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Covid made Pfizer a household name and sent its revenues and profits soaring. Now flush with cash and amid its post-covid slump, Pfizer is betting that its next blockbuster drug could be a cancer treatment.
The pharma giant made headlines last Spring after announcing it was spending $43 billion to buy Seagen, a cancer specialist, in the largest merger and acquisition in the industry since 2019. Pfizer’s goal in buying Seagen was multifaceted – it expands the pharma giant’s existing portfolio of cancer drugs with new treatments, and is slated to bring in enough revenue to make up for a looming patent cliff threatening the company’s revenue.
“They are investing in the next generation of drugs to really be able to drive long term growth, with that innovative pipeline being able to offset the pretty significant patent losses that they have,” said Damien Conover, the director of healthcare equity research for Morningstar.
Bolstering its cancer portfolio is an obvious choice for the pharma giant, as oncology spending has boomed in the last decade. By the end of 2023 global spending on oncology is forecasted to be $218 billion, a 257% increase over the last ten years, according to Statista. Spending on cancer drugs alone is also set to double to $177 billion in the next three years, according to research by IQVIA, a global life sciences analytics firm.
“Oncology already within the pharmaceutical industry is the big dog,” said Mike Ward, global head of life sciences & healthcare thought Leadership at Clarivate, an information service provider. “Oncology is still a huge focus for the pharmaceutical industry and is likely to remain so,” he said.
Pfizer is also in need of a new cancer win, as its cancer sales have been slipping. The company reported $28 billion total oncology revenues for the third quarter of 2023, a 6% decline from a year ago. Sales of Pfizer’s leading breast cancer drug, Ibrance, have also been slow. Ibrance’s loss was primarily driven by more competition, lower clinical trial purchases internationally and planned price decreases in some international markets, the company said in the second quarter earnings press release earlier this year.
Those losses are reflected across the company. Overall revenues from sales have been sliding with fewer orders for Covid treatments. Earlier this fall Pfizer revised its full-year guidance, now anticipating the 2023 revenues to be between $58 and $61 billion, a $9 billion cut compared to previous estimates and below the analysts’ consensus of $60.7 billion.
The stock has also taken a hit, falling over 40% so far in 2023, shaving more than $118 billion from the company’s market value.
With the addition of Seagen’s portfolio, Pfizer now has access to antibody-drug conjugates, or ADC’s, a targeted cancer treatment that has grabbed the industry’s attention. Big pharma is spending billions of dollars on this promising cancer treatment.
The European Society for Medical Oncology meeting in October opened with a major deal between Merck and a Japanese Daiichi Sankyo to work on three drug candidates. Merck paid $5.5 billion in cash and could potentially spend as much as $22 billion if the drugs prove successful. Earlier in November another giant Bristol Myers Squibb announced it’s paying $100 million upfront for Orum Therapeutics’ blood cancer drug. Astra Zeneca’s Senior Vice President Puja Sapra also emphasized the company’s ambition to develop ADC’s.
“It provides a little bit more opportunity into the antibody drug conjugate space, which is a growing field of iImportance for the industry,” said Conover of Morningstar.
In addition to having access to a new treatment path, Pfizer is looking to offset potential losses it faces with upcoming patent expirations of blockbuster drugs such as Ibrance in 2027. Pfizer estimates that Seagen’s marketed oncology drugs will bring in around $8 billion a year, placing Pfizer on a path to meeting its targets of $25 billion in acquisition-based revenue by 2030. Those revenues will also help offset the estimated $17 billion in losses Pfizer expects with the multiple patent expiration coming down the line in the next few years.
“It’s a perpetual problem that pharma companies have, when their blockbuster drugs go off patent and the prices that can be charged once they go off patent typically decline very precipitously, as more generics enter into the market,” said Daniel Nevrivy of Nevrivy Patent Law Group, a law firm focused on intellectual property law in life sciences.
That’s why, he explained, the drug manufacturers are always trying to diversify their portfolio.
“They’re trying to have as many coals in the fire as possible because, especially in this market, you can’t just say: ‘Well, we’re going to create a cancer drug and we’re going to put it in clinical trials and boom, it works!’ In the vast majority of cases, the drugs don’t make it out of clinical trials successfully to create a product, let alone a blockbuster,” Nevrivy said.
Spending $43 billion on Seagen may not be a slam dunk for Pfizer. The price was high – it paid a premium for Seagen– and cancer research is unpredictable. It can take years of development, billions in spending and multiple drug trials just to get results.
“I think for Seagen to really work for Pfizer, some of the early stage assets within Seagen have to work out really well,” said Connover.
However, Seagen’s acquisition gives Pfizer direct access to four of the twelve total FDA-approved ADC treatments. Pfizer needs those golden eggs in its portfolio.
“We are not buying the golden eggs, we are acquiring the goose that is laying the golden eggs,” Pfizer CEO Albert Bourla said on a conference call discussing the merger.