The Next Blockbuster Drug (PFE, BMY, BAYRY, JNJ, SNY)

June 23, 2011 · Filed Under fda, Financial, Heart, R&D · Comment 

Against a backdrop of falling stock prices, Pfizer Inc. (NYSE: PFE) and Bristol-Myers Squidd company (NYSE: BMY) have bucked the trend of the day and both are seeing a rise in their share prices after reporting that “apixiban” has tested as being superior to and safer than the generic drug “warfarin.”   Both drugs are intended to aid in preventing strokes in patients with dangerously irregular heart rhythms.  “Apixiban” is the experimental blood thinner being developed by both Pfizer and Bristol Myers.  “Warfarin” is the generic version of Coumadin, whose patent expired more than 10 years ago.

The hope is that this will lead to another blockbuster drug with more than $1 billion in sales.  The timing couldn’t be better for the two companies as Big Pharma companies are generally facing an industry-wide patten cliff, where a number of significant pattens will soon expire.  As a result, less expensive and far-less-profitable generics will soon displace proprietary pharmaceuticals along with much off the revenues these products generate.  This has so far not managed to keep these companies from being able to offer extremely high dividends.

The news of apixiban’s successful tests negatively impacted the prices of companies manufacturing competing blood thinners.  Bayer AG (BAYRY.PK) and Johnson & Johnson (NYSE: JNJ ) are seeking FDA approval for “xarelto,” their own blood thinner, traded lower.  In mid-day activity, Bayer traded at $77.15, down 7.26%, while Johnson and Johnson traded at $64.85, down 1.85%. Sanofi-Aventis (NYSE: SNY) who partners with Bristol-Myers in co-marketing, the hugely successful blood thinner, “Plavix” traded down over 2% at $37.08. “Plavix” will lose its patent protection in the near future.

The successful tests of “apixiban” effectively make Bristol-Myers a double winner by compensating for the impending expiration of its proprietary position with a promising new blood thinner.  In mid-day activity, shares of Bristol-Myers traded up 5.4% at $29.25, while Pfizer traded up 2.1% at 20.72.  Shares of both companies are near their highs for the day.

Before today’s announcement, the consensus price target for Pfizer was $23.37 per share, giving the shares an implied upside a tad less than 13%.  With today’s gains, Bristol-Myers Squibb has essentially surpassed its posted consensus target price.  Keep in mind that unforeseen and significant new product introductions like “apixiban” have the potential of powering upside adjustments in consensus price targets, earnings and revenue estimates, and even in the overall bias.  The question is, how much of a game changer will “apixiban,” prove to be . . . not merely in “targets” but in realized revenues and profits.

Morgan Stanley has now boosted its rating on Bristol-Myers Squibb to Overweight and said they win from this much more than Pfizer due to relative size.

JON C. OGG

    Subscribe to BioHealth Investor BioHealth Investor RSS Feed