Pfizer still mum on BD, frustrated by biosimilar market
- Pfizer Inc. reported second quarter earnings on Tuesday, missing analysts’ expectations for topline revenues but beating estimates on the bottom line.
- The company reported $4 billion in net income on $12.9 billion in revenues, missing forecasts of $13.07 billion. This miss was driven by lower sales from key drugs like Lyrica and Prevnar 13.
- The company’s biosimilar Inflectra continued to have mixed reimbursement — securing coverage under Medicare, but having limited success among commercial payers despite its lower cost. Pfizer priced Inflectra at a 15% discount to branded Remicade.
Like many recent quarterly earnings reports, Pfizer’s second quarter financials were a bit of a snooze. Yet, Q&A on the call with analysts focused largely on the potential for the company to do some major M&A, as well as the prospects for its biosimilar franchise.
"We have a base plan and we look to improve that plan as far as capital allocation. We look at BD as a way to improve that plan. There are small events in the short term that may change valuations in BD," Pfizer CEO Ian Read said on the call, keeping in line with comments he made during the first quarter.
Speculation has spun up that Pfizer could be looking at AstraZeneca (again) or Bristol-Myers Squibb as potential take out targets. Surely, one of those smaller events that Read mentioned was AstraZeneca’s failed MYSTIC trial. The CEO said to analysts that the study was noteworthy.
"MYSTIC certainly indicated that the I/O-I/O may be more problematic in the near-term, but reinforces the value of PD-1 franchises. We want to see the full report. But certainly we think that its remains that the PD-1/L1s will be a major player in the game," said Read.
Pfizer has its own PD-1 in development with Merck KGaA, as well as several other oncology products with different mechanisms that could be combined with the molecule.
The company is concentrating on a combination strategy for its oncology products and has been conducting basket studies to see which combinations may be most valuable to bring forward in certain patient populations.
Ultimately, though, Read noted the company’s M&A strategy will continue to hinge on whether the Trump administration will conduct comprehensive tax reform that could both lower the corporate tax rate, as well as allow for foreign cash to be repatriated.
A slow start
The company’s biosimilar franchise has been off to a slow start, bringing in only $121 million during the quarter. This was driven by Inflectra (infliximab-dyyb), a copycat biologic of Johnson & Johnson’s blockbuster TNF-inhibitor Remicade (infliximab). Pfizer said on the call that Inflectra has a 2.3% share of market, but has been largely blocked by contracts J&J already has in place with payers. Read called this "marketplace extremely difficult," expressing his frustration with the situation and noting that it makes competitive pricing irrelevant.
The drug will face further competition — Merck & Co. recently launched its own Remicade biosimilar, Renflexis (infliximab-abda).
Merck priced the drug at a 35% discount to Remicade, effectively undercutting Pfizer's slimmer 15% discount.
"We continue to see the value of biosimilars in the marketplace in providing new treatment options. But we know the market is still in development. We’ve made steady progress. We’ve had some wins," said Pfizer Chief Financial Officer Frank D’Amelio.
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