MYOV - Women Can Thank Pfizer And Myovant For MYFEMBREE

Summary

• The compelling results of endometriosis treatment MYFEMBREE's phase 3 led to the drug's approval, and Myovant will be eligible for up to $200 million based on achieving certain milestones.
• The endometriosis market currently has few competitors, and more generally, there are many opportunities in women's health drug development.
• Myovant currently appears to be overvalued because of uncertainties around its financial condition.

In brief, what happened

In August, Pfizer Inc. ( PFE ) and Myovant Sciences Ltd. ( MYOV ) announced that the FDA approved MYFEMBREE, a drug for treating moderate to severe pain associated with endometriosis. The drug is taken once daily for up to 24 months and is among hormonal therapies. The pill's approval is based on positive data from the phase 3 SPIRIT program of more than 1,200 women, which demonstrated a "reduction in menstrual pain and nonmenstrual pelvic pain with an average bone mineral density loss of less than 1% from baseline at one year of treatment."

The SPIRIT program, divided into SPIRIT1 and SPIRIT2, achieved their respective co-primary endpoints: in both studies, 75% of women reduced dysmenorrhea compared with 27% and 30% of women in the placebo groups. In addition, MYFEMBREE also demonstrated a significant reduction in nonmenstrual pelvic pain in 59% and 66% of women, compared with 40% and 43% of women in the placebo groups.

How big is the market for endometriosis?

Endometriosis affects about 5%-10% of women of reproductive age, and the condition is often underestimated because it is diagnosed based on symptoms and can sometimes be confused with other conditions. The endometriosis market in 2020 was worth $1.8 billion, and analysts expect it to reach $2.2 billion in 2027. Of this $2 billion, $1.4 billion will be occupied by hormonal therapies, such as MYFEMBREE or Orilissa. The U.S. market is the largest and was worth $524 million in 2020, while China, the second largest market, could be worth $400 million by 2024. Analysts expect MYFEMBREE to cross the $1 billion barrier in 2028.

Who are the main competitors

Among MYFEMBREE's main competitors is Orilissa, a drug developed by AbbVie (ABBV) and Neurocrine Biosciences (NBIX) that received FDA approval in 2018. As with the drug from Pfizer and Myovant Sciences, Orilissa is also a hormonal drug taken orally. Still, MYFEMBREE is indicated for managing heavy menstrual bleeding and affects pain management. Orilissa is specifically for pain management.

Another drug similar to MYFEMBREE is Oriahnn (which, like Orilissa, contains elagolix, estradiol and norethindrone acetate). In Europe and the UK, Linzagolix was recently approved for treating moderate to severe pain associated with endometriosis. From phase 3, Linzagolix has a significant advantage over MYFEMBREE and Orilissa in minimizing adverse effects such as loss of bone density. However, the drug was rejected by the FDA due to significant shortcomings in the NDA that prompted ObsEva ( OBSV ) to return the license to its discoverer, the Japanese company Kissei, because of the high costs the company would incur for further trials.

Risks

The principal risks of Pfizer's new drug are twofold:

1. First, one of MYFEMBREE's main problems that it shares with Orilissa is that it can be used for a maximum of two straight years to avoid losing bone mass. If a drug without this adverse effect were to be developed, it could gain market share.
2. Both MYFEMBREE and Orilissa are hormonal drugs that cannot be taken by all women and have significant adverse effects. Linzagolix, on the other hand, not being a hormonal drug, could be preferred by many women in Europe, where it has been approved, although in the U.S., there is no such drug yet.

Conclusions

The approval of MYFEMBREE is an important step for Myovant Sciences following the 2020 approval of ORGOVYX. As a result, the company can obtain up to $200 million to achieve certain milestones. In addition, MYFEMBREE will allow Pfizer to expand the number of women's health products, a growing market that is still largely untapped: only 1% of the $200 billion spent on research is dedicated to women's health.

I believe that Myovant is currently an overvalued company. It cannot produce stable cash flow and, according to analysts, will not be able to do so until at least 2027. In the meantime, the company will have to dilute its shares (as it has done consistently) to finance new trials, and the cash the company has on hand right now is sufficient for two years. In addition, Myovant is not debt-free, and in this historical period, with rising rates, financing through debt becomes a less attractive avenue for management. Finally, the company's future from a financial perspective is closely tied to the success of ORGOVYX and MYFEMBREE, which is not currently priced into the stock.

In contrast, Pfizer, as I wrote in a previous article , is developing some exciting drugs that will allow the company to expand its product line in rare diseases and vaccines. All the investments that Pfizer is pursuing make it an extremely competitive company. In addition, its solid balance sheet, brand, 3.5% dividend, and its drugs represent primary consumption, making it an extremely stable stock to market fluctuations in this period of high inflation.

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