07.19.09
#1 - Pfizer
235 E. 42nd St.
New York, NY 10017-5755
Tel: (212) 573-2323
Fax: (212) 573-7851
www.pfizer.com
Headcount | 81,800 | |
Year Established | 2000 | |
Pharma Revenues | $44,174 | -1% |
Total Revenues | $48,296 | flat |
Net Income | $8,106 | flat |
R&D Budget | $7,945 | -2% |
2008 Top Selling Drugs | |||
Drug | Indication | Sales | (+/-%) |
Lipitor | cholesterol | $12,401 | -2% |
Lyrica | epilepsy/neuropathy | $2,573 | +41% |
Celebrex | arthritis | $2,489 | +9% |
Norvasc | antihypertensive | $2,244 | -25% |
Viagra | erectile dysfunction | $1,934 | +10% |
Xalatan | glaucoma | $1,745 | +9% |
Detrol | overactive bladder | $1,214 | +2% |
Zyvox | bacterial infections | $1,115 | +18% |
Geodon | schizophrenia | $1,007 | +18% |
Genotropin | HGH deficiency | $898 | +7% |
Sutent | cancer | $847 | +46% |
Chantix | smoking cessation | $846 | -4% |
Vfend | fungal infections | $743 | +18% |
Caduet | cholesterol/hypertension | $589 | +4% |
Camptosar | colorectal cancer | $563 | -42% |
Zoloft | antidepressant | $539 | +2% |
Cardura | hypertension/prostatic hyperplasia | $499 | -1% |
Alliance Revenues* | $2,251 | +26% | |
Aricept | Alzheimer’s disease | ||
Exforge | hypertension | ||
Macugen | wet macular degeneration | ||
Mirapex | Parkinson’s disease | ||
Olmetec | hypertension | ||
Rebif | multiple sclerosis | ||
Spiriva | COPD |
Account for 78% of total pharma sales, up from 75% in 2007.
PROFILE
In some respects, Pfizer is like a microcosm — or should that be “macrocosm”? — of major pharma. Restructuring while cutting internal R&D? Check! Adding biologics? Check! Building generics unit? Check! Expanding into emerging regions? Check! Highly profitable CNS drug? Check! First quarter of 2009 was a wreck? Check! Major litigation settlement? Check! Abandoned a cannabinoid-1 receptor blocker after years of development? Check! Teetering on the edge of a patent cliff? Check! Using M&A to maneuver its way out of short-term problems? . . .
Well, that’s where Pfizer really sets the tone for the rest of the industry. Its January 2009 announcement that it planned to acquire Wyeth touched off one $40-billion-plus deal and a frenzy of rumors about others to come. I ended last year’s profile of Pfizer with the request, “Please: No mega-merger!” largely for that reason: the domino effect.
The Lowe Down
So, what can you say about Pfizer now that they’re giving Wyeth their well-known Amoeba Treatment? That if you thought that they were huge and unwieldy before, to just sit back and watch as they get even more so? That while they’ve been rearranging (and closing down) their research sites, they’re now perforce adding more of them? That Lipitor is still going off patent no matter who they buy? All of the above, I suppose, and none of it will do the slightest bit of good. The company’s clearly decided that Bigger will continue to be Better — or they may have just concluded that they have no other choice by now. Maybe they don’t: how on earth would one go about unwinding the Pfizer we have today? But even if you tried, you still wouldn’t get back all those research organizations that used to exist. And that remains my primary objection to the company’s growth — that it hurts the whole ecosystem of the industry. It’s not that Pfizer doesn’t do good work of its own, but a lot of other good ideas have also disappeared inside that giant cardboard box that is The World’s Biggest Drug Company.—Derek Lowe |
But, as we point out each year, Pfizer has an unprecedented challenge: the loss of exclusivity on the biggest selling drug in history. (I would like to point out, however, that Plavix actually accounts for a bigger percentage of Bristol-Myers Squibb’s pharma sales and total revenues — 32% and 27% — than Lipitor does for Pfizer, at 28% and 26%, respectively.) All told, patent expirations and other generic pressure may cost Pfizer as much as 70% of its 2007 revenues by 2015, and a series of high-profile R&D misses and disappointing new products (there’ve been some hits, too) help justify the company’s decision to make this move.
That said, Wyeth isn’t the model of perfect pharma-health, either; its key moneymaker (Effexor) is set to lose exclusivity in a few years, and its followup (Pristiq) has yet to catch on. Wyeth’s also mired in legal issues, most recently a whistleblower investigation into scamming Medicare over drug pricing. That’s not good.
I’ve read some criticism of the acquisition on the grounds that Wyeth has a significant business in consumer healthcare products. The haters complain that Pfizer sold off its own OTC business to J&J only a few years ago, and must be admitting to some mistake. Since the current chief executive officer wasn’t involved in that transaction, I won’t join the chorus. In fact, I don’t think the OTC component of Wyeth matters all too much to Pfizer. Sure, it generates cash, but the margins aren’t terrific; I mean there’s a reason Pfizer sold its OTC unit to J&J in the first place. I don’t think Pfizer is in this for the Advil, and I don’t think it’s Effexor, either.
No, I think the Wyeth acquisition is about biologics and vaccines. Faced with the multi-year timeline of building a biologics infrastructure and developing the expertise of running it, Pfizer chose to buy it ready-made. Pfizer had been referring to itself as a biopharmaceutical company of late — a lot of small-molecule companies do that — and it put its money where its mouth is. The price was big, but hey: Pfizer had sizeable cash on hand and the financial markets were basically begging companies to take loans at low rates around that time. If they’re lucky, they’ll be able to flip that consumer health business to someone in a few years and recoup a chunk of their purchase price.
Charged Up
The same day the Wyeth merger was announced, Pfizer oh,-by-the-way’d in its 4Q08 earnings statement that it was taking a $2.3 billion charge to settle charges of promoting off-label uses for Bextra, “as well as other open investigations.” Now, I know Pfizer’s a very large company, and I’m no Ralph Nader, but I think a $2.3 billion charge requires its own statement, not a line item in a quarterly report. (The company took the same tack in 3Q08, mentioning a $900 million charge to resolve “certain litigation involving the Company’s non-steroidal anti-inflammatory (NSAID) pain medicines.”) |
In addition, the move gives Pfizer some cover as it reviews its own infrastructure and tries to shrink the pre-merger company to appropriate levels. Chief executive officer Jeffrey Kindler has mentioned that the combined companies will fire around 19,000 people, or 15% of their workforce. This is on the heels of Pfizer’s previous four years of layoffs and restructuring programs. From 2005 to 2008, the company has laid off nearly 20,000 workers, with plans for another 10,000. In 2008, Pfizer took $2.6 billion in restructuring charges; since 2005, the program has cost $6.9 billion. In comparison, the 2008 loss of revenues from Zyrtec/Zyrtec-D ($1.4 billion), Norvac ($757 million), Camptosar ($457 million) and Lipitor ($863 million) add up to $3.5 billion.
The merger-day restructuring plan is intended to save Pfizer approximately $3.0 billion in annual operating costs by 2011, with a third of that being reinvested into the company. The new plan involves closing another five of Pfizer’s manufacturing facilities, along with cuts in marketing and R&D (Pfizer announced around 800 R&D layoffs in December 2008).
Meanwhile, during the merger announcement, Pfizer chief financial officer Frank Amelio commented, “As part of the proposed acquisition of Wyeth, we expect to achieve synergies of approximately $4 billion by the end of 2012.”
So with all this restructuring tumult going on, how does Pfizer plan to keep track of its large and small molecule pipelines? By keeping them apart! In April 2009, Pfizer explained what its post-merger setup’s going to look like, and the main division in R&D will occur between small molecules and large ones. Martin Mackay, the current head of Pfizer Global R&D, will run the new PharmaTherapeutics Research Group, while Mikael Dolsten, current president of Wyeth Research, will head up the BioTherapeutics Research Group. They’ll both report directly to Pfizer chief executive officer Jeffrey Kindler.
The goal — another one of those pharma-in-a-microcosm moments — is to make R&D “more nimble,” akin to a biopharma startup. You can thank me later for not including the same passage in most of the other profiles, but most of our top companies espouse similar sentiments. Personally, I think history is filled with examples in which massive scale is irreconcilable with agility, but maybe there’s a potential (young) Shaquille O’Neal lurking within one of these companies.
One of Pfizer’s pipeline drugs that intrigues me is its JAK inhibitor, an oral treatment for rheumatoid arthritis. Given that the big breakthroughs in RA treatment have come from biologics this decade, I think it’s great that Pfizer is developing a small-molecule drug that may undercut the growth rate of several biologics on the market, even while it’s diving into bio.
The Lost Generation
I recently tried describing Pfizer’s problems with replacing Lipitor revenues to a non-pharma pal of mine. I explained how the company had several potential blockbusters in the pipeline through this decade that were going to help ease the pain of Lipitor’s eventual expiration, but that almost every one of them had run into problems, either failing in Phase III or reaching the market but having a much smaller upside than predicted. He said it reminded him of the New York Mets’ fabled Generation K: three young pitcherswho were going to come up to the major leagues together circa 1995 and anchor the team’s rotation for the next decade. It was a sports-media sensation here in New York; trust me. (This is the same market that argued whether Melky Cabrera would be the next Mickey Mantle.) How’d Generation K turn out?
Now I’m trying to figure out which one is Exubera. |
Pfizer is trying to reinvent itself in a number of ways, not just through cost-cutting and adding biopharma capabilities. The company has also pushed into generics, vying with other major players to pick up product lines in emerging regions (see this issue’s From the Editor column for more on that topic). In May 2009, Pfizer signed a pact with Claris Lifesciences to commercialize 15 post-patent sterile injectables in North America, Europe, Australia and New Zealand. That same month, Pfizer extended its licensing agreements with Aurobindo in India, acquiring rights to 55 solid oral dose and five sterile injectables in 70 markets. Two months earlier, Pfizer bought from Aurobindo rights to 39 generic solid oral dose products in the U.S. and 20 in Europe, and another 11 in France, as well as rights to 12 sterile injectable products in the U.S. and Europe.
Those moves are all part of the company’s new Established Products business unit, which covers generics and innovative products that are near the end of the protected phase of their lifecycle. Established Products is one of nine units that Pfizer has lately demarcated for itself. The others are: Primary Care, Specialty Care and Vaccines, Emerging Markets, Oncology, Animal Health, Capsugel, Consumer Health and Nutritional Health.
Except for Specialty, every one of these new divisions got hammered in 1Q09, due to factors such as currency exchange rates (which wreaked havoc on most of our Top Companies), patent expirations, pressure from same-class generics, and revised warning labels. Pfizer’s overall revenues dropped 8% in the quarter, with Lipitor revenues falling 13% to $2.7 billion, and accounting for 40% of Pfizer’s overall drop.
Our top-selling drugs chart on the first page of this profile shows a number of products with double-digit growth. By 1Q09, the double-digits are almost solely on the side of the decliners. The only Pfizer product to show a significant increase in 1Q09 sales was Lyrica, up 17% to $684 million (after growing 41% in FY08 revenues). Zyvox sales grew 9% to $283 million, half the rate of growth it showed in 2008.
Sutent, the company’s up-and-coming cancer drug, also slowed dramatically in sales growth, up 7% for the quarter. That drug is still getting its legs under it, while getting buffeted by waves of good news and bad news from clinical trials for new cancer indications. Most recently, it failed a trial as a first-line treatment for metastatic colorectal cancer.
At least Sutent has room to grow. Early in July 2009, Pfizer revised the label for its smoking cessation drug, Chantix. Both Chantix and GSK’s anti-smoking drug, Zyban, will now carry “black box” warnings about mental illness and suicide. Pfizer’s drug had already struggled because of warnings in 2008, dropping 4% to $883 million and falling 36% in 1Q09 to $177 million in revenues. With the black box, it looks like another one of Pfizer’s blockbuster-in-the-making will be cut down to size.
Back in March, I wrote my editorial about this merger, wondering if it was “too big to succeed.” Mr. Kindler seems pretty aware of the horrible R&D reputation Pfizer earned during its previous mega-acquisitions this decade (Warner-Lambert, Pharmacia), and is promising that this mega-merger will be different. And it is different inasmuch as it doesn’t promise a can’t-miss pipeline to replace Pfizer’s R&D shortfalls. He commented at the announcement that the new company will have “a distinct blend of diversification, flexibility, and scale.”
Pfizer encapsulates most of the challenges that the pharma industry faces, as well as many of the new approaches the industry is trying out. As ever, I’m dying to see whether its new structures and strategies pan out.