Xtandi Sales Disappoint Pfizer, Returning Focus To The High-Priced Deal
Executive Summary
Xtandi sales declined 11% in the first quarter due to an increase in the use of patient assistance programs, but demand grew 13%, which management said reflects the underlying strength of the prostate cancer drug.
Pfizer Inc. paid a sweet premium to buy Medivation Inc. last year for $14bn, an amount that surpassed even the high estimates of pharma analysts and left some investors questioning the value of the deal. Now, during Pfizer's first quarter sales and earnings call May 2, management admitted the primary driver behind the deal, the prostate cancer drug Xtandi (enzalutamide), performed below expectations.
Xtandi's US net sales declined 11%, due to an increased use of patient assistance programs, Pfizer reported. Demand for Xtandi grew, however, up 13%, Group President-Pfizer Innovative Health Albert Bourla added.
Pfizer reported $131m in Xtandi alliance revenues in the quarter. The drug is partnered with the Japanese pharma Astellas Pharma Inc. and under the arrangement, the companies jointly commercialize Xtandi in the US and share sales and profits, while Astellas is responsible for marketing the drug outside the US and pays a royalty on sales to Pfizer.
Bourla reassured investors that the issue is a temporary one, likely the result of dislocation in the reimbursement market.
"We believe that the demand for patient assistance as a percentage of total demand will stabilize, moderate gradually through 2017 and over time, resolve," he said.
But Bourla also admitted that the issue was unexpected and was not built into the company's plans for growing the market-leading androgen receptor inhibitor. "This was not anticipated," he said when pressed by an analyst. "Today, Xtandi is performing below our expectations in the US."
Nonetheless, the thesis behind growing Xtandi – expanding its use to earlier, non-metastatic lines of therapy and broadening the prescriber base – remain intact, he insisted.
"We remain confident in achieving both of these initiatives going forward," he said. Pfizer and Astellas have several late-stage studies underway exploring Xtandi in non-metastatic prostate cancer, in hormone-sensitive prostate cancer and other types of cancer, including breast cancer.
The sale of Medivation was a competitive process, one in which Pfizer outbid rivals including Sanofi. But some industry watchers wondered at the time if winning Medivation at such a high premium would still be considered a win long-term.
Big M&A On The Back Burner – For Now
Investors are already wondering what Pfizer's next big M&A move will be now that the company announced a decision not to pursue a break up last year and as new headwinds approach, including the loss of Viagra in late 2017 and Lyrica in 2018 to generics. (Also see "Stronger Together: Pfizer Decides Against A Split" - Scrip, 26 Sep, 2016.) Bristol-Myers Squibb Co. has been floated as a potential acquisition target for Pfizer, with the company's stock price under pressure due to missteps in immuno-oncology.
The field is one Pfizer is also investing heavily in. The company's first immuno-oncology drug, the PD-L1 inhibitor Bavencio (avelumab), partnered with Merck KGAA, was approved by FDA in March for Merkel cell carcinoma, although the company also announced a major setback in lung cancer, revealing that it's Phase III trial was pushed back until 2019 due to a protocol change. (Also see "Pfizer's Avelumab Makes Its Debut, In Rare Form Of Skin Cancer" - Scrip, 23 Mar, 2017.)
President-Worldwide R&D Mikael Dolsten said during the conference call that Pfizer has 30 clinical programs underway involving avelumab, including nine registrational trials. The company also initiated its first triple combination program testing avelumab in combination with investigational drugs targeting 4-1BB and OX40.
Analysts pressed management about their commitment to avelumab and the Merck partnership, attempting to tease out any information about how seriously they should be thinking about a Bristol buyout. But CEO Ian Read didn't offer much to fan the speculation. He insisted the company remains committed to avelumab, though he did say in regards to the Merck deal, "I don't think that any type of breakup fee would be material compared to the size of a large deal."
Pfizer will remain focused on business development, Read said, but he acknowledged uncertainties in the political and healthcare arena that are giving the big pharma pause.
"Pfizer has been and I expect will continue to be active industry consolidators," Read said. "However, there is a lack of clarity on potential tax reform, health care policies of the US and uncertainties in the European markets both with the French election and the UK snap election."
"We never say never, but I believe the current environment needs to stabilize in order to be an advantageous market for big deals," he added.
Pfizer's first quarter sales were lackluster. Revenues declined 2% to $12.78bn, while net income grew 3% to $3.12bn. The big bright spot for Pfizer has been the breast cancer drug Ibrance (palbociclib), which has become Pfizer's top-selling oncology drug; Ibrance generated $679m in sales in the quarter, reflecting a 58% jump. But Ibrance no longer has the CDK4/6 inhibitor market to itself now that Novartis AG's Kisqali (ribociclib) was approved by FDA. (Also see "Novartis Sets 'Flexible Pricing' For Kisqali To Compete Against Pfizer's Ibrance" - Scrip, 14 Mar, 2017.)