Morningstar

Pfizer: Discontinuation of Obesity Drug Candidate Danuglipron Has No Effect on Our Valuation

We expect Pfizer to continue to prioritize obesity as a therapeutic area in its pipeline.

Exterior view of the Pfizer headquarters building.
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Pfizer Inc
(PFE)

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Pfizer PFE has announced that it is discontinuing development of its oral small molecule GLP-1 agonist, danuglipron, after one patient in a clinical trial experienced a liver injury that could have been related to the drug candidate.

Why it matters: Pfizer was vying to offer a potential second-to-market oral small molecule GLP-1 agonist, behind Lilly’s orforglipron, as part of what we forecast as a more than $200 billion global GLP-1 market by 2031.

  • Pfizer’s growth has faced headwinds from both slowing demand for its covid vaccine and antiviral treatment as well as clinical trial failures.

The bottom line: We’re maintaining our fair value estimate of $42 per share for Pfizer, as the firm’s diversified portfolio and pipeline buffer it against impacts from individual program failures, particularly a high-risk program like danuglipron, which investors had largely dismissed.

  • We were already skeptical of the firm’s ability to transform danuglipron from a twice-daily drug (with relatively poor tolerability in a prior phase 3 trial) into a once-daily drug with an attractive efficacy, safety, and tolerability profile.
  • Removing the potential $1 billion in peak sales for danuglipron from our model does not significantly affect our fair value estimate.

Big picture: We expect Pfizer to continue to prioritize obesity as a therapeutic area in its pipeline, either with external deals or additional internal advancement.

  • Pfizer did achieve its goal of converting danuglipron into a once-daily formulation, which could imply that its new formulation technology could be applied to other drug candidates.
  • Pfizer has up to $15 billion to spend on acquisitions, which could be applied to more advanced drug candidates, and also has a phase 2 program for an oral small molecule GIPR agonist and another oral GLP-1 in phase 1.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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