Should Pfizer Inc. Buy This Surprisingly Competitive Biotech Stock?

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Amgen is in a race with Sanofi and Regeneron Pharmaceuticals to bring the first PCSK9 inhibitor to the market, but the companies had better watch out for tiny Esperion Therapeutics coming up from behind with its own cholesterol-lowering drug.

PCSK9 Protein Structure
Source: "Protein PCSK9 PDB 2p4e" by Emw - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.

PCSK9 inhibitors, and their potential sales, have garnered a lot of interest from investors Pfizer's Lipitor peaked at well over $10 billion in annual sales. Amgen's evolocumab and alirocumab from Sanofi and Regeneron probably won't achieve that level considering they'll compete with generic statins, like Lipitor, or find smaller niches, but they both still have blockbuster potential.

The PCSK9 protein -- short for proprotein convertase subtilisin/kexin type 9 -- is responsible for breaking down the LDL receptor that removes bad LDL cholesterol from the blood. Inhibiting the inhibitor with PCSK9 drugs results in more LDL cholesterol receptor and thus more LDL cholesterol removed from the blood. The results for both drugs have been pretty remarkable, with LDL cholesterol levels dropping by half or more depending on the patient population.

Amgen in August submitted evolocumab for Food and Drug Administration approval, and alirocumab should be submitted soon, setting up an epic battle in the new class of drugs.

Further back, but with potential
Esperion Therapeutics' ETC-1002 has only completed phase 2b trial, so it's still a ways behind the PCSK9 drugs, but the data released last week looked good. ETC-1002 reduced LDL cholesterol by up to 30%, compared to 21% for Merck's Zetia. When the two drugs were combined, LDL cholesterol dropped by as much as 48%.

It's hard to compare the declines in LDL cholesterol between clinical trials testing ETC-1002 and the PCSK9 drugs because clinical trials don't necessarily enroll the same types of patients. But ETC-1002 doesn't really have to beat the PCSK9 drugs to be competitive; it's a small molecule that can be taken orally, while the PCSK9 drugs are antibodies that need to be injected. Given the choice, most doctors and patients will give up a little efficacy for the convenience of avoiding injections.

Buyout coming?
It's not hard to see Amgen or Sanofi buying Esperion so they don't have to worry about the potential competition. ETC-1002 might be used early in treatment, especially for patients who react badly to statins, and PCSK9 drugs saved for more severe cases.

Pfizer could be an even better fit. It also has a PCSK9 drug, but it trails the leaders, giving it more incentive to have multiple drugs in the queue. More important, Pfizer once owned ETC-1002 before licensing it to Esperion. In fact, Pfizer already bought Esperion once for a drug it was developing to increase good HDL cholesterol. With a historical knowledge of the drug and a good relationship with Esperion's management, which ran the first Esperion, it's easy to see Pfizer two consummating a deal if the price is right.

It can be dangerous to invest in a biotech solely on the hopes of a buyout, but Esperion Therapeutics looks pretty cheap right now with a market cap under $500 million. If you're willing to wait for the phase 3 data, investors could see a nice return over the long term with the potential for a quick return if a buyout materializes.

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