Could this new indication create a blockbuster for Pfizer?

In mid-January, Pfizer (NYSE: PFE) announced that the United States Food and Drug Administration (FDA) has approved Cibinqo as a treatment for patients with moderate to severe atopic dermatitis (eczema) whose disease is not adequately controlled by other treatments.

Why has the FDA approved Cibinqo for patients with moderate to severe eczema? And what could that mean for Pfizer’s revenue? Let’s look at clinical trial results for Cibinqo and the US eczema market to answer these two questions.

Image source: Getty Images.

An impactful treatment option for a challenging condition

Eczema is a common inflammatory skin condition that manifests as redness, dryness, and itching. If eczema is left untreated, it can cause sleep problems and reduce the patient’s quality of life.

This is why it is important for patients to establish a treatment plan with a doctor. Initial treatment options usually include steroid creams and ointments or light therapy. Unfortunately, 55% of patients with moderate to severe eczema report inadequate disease control.

The good news is that with Cibinqo now approved as a treatment in the US (not to mention Japan and the UK), more patients could finally get their moderate to severe eczema under control. So what data is behind the most recent US approval?

Two phase 3 clinical trials randomized patients to receive 100 mg or 200 mg of Cibinqo (abrocitinib) oral tablets once daily or placebo. Cibinqo was shown to be far superior in helping a greater proportion of patients achieve clearer skin than placebo. Eczema can be measured using the Eczema Area and Severity Index (EASI), which examines the area and severity of eczema. A significant improvement from a patient’s baseline before treatment during treatment indicates that a treatment is effectively managing the disease. The gold standard for knowing if a treatment is effective is the number of patients whose skin clears at least 75%, as measured by EASI during treatment, which is called EASI75.

Patients receiving the lower dose of Cibinqo achieved at least 75% (or EASI75) clearer skin at a maximum rate of 44.5% in both clinical trials, while patients on placebo did not reached only 11.8% of patients reaching the EASI75. Patients were able to achieve EASI75 at a much higher rate with the 200mg dose, which reached 62.7% in both clinical trials.

An indication with blockbuster potential

In the United States, 6.6 million adults suffer from moderate to severe eczema. While 55% of these adult patients report that their condition is not adequately controlled on their current treatment, I would estimate that 20% would be eligible to start treatment with Cibinqo, to err on the side of caution. This would equate to a patient pool of approximately 1.3 million.

Since there are other drugs on the market like Sanofi and Regenerateby Dupixent and AbbVie‘s Rinvoq, I will conservatively assume that Cibinqo can start by capturing 5% of those patients, or 66,000 individuals.

The reason for my low prediction of Cibinqo’s potential market share is related to the fact that the drug belongs to the Janus kinase (JAK) inhibitor class of drugs along with Rinvoq. Because this class of drugs carries an increased risk of cancer, serious heart events, and blood clots, the FDA may restrict the higher dose of Cibinqo in the worst-case scenario. A restriction to a lower dose of Cibinqo would remove the drug’s competitive advantage in a crowded market.

Although pricing information for Cibinqo in the United States is not yet publicly available, the Institute for Clinical and Economic Review recommends an annual list price of between $30,000 and $40,000 for the drug. I will use an annual list price of $30,000. And taking into account patient assistance programs and Medicare drug price negotiations, I project an annual net price of $15,000 per patient for Cibinqo.

This equates to essentially $1 billion in annual sales potential for Cibinqo in the United States. Even though Pfizer expects $81.5 billion in revenue for 2021 mid-term, $1 billion in additional sales is enough to move the needle. This is especially the case when you consider that this would represent a 2.2% increase in non-COVID vaccine revenue for the company.

Pfizer is a solid buy for 2022

Pfizer is down 6% year-to-date due to the broader market slowdown. This begs the question: is Pfizer a buy right now?

Pfizer trades at a forward price-to-earnings ratio of 7.8, well below other drugmakers — the overall industry average is 11. This despite the fact that the annual growth rate of Pfizer’s projected profit of 19% over the next five years is much higher than the industry average of 10%.

Pfizer offers investors above-average growth at a below-average price. And if that weren’t enough, investors can earn a 3% dividend yield while they wait for the stock to rise.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

About Michael Bill

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