IRA Drives Pfizer’s Decision to Focus on Biologics, Not Small Molecules

Pfizer's oncology business

Pictured: Exterior view of a Pfizer building/iStock, Alexandros Michailidis

Pfizer late last week briefed investors on the strategic priorities for its oncology business, which will be built on a portfolio focused more on antibody-drug conjugates and bispecific antibodies and far less on small molecules. Pfizer executives said the company's change in business strategy is motivated in part by the disparity in how the Inflation Reduction Act’s drug price negotiation provisions treat biologics versus small molecule drugs.

Under a provision of the Inflation Reduction Act (IRA), biologics are spared from price negotiations for 13 years following approval, while the grace period for small molecules is only nine years. This four-year difference figured prominently in Pfizer’s oncology business strategy going forward, the company explained at last week’s meeting.     

“There’s no question” the law’s “so-called pill penalty” influenced the Pfizer change in focus, Peter Rubin, executive director of No Patient Left Behind, a non-profit focused on patient access to affordable medicines, told BioSpace. “[The IRA] is having a huge impact on new small molecule R&D, which is particularly bad for oncology.”

By 2030, Pfizer expects biologics such as antibody-drug conjugates (ADCs) and bispecific antibodies to contribute approximately 65% of its oncology revenues—up from 6% in 2023, a more than 10-fold increase. At the same time, company leaders said that the mix of small molecule drugs in its cancer portfolio will plummet from 94% last year to 35% in 2030.

“Biologics represent a more durable revenue potential based on a number of factors, including differentiated access and affordability to the patient, IRA considerations and patent expiration timeline,” Suneet Varma, commercial president of Pfizer Oncology, told investors at Thursday’s event.

Asked by an analyst whether the IRA’s drug price negotiation provisions influenced Pfizer’s business strategy going forward, Varma said that they did. “Biologics have that 13-year versus the 9-year [for small molecules] before you enter negotiation or price negotiations, so I think that all of that strengthens the case and that has driven us to be deliberate intentionally not just on our tumor types but on the modalities that you heard about today—the ADCs as well as the bispecifics.”

A June 2023 analysis by the Partnership for Health Analytic Research, in collaboration with the Pharmaceutical Research and Manufacturers of America (PhRMA), highlighted that the majority of cancer medicines approved by the FDA are small molecules and projected that the IRA’s price setting provisions will have “an acute impact” on the research and development (R&D) of cancer drugs.

Rubin told BioSpace that Pfizer’s new business strategy is the latest example of the IRA’s negative impact on small molecule R&D.

Gaurav Gupta, managing partner of J.P. Morgan Life Sciences Private Capital, agreed. He told BioSpace last month that the IRA’s biologics-small molecule disparity “is a topic that does factor in when larger companies are making their research allocation decisions.”

Pfizer’s Game Plan

Pfizer’s messaging to investors is that the company is shifting toward a “more balanced portfolio mix,” Varma said, which will be driven by the increased leveraging of currently commercialized ADCs, the launch of new indications for current bispecific antibodies and the development of next-generation biologics.

“While today small molecules comprise the vast majority of our commercial portfolio, by 2030, we plan to increasingly rely on revenues generated by complex biologics, including ADCs,” Varma said.

The company’s strong emphasis on ADCs going forward is not surprising given its recently completed $43 billion acquisition of Seagen, which pioneered the technology to treat cancer and has become an industry leader in the ADC field.  

Currently, Pfizer’s oncology portfolio includes 11 FDA-approved ADCs—five of which are company products and two others use licensed Seagen technology—while an additional Pfizer product (disitamab vedotin) is approved in China. The company’s goal is to have at least eight potential blockbuster cancer assets by 2030, according to last week’s presentation.

Jeffrey Settleman, chief scientific officer of Pfizer Oncology, told investors last week that the Seagen acquisition will enable the pharma giant to combine their respective expertise and technologies to discover and develop next-generation cancer therapies.

“We’ll be leveraging Pfizer’s protein engineering and antibody design capabilities to enhance the legacy Seagen’s ADC technology to deliver next-generation antibody conjugates with innovative new features,” Settleman said.

Pfizer will also be incorporating its “deep expertise in small molecule drug discovery into legacy Seagen’s ADC platform to advance next-generation ADCs with differentiated payloads with new mechanisms of action,” he added.

Greg Slabodkin is the News Editor at BioSpace. You can reach him at greg.slabodkin@biospace.com. Follow him on LinkedIn.  

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