#1 - Pfizer
235 E. 42nd St.
New York, NY 10017-5755
Tel: (212) 573-2323
Fax: (212) 573-7851
|2009 Top Selling Drugs|
|Effexor (10 weeks of post-merger revenues)||antidepressant||$520||n/a|
|Enbrel (North America)||inflammation|
Account for 74% of total pharma sales, up from 76% in 2008.
It’s a brand-new year and a brand-new Pfizer! (I’ll repeat this refrain throughout the report, I’m afraid; so many of our Top Companies are in the process of reinvention.) On October 16, 2009, Pfizer completed its acquisition of Wyeth, marking its third mega-acquisition in a decade. As big a deal as it was, many of Pfizer’s long-standing problems remain. The company posted minuscule pharma growth in 2009 even with the inclusion of 10 weeks of post-merger Wyeth revenues. Nine of Pfizer’s legacy drugs had sales above $1 billion for the year, but only two of them grew from 2008; the rest were either flat or fell by 2% to 12%. And the top performer, Lyrica, is under multiple generic threats in the U.S.
Good thing they added Wyeth! In 1Q10, revenues grew 54%, thanks to the addition of Wyeth and funky currency exchange rates (a factor that will cause chaos throughout this report). Without those two boosts, Pfizer’s total revenues would have slipped 1%. Legacy pharma revenues would have fallen 3%, but Wyeth and exchange rates boosted the numbers 44% to a mind-blowing $14.5 billion. (Which means the new Pfizer’s first quarter would rank as the #11 company in our Top 20 list.) So there are some immediate benefits in adding Enbrel ($802 million), Effexor ($716 million), the Prevnar vaccine franchise ($806 million), Zosyn ($264 million) and the Premarin family ($256 million).
On top of that, units in the Diversified segment — Animal Health, Consumer Healthcare, Nutrition and Capsugel — contributed another $2.1 billion for 1Q10, more than half coming from Wyeth’s consumer and nutrition products.
The Lowe Down
Ah, Pfizer. Respected by some, feared by many, and loved by . . . well, whom, exactly? Perhaps by small companies who hope to deal a deal with them, but even those guys may be faking it. Someone at Pfizer has been reading Machiavelli about which emotion a prince should prefer to inspire in his onlookers.
It’s tough to cover these guys, in a way, because it’s hard for any one drug program to make that much of a difference to them. Well, with the exception of the humongous wasting asset known as Lipitor. Pfizer’s history, in the end, may well end up being divided into the period before Lipitor went generic, and afterwards. Past that singularity, none of us can quite see yet.
The absorption of Wyeth continues, as does the disappearance of everything that made Wyeth different from Pfizer in the first place. The unnerving thing is that you can never rule out the company’s doing something like this again. They’ve been though so many gigantic mergers that the thought of another doesn’t seem to bother them much, like a professional poker player who can’t be scared out of any hand by a big raise. Even, perhaps, when they should be. —Derek Lowe
In his annual letter to shareholders, Pfizer chairman and chief exec referred to “the spirit of small and the power of scale” to explain Pfizer’s best-of-both-worlds benefits of having enormous Resources but also giving accountability to (relatively) small business units. I’m a sceptic, but I’ve spent my career at companies with fewer than 50 employees.
In that same letter, Mr. Kindler made two important points about The New Pharma and Pfizer’s place in it. He wrote:
“Drug discovery and development is enormously expensive and inherently risky—so those of us who are stewards of your capital must invest it wisely.”and
“It is unwise to rely on one or two blockbuster drugs (whether on the market or still in the pipeline) for a disproportionate amount of our future revenue and profit.”
Which is to say, Pfizer still plans to go after blockbusters, but is trying to “drive profitable growth from multiple additional sources.” This is a theme that will crop up throughout this year’s report; after years of R&D shortfalls, pharma is hedging its bets on big new drugs and is trying to bring in surer (but lower-margin) revenues. But companies are also trying to go after major therapeutic classes (just fewer of them) where they have a chance to make a big splash.
And, boy, could Pfizer use just a couple of big hits. Cancer treatment Sutent is gaining greater market-share, but a trial of the drug in advanced hepatocellular carcinoma recently had to be halted because of adverse events and lack of superiority/non-inferiority to a competitor. Two more trials of it against advanced breast cancer also failed to hit their endpoints. Pfizer’s attempts at expanding Lyrica’s label to cover generalized anxiety disorder and chronic pain were both met with Complete Response Letters. And after 10 years on the market, Mylotarg, a Wyeth-originated leukemia treatment, will be withdrawn due to safety questions and a lack of clinical benefits.
On the investigational side, Figitumumab, an IGF-1R inhibitor, failed in Phase III trials against non-small cell lung cancer. Dimebon, a weird longshot drug to treat Alzheimer’s, suffered the fate most every Alzheimer drug has suffered. In June 2010, Pfizer cut development of a new RA drug, and ended trials tanezumab in osteoarthritis because of safety and efficacy problems (Pfizer will continue trials of the MAb in other pain indications).
Who Took the Money Away?
I was hoping to give you a breakdown of Wyeth’s sales numbers up through the day of the merger, in order to give a more complete picture of industry revenues. However, Wyeth’s last financial filing was 2Q09. My attempt to find out the company’s revenues from July 1 to October 15 — more than a full quarter, mind you — was dashed when an investor relations spokesman explained to me, “Because the acquisition of Wyeth was completed on October 15, 2009, Pfizer’s third quarter results don’t include Wyeth’s results. And by the same token, Wyeth did not report their third quarter results, because they had already become part of Pfizer.”
Consequently, I was told, no Wyeth results exist for that period. So here’s how Wyeth did for the first half of 2009:
Pharma revenues: $9.3 billion (-5%)
Total revenues: $11.1 billion (-5%)
Net income: $2.6 billion (+4%)
R&D Budget: $1.7 billion (flat)
Effexor: $1.6 billion (-22%)
Prevnar: $1.5 billion (+10%)
Enbrel: $1.4 billion (+5%)
Zosyn: $614 million (-7%)
Premarin: $503 million (-8%)
Hemophilia products: $454 million (-7%)
Protonix: $452 million (+17%)
After all, there’s been some good news, too: the 13-valent version of the Prevnar vaccine was approved in the U.S. and other markets, and Apixaban, an anticoagulant co-developed with Bristol-Myers Squibb, is showing better than expected results in its Phase III trials.
So how is the new Pfizer going to find the new products to offset all that generic loss? By mixing internal and external R&D! In November 2009, three weeks after the merger was finalized, Pfizer revealed its new global research network. The five main research sites are Cambridge, MA, Groton, CT, Pearl River, NY, La Jolla, CA, and Sandwich, UK., while shutdowns were slated for R&D at Princeton, NJ, Chazy, Rouses Point and Plattsburgh, NY, Sanford and RTP, NC, and Gosport and Slough/Taplow, UK. The moves, along with reallocation from some sites, will reduce Pfizer’s R&D footprint by 35%.
Pfizer made a pipeline update in January 2010, in which it cut 100 projects down to a “new prioritized portfolio” of 500 projects, focusing on the following areas: oncology, pain, inflammation, Alzheimer’s disease, psychoses, and diabetes. Overall, the company plans reduce the combined R&D spending of Pfizer & Wyeth by $3 billion by 2012, falling somewhere between $8 and $8.5 billion. Pfizer plans to find a total of $7 billion in cost savings, between merger cuts and previous restructurings.
In its original plans for the post-merger company, Pfizer separated research into two units, BioTherapeutics and PharmaTherapeutics, the former headed by Mikael Dolsten (former Wyeth R&D head) and the latter by Pfizer veteran Martin Mackay. That structure was scotched when Dr. Mackay left Pfizer in May 2010 to join AstraZeneca in the newly created role of president of R&D. Dr. Dolsten was then named president of Pfizer Worldwide R&D. He’ll head R&D up through Phase II, at which point development will get passed on to clinical teams in the Worldwide Biopharmaceutical Business unit.
None of my “deep throat” sources will tell me whether Pfizer merged the two units in response to Dr. Mackay’s departure or his departure was prompted by the plan to merge the two units (under Dr. Dolsten), but when anyone tells you that a mega-merger can have a seamless integration, hold onto your wallet.
The manufacturing infrastructure is also in the process of shrinking. In May 2010, Pfizer Global Manufacturing unveiled its post-Wyeth cuts to its worldwide plant network. Eight sites will be shut down and six more will reduce operations, leading to 6,000 layoffs. For more about the manufacturing overhaul, check out our Newsmakers interview with Tony J. Maddaluna, senior vice president, Strategy and Supply Network Transformation for Pfizer Global Manufacturing (PGM), right after this profile.
In past conversations with Mr. Maddaluna, we talked about Pfizer’s plans to outsource as much as 30% of its manufacturing, by cost. As we talked about our differing ideas of what this entailed, the term “outsource” gave way to “external,” and licensing agreements, in which Pfizer sells products manufactured by other companies, were understood to be part of that 30% figure (now lower, because of the company’s increased base).
One of the problems with licensing agreements is that they don’t always work out as planned. In May 2009, for example, Pfizer signed a deal with Claris Lifesciences to bring as many as 15 generic sterile injectables into several western markets. In June 2010, Pfizer had to initiate a voluntary recall of three of those products from the U.S. due to non-sterility. Two of the drugs were IV antibiotics and the third was an IV product to treat nausea and vomiting from chemotherapy or surgery. The event left me wondering about the expertise needed to handle these new areas that major pharma companies are getting into.
After all, Pfizer has two similar significant deals with Aurobindo and Strides Arcolab, and competitors in these pages are pursuing the same path. Pharma companies — and I’m not singling out Pfizer here — are pursuing a lot of alternative revenue streams to survive the R&D drought, and I hope they have the processes in place to stay on top of all of them. All the scale in the world won’t help if you can’t trust your product supply.
For more on Pfizer, manufacturing and outsourcing, read this issue's Newsmakers interview with Tony J. Maddaluna!
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