has brought in-house all the techniques of biotech screening, chemistry agents, and the mechanisms involved in the discovery of products. Alliances struck with outside biotech specialists are now in full flower, "turbocharging R&D." These alliances help Pfizer identify, screen, and search for new products. Pfizer has sought early alliances with all of the genomic information companies, with the exception of Human Genome Sciences (Nasdaq: HGSI), as it has a different business model. Pfizer's focus in this area is to ensure that it will have freedom of access to the human genome.
Looking out five years, which five drugs do you see as Pfizer's bestsellers?
Pfizer believes it has four products in its pipeline with the potential for peak sales in excess of $1 billion. These include the following:
- Inhaled insulin, a product that Pfizer expects to come to market in about a year. There are other competitive products, but Pfizer is ahead of the competition. Pfizer's other partners for this product included Inhale Therapeutic Systems (Nasdaq: INHL) and Aventis (NYSE: AVE).
- Valdecoxib, a second-generation Cox-2 inhibitor that will treat osteoarthritis and rheumatoid arthritis. This drug is being developed with Pharmacia (NYSE: PHA), which recently acquired Monsanto, and is also expected to come to market within a year.
- Relpax, a new migraine medication. Pfizer has received an approvable letter for this drug from the Food & Drug Administration (FDA) and is currently engaged in final discussions related to its release into the marketplace. Pfizer's testing of this drug indicates that it has superior efficacy compared to the leading migraine medication, Immitrex, a drug marketed by Glaxo Wellcome (NYSE: GLX).
- Zeldox, an antipsychotic medication. Pfizer is presently filing arrhythmic data for this drug.
Another drug that is currently in Phase III testing is Darifenacin, an antifungal drug for overactive bladder, which Pfizer anticipates will generate sales of up to $750 million annually. In addition, the current products driving Pfizer's growth will be around for a while, as the company has no significant patent expirations in the near-term. Pfizer is also doing additional development work with many of these products in an effort to find additional treatment indications for them.
At what stage of the process was the decision made to stop research on Elzopitant and Alond? (Note: This question was asked due to the fact that the later a drug gets into the development process, the more costly it is to the company.)
Stage two and stage three, respectively. Pfizer's goal is to extend the thumbs-up/thumbs-down to the lowest level possible so that money isn't wasted. As a general rule, attrition normally takes place in either Phase I or the clinical stage. Alond is still undergoing some testing for cardiomyopathy and neuropathy.
What's the current status of Tikosyn, Relpax, and Zeldox? I do not recall hearing anything about these during the first quarter.
Tikosyn, which was launched during the first quarter, is likely to be a relatively small product for Pfizer. It is currently available in only eight institutions in the U.S. and requires a very conservative dosing mechanism as well as fairly close patient monitoring. Institutions using the drug need training from Pfizer. As noted above, Pfizer has received an approvable letter from the FDA for Relpax, and they are currently in labeling discussions. Additional data has been submitted to the FDA for Zeldox, and Pfizer is awaiting approval, which should come within the next six months.
That's it for tonight. Next week, on Tuesday, I'll pick up with the fourth and final segment of this series. I'll also share some parting thoughts on where Pfizer currently stands as an investment. If you wish to discuss this report further, please feel free to ask your questions on the Rule Maker Strategy discussion board.
Also, in closing, we have another poll. Your Rule Maker managers are always looking for ways to better serve you. One of the questions we've been debating internally is column length. So...
How do you feel about the typical length of the Rule Maker nightly report?
- Too long -- I often just skim it because the material is too dense.
- Just right -- don't change a thing.
- Too short -- I really like it when you all go into greater depth.
Submit your vote.
We truly thank you for your excellent responses these past two nights. Your feedback is invaluable to us.
Fool on!
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