The US Food and Drug Administration (FDA) recently issued a “refusal to file” letter to Pfizer (PFE) for its new drug application for tafamidis. The agency said that the application, which was submitted in Feb 2011, was incomplete.
Pfizer is looking to get tafamidis approved for transthyretin familial amyloid polyneuropathy (TTR-FAP). Tafamidis became a part of Pfizer’s portfolio with its October 2010 acquisition of FoldRx. TTR-FAP is a progressively fatal genetic neurodegenerative disease. Currently, liver transplant is the only option available for combating this disease.
Tafamidis is currently under review in the EU. The candidate enjoys orphan drug status in both the US and the EU and fast track status in the US.
Pfizer is working with the FDA and intends to submit a response as soon as possible. Pfizer believes that it does not need to conduct additional trials for the information needed to complete the filing.
Pfizer was in the news recently regarding the sale of its Capsugel unit to Kohlberg Kravis Roberts & Co L.P. (KKR) for $2.375 billion in cash.
Capsugel, which is a part of Pfizer’s Diversified business segment, is a provider of hard capsules and drug-delivery systems. The unit posted sales of about $750 million in 2010 and manufactured more than 180 billion hard capsules in 2010.
Pfizer had initially announced its intention to divest the Capsugel unit in early October 2010. The company decided to evaluate strategic alternatives for Capsugel in order to optimize its business mix and leverage its competitive strengths.
Revenue Guidance Tweaked
Pfizer adjusted its revenue guidance for 2011 and 2012 to reflect the impact of lost Capsugel sales. The company now expects 2011 revenues in the range of $65.2 – $67.2 billion, down from its earlier guidance range of $66.0 – $68.0 billion.
Meanwhile, 2012 revenue guidance was reduced by $800 million to $62.2 – $64.7 billion (from $63.0 – $65.5 billion). The company did not make any other changes to its guidance.
The cash received from the Capsugel sale will be utilized to boost Pfizer’s share repurchase program. The company, which has already announced a $5 billion share buyback program for 2011, expects to spend additional dollars on share buybacks in 2011. The Capsugel unit sale is scheduled to close in the third quarter of 2011.
Neutral on Pfizer
We currently have a Neutral recommendation on Pfizer, which is supported by a Zacks #3 Rank (short-term “Hold” rating). With the Lipitor patent expiration coming up later this year, near-term earnings growth at Pfizer will come in the form of cost-cutting and share repurchases. While Wyeth brings with it an attractive biologics platform and some complementary products and businesses, we do not believe they are enough to sustain long-term top-line growth. We see the merger as mostly an opportunity for Pfizer to cut additional costs. Longer term growth will be dependent on the success of drug development.
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