Oncology market is witnessing considerable growth and attracting large investments from many big pharmaceutical companies to increase their presence. Pfizer (PFE) aims big in the oncology market, which is mainly dominated by Roche and expects its global medicine sale for cancer to increase ten-fold by 2018.

The company plans to become the third largest player (from current seventh) in cancer medicine, which contributed about $2.5 billion of sales in 2008. At present, many of its products under clinical trial are for cancer treatment and six more will be added from the acquisition of Wyeth.

A number of factors such as high unmet need, favorable demographics, increased life expectancy and aging population are responsible for the renewed interest in this area. The anti-cancer drug market value is expected to grow to $85 billion in 2013 from $67 billion in 2008. Leading products for cancer therapy (fifth-largest therapeutic class globally) include MabThera/Rituxan, Herceptin and Avastin (of Roche).

Pfizer intends to exit the areas of heart disease, obesity and bone health in order to commit more resources to the treatment of oncology, pain, inflammation, diabetes, Alzheimer’s and schizophrenia.  These are the areas that the company believes where it will be able to take leading position. Wyeth also has some complementary products and research.

Pfizer has established a separate business unit focused specifically on oncology as management expects this area to offer significant opportunities for future growth.  The Oncology Business Unit has been established to expedite the launches of novel oncology agents and focus research efforts on cancers common in Asia.  While the business unit will have a global focus, they will have a significant interest in emerging markets as Pfizer believes this to be a region that has substantial unmet needs.

We have a Hold recommendation on the stock, based on our reservations whether Wyeth will provide the opportunity to grow revenue in the long-term, the significant reduction in the company’s net cash balance and the substantially lower-than-expected financial guidance for 2009.

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