Gil Roth07.18.12
#1: Pfizer
235 E. 42nd St.
New York, NY 10017-5755
Tel: (212) 573-2323
Fax: (212) 573-7851
www.pfizer.com
Headcount 103,700
Year Established 2000
Pharma Revenues $57,747 -1%
Total Revenues $67,425 1%
Net Income $10,009 21%
R&D Budget $9,112 -3%
Top-Selling Drugs
Alliance Revenues**
Aricept Alzheimer’s disease
Exforge hypertension
Rebif multiple sclerosis
Spiriva COPD
Account for 77% of total pharma sales, up from 75% in 2010
PROFILE
235 E. 42nd St.
New York, NY 10017-5755
Tel: (212) 573-2323
Fax: (212) 573-7851
www.pfizer.com
Headcount 103,700
Year Established 2000
Pharma Revenues $57,747 -1%
Total Revenues $67,425 1%
Net Income $10,009 21%
R&D Budget $9,112 -3%
Top-Selling Drugs
| Drug | Indication | $ | (+/- %) |
|
Lipitor |
cholesterol |
$9,577 |
-11% |
|
Lyrica |
epilepsy/neuropathy |
$3,693 |
21% |
|
Enbrel |
inflammation (ex-N.A.) |
$3,666 |
12% |
|
Prevnar 13 |
pneumococcal vaccine |
$3,657 |
51% |
|
Celebrex |
arthritis |
$2,523 |
6% |
|
Viagra |
erectile dysfunction |
$1,981 |
3% |
|
Norvasc |
antihypertensive |
$1,445 |
-4% |
|
Zyvox |
bacterial infections |
$1,283 |
9% |
|
Xalatan |
glaucoma |
$1,250 |
-29% |
|
Sutent |
cancer |
$1,187 |
11% |
|
Geodon |
schizophrenia |
$1,022 |
0% |
|
Premarin |
menopause |
$1,013 |
-3% |
|
Genotropin |
HGH deficiency |
$889 |
0% |
|
Detrol |
overactive bladder |
$883 |
-13% |
|
Vfend |
fungal infections |
$747 |
-9% |
|
Chantix |
smoking cessation |
$720 |
-5% |
|
Benefix |
hemophilia |
$693 |
8% |
|
Effexor |
antidepressant |
$678 |
-61% |
|
Zosyn |
antibiotic |
$636 |
-33% |
|
Pristiq |
neuropathic pain |
$577 |
24% |
|
Zoloft |
antidepressant |
$573 |
8% |
|
Caduet |
cholesterol/hypertension |
$538 |
2% |
|
Revatio |
cardiovascular |
$535 |
11% |
|
Medrol |
inflammation |
$510 |
12% |
|
ReFacto AF |
hemophilia |
$506 |
25% |
Alliance Revenues**
Aricept Alzheimer’s disease
Exforge hypertension
Rebif multiple sclerosis
Spiriva COPD
Enbrel inflammation
(U.S., Canada)
Account for 77% of total pharma sales, up from 75% in 2010
PROFILE
Pfizer kicks off our Top 20 Pharma Report for another year, but how long will it hold onto to #1 spot? The patent expiration that everyone was waiting for finally happened, as Lipitor went generic at the end of November 2011.
The immediate impact of that switch was mitigated somewhat by the first-to-file exclusive phase enjoyed by Ranbaxy, as well as Pfizer’s creative dealings with insurers, pharmacy benefit managers and patients themselves to hold onto the brand.
Despite Pfizer’s maneuverings, Lipitor posted its first sub-$10.0 billion year since 2003, dropping 11% in annual revenues. That path accelerated rapidly in 1Q12, with Lipitor shedding almost $1.0 billion in sales for a 42% drop. In Pfizer’s 1Q12 earnings call, chief executive officer Ian Read (who took over in December 2010 after Jeffrey Kindler’s abrupt resignation) represented that as a success, contending that Lipitor’s market share was 2.5 times higher than comparable drugs five months after loss of expiration. But now that Ranbaxy’s six-month exclusivity has expired and other generics-makers are piling on, we’re sure to see a sharp plunge after 2Q12. Pfizer ceased negotiating Lipitor contracts and stopped sending reps to detail the product.
How is Pfizer reacting to this transition? By devolving! Last year, the company underwent a strategic review and management decided to get rid of the Nutrition and Animal Health units in order to focus on pharma, both innovative and generic. (Pfizer completed its previously announced $2.4 billion sale of the Capsugel business to KK&R in August 2011.) In April, Pfizer agreed to sell its Nutrition business to Nestle for $11.9 billion, a 5.66 multiple of the division’s $2.1 billion in 2011 revenues.
Pfizer rebuffed a reported $16 billion offer from Novartis for the Animal Health unit in March 2012 and decided in June to spin the company off on its own, renaming it Zoetis. The spinoff is expected to include a share sale by Pfizer, but details weren’t made available by press time. The unit had sales of $4.2 billion in 2011 and has approximately 9,000 employees.
Mr. Read characterized the remaining company as consisting of two primary businesses, a growth business driven by a pharmaceutical innovation engine, and a value business expected to generate strong cash flow from established and generic products, with consumer healthcare slotting into both areas. The company will also look at bolt-on acquisitions similar to or smaller than the King Pharma $3.6 billion buyout from 2010, but isn’t interested in anything “integrative.” Pfizer’s mega-merger days are behind it. (For now.)
Holding on to generics and consumer make this devolution a bit different than Bristol-Myers Squibb’s version of it a few years ago. BMS sold off its imaging business and spun out its nutritionals unit, but also sold off smaller regional operations, in order to focus on innovative R&D. It’s also not as extreme as Abbott’s decision to spin off its innovative pharma company but hold onto its generic/emerging markets business (see Abbott’s profile for more on that decision).
Rumors still abound that Pfizer is considering taking that last step, and going “pure innovative,” but we think that sells short the value of the generic/emerging market business it’s built in recent years. Also, it would make Pfizer that much more reliant on its R&D productivity.
Speaking of: Pfizer’s big R&D story in the past year was the approval of Xalkori to treat locally advanced or metastatic ALK-Positive non-small cell lung cancer (NSCLC). Pfizer partnered with Abbott’s diagnostics unit to develop a test to select patients who are likely to respond to the drug. The drug was approved without a Phase III study, thanks to heavy-duty response in a Phase II trial of 136 patients and an extended Phase I trial of 119 patients.
Xalkori got a lot of press that framed it as a revolutionary approval because the ALK fusion gene it targets was only discovered four years earlier. Pfizer is conducting Phase III trials of the drug as a postmarketing requirement to determine efficacy. The company estimates that between 6,500 and 11,000 NSCLC patients will qualify to be treated with Xalkori. At Pfizer’s 1Q12 earnings call, a spokesman noted that approximately 1,000 patients were currently being treated by it.
Xalkori’s not going to be a mega-blockbuster, but it could become a potential “niche blockbuster,” if that model holds up for this new era of pharma. The reasoning goes that if drug companies can demonstrate serious efficacy in a small, identifiable group, it can charge more. A full course of the drug is estimated to “cost” $80,000 (although if patients respond as well as they did in the trials, they may live longer and require longer courses of treatment). Some analysts estimate that Xalkori may reach $1.5 to $2.0 billion in annual sales.
Mr. Read characterized Xalkori as Pfizer’s “first entry into Precision Medicine,” in his letter to shareholders, an R&D approach he described as one “that defines the molecular and biologic predictors of efficacy and then groups patients based on the unique molecular or genetic characteristics of their disease.”
The company expects that the Precision Medicine approach will be employed in half of its proof-of-concept study starts by this year, 66% of all Phase III drugs by 2015, and 80% of launches by 2020. Pfizer’s also working with insurer Humana and pharmacy benefit manager Medco to build genomic profiles for patients and improve drug outcomes.
In addition to the Precision Model, the company is hoping to get an R&D boost by establishing a network of Centers for Therapeutic Innovation (CTI) to mix in-house scientists with academic collaborators in an “open-innovation” model. Pfizer has established four dedicated labs in Boston, New York, San Francisco and San Diego, and has received more than 300 proposals for programs from partners at 20 academic medical centers. In its first year, the CTI network has 16 projects; the company hopes to get three of them to proof-of-mechanism stage by 2014.
Despite all these initiatives, Pfizer still plans on reducing its annual R&D budget below the company’s pre-Wyeth levels (around $6.5 billion). R&D expenditures in 1Q12 only shrank 1%, but it takes time to wind down.
Xalkori made a good PR splash and can certainly be an important drug, but Pfizer’s commercial hopes seemed to be pinned on Eliquis, the best-in-class next-gen blood thinner it co-developed with Bristol-Myers Squibb. In February 2012, the FDA extended its action date for reviewing the drug, and in June, it sent the companies a complete response letter, requesting clarification of clinical data. No new trials were requested, so it’s possible that Eliquis could get on the market in early 2013.
Pfizer had been planning for an aggressive entry into the market this year, and some estimates have Pfizer and BMS sharing nearly $3.0 billion in annual Eliquis revenues by 2015. Manage-ment at both companies must be distraught at this delay; we’re just hoping it doesn’t prompt a round of cost-cuts. Pfizer hasn’t announced any significant restructuring plans in the past year, after announcing 57,400 (!) layoffs between 2005 and 2011, so we’ve got our fingers crossed.
Which we couldn’t do if we had rheumatoid arthritis! Pfizer’s very close to getting a decision from the FDA about tofactinib, its oral treatment for RA. The PDUFA action date for its NDA is August 2012, and an advisory panel recommended its approval in May. There are questions about healthcare payers ponying up for the drug, but Pfizer execs are optimistic that it’ll break out in the RA market, taking share from the five injectable TNF inhibitors that dominate the field. Estimates vary, but peak at around $3.0 billion annually.
Tofacitinib is an interesting business case, because Pfizer currently co-markets one of the aforementioned TNF inhibitors, Enbrel, with Amgen in the U.S. and Canada. So if it does manage to get this oral treatment on the market, it may find itself in competition with one of its top-sellers.
Albeit not for long, since Pfizer’s agreement with Amgen expires at the end of 2013 (but Pfizer will retain marketing rights outside of those two countries). Amgen reported paying Pfizer $1.3 billion in Enbrel profits in 2011, which Pfizer reports under Alliance Revenue. Yet another hole to plug.
Good thing Pfizer gained a new market for Prevnar 13! The former received a recommendation from the Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) in June 2012 for use in adults 19 and older with immunocompromising conditions. In December 2011, Prevnar 13 was approved for adults over 50, expanding its label from its initial group of kids five years old. Prevnar 13’s growth in 2011 outstripped the decline of Prevnar 7, the vaccine it replaces. The 50+ indication could add another $1.5 billion in revenues.
With Wyeth fully integrated into Pfizer, biologics and vaccines are key to the company’s growth. As we mentioned last year, Pfizer is also committed to the biosimilars space. In May 2012, the company began Phase I/II trials of a biosimilar of Rituximab for rheumatoid arthritis. However, in March 2012, the company suddenly ended its partnership with Biocon to produce biosimilar insulin analogs. Reportedly, Pfizer concluded that it didn’t have the resources to develop business in the diabetes space. The companies began their collaboration in October 2010 and Pfizer is believed to have paid $200 million upfront to Biocon.
Pfizer’s also working in the orphan drug space, perhaps in hopes of replicating the success of a company like Genzyme, but without the manufacturing quality disasters. In May 2012, the company was cleared to market Elelyso (who names these things?) for treatment of Gaucher disease. The drug was licensed from Protalix and will compete with Shire’s VPRIV and Genzyme’s previously supply-constrained Cerezyme. It’s not expected to be a blockbuster, but we ought not to criticize Pfizer for pursuing projects that aren’t going to be home runs on the balance sheet. The drug was blocked in the EU because Shire’s treatment has exclusive marketing rights as part of its orphan drug designation.
Pfizer had a setback in June 2012 with Tafamidis, a treatment for Transthyretin Familial Amyloid Polyneuropathy, a rare disease (as in, about 8,000 patients worldwide). The drug was approved in Europe in November 2011, but the FDA felt that the pivotal trial didn’t pass the sniff test, and issued a complete response letter. The drug got a refuse-to-file letter in April 2011, so a CRL is an improvement, right?
In January 2012, Pfizer got approval for Inlyte, a treatment for advanced renal cell cancer. Unlike Elelyso, Inlyte has a large patient population. However, like Elelyso, there are a number of established products in place in the market, including Pfizer’s own Sutent, so it may have trouble gaining traction. Still, every approval counts, and Pfizer does have much bigger hitters on their way to the market.
So will Pfizer stay #1 next year? Lucky for it, the companies behind it aren’t exactly growth dynamos just now. Even though Pfizer reported around $5.0 billion in lost revenue from patent expirations in 2011, the company will likely stay ahead of Novartis, Sanofi and Merck for at least another year. We guess that one advantage to scale is that you can actually survive shedding much of Lipitor’s revenues, as well as another $1 billion from Effexor, a few hundred million from Caduet, and Geodon, which went generic in March 2012, and Xalatan, which dropped exclusivity in January 2012, and Revatio, which loses protection in September 2012, etc.
Mr. Read has his work cut out for him in the next several years, but as a Pfizer lifer, he seems to understand that the company has to innovate its way out of this unprecedented trough.
But still — all that for nothing, eh? All those sites closed, all those research programs reshuffled, all those thousands of people laid off and transferred and jerked around, and the end result is that the company finally realizes that the whole enterprise was a dead end? —Derek Lowe
ACQUISITION NEWS
Generic Injectables
The Lowe Down
OK now, let’s see if we have this straight. Pfizer spends 20 years growing like kudzu from a compost pile — spreading, smothering, surrounding. Bigger is clearly better, and if they just keep buying enough pipelines and enough programs, they can reach that magical critical mass, where the big blockbuster drugs will just keep on popping out.
And now their CEO is talking devolution: spinoffs, asset sales, back to the basics, unlocking shareholder value and all the rest of it. So are we really just going to ratchet the whole thing back? On one level, that’s probably the only thing to do, because the Borg strategy hasn’t exactly worked out the way it was supposed to. It beats the opposite strategy, where they decide that they just didn’t get big enough, and wind up taking most of big pharma down with them.
They can’t stay the same size they are, either, since it just isn’t sustainable without Lipitor
They can’t stay the same size they are, either, since it just isn’t sustainable without Lipitor
But still — all that for nothing, eh? All those sites closed, all those research programs reshuffled, all those thousands of people laid off and transferred and jerked around, and the end result is that the company finally realizes that the whole enterprise was a dead end? —Derek Lowe
ACQUISITION NEWS
Target: Icagen
Price: $50 million for outstanding shares
Announced: July 2011
What they said: “Icagen’s capabilities and core ion channel technology will help to further expand Pfizer’s position in the pain relief disease area and our ability to develop potential first-in-industry drugs for the treatment of pain and related disorders.”
—Ruth McKernan, senior vice president,
Pfizer’s Pain & Sensory Disorders and Regenerative Medicine unit
Pfizer’s Pain & Sensory Disorders and Regenerative Medicine unit
Target: Excaliard
Price: $86 million, plus milestones of $88 million
Announced: November 2011
What they said: “The science behind Excaliard’s lead compound aligns well with our R&D focus on new treatments for fibrosis and tissue remodeling. We view EXC 001 as being well positioned to potentially become a novel, transformative therapy in a space with limited available treatment options [skin scarring].”
—Jose-Carlos Gutierrez-Ramos, senior vice president,
Biotherapeutics, Worldwide R&D, Pfizer
Biotherapeutics, Worldwide R&D, Pfizer
Target: Alacer Corp.
Price: undisclosed
Announced: February 2012
What they said: “Emergen-C products add to and greatly complement our market-leading dietary supplement portfolio.”
—Paul Sturman, president of Pfizer Consumer Healthcare
Generic Injectables
During Pfizer’s 1Q12 earnings call, an analyst asked about the company’s activity in the hospital-based generic sterile injectables market, given the number of companies that have had manufacturing problems in that area.
David S. Simmons, who served as president and general manager of Emerging Markets & Established Products units at the time (he left Pfizer in May 2012 to become president and chief executive officer of PPD), fielded the question:
“Since 2008, we’ve been interested in [the hospital-based sterile injectables] area and making efforts against our strategy here. The reason of interest is primarily because the competitive intensity is lower in this segment of the generics market. And that’s driven by the precision and technical difficulty of manufacturing quality standards and holding those standards. If anything, in the last three years, that competitive intensity has even gotten less because we’ve had more and more competitors fail to rise to the level of scrutiny that the FDA is rightfully applying. Now our strategy against this area is to broaden the portfolio and introduce a few new technology platforms like prefilled syringes and bag technologies. The portfolio expansion that we’re doing comes from three areas. One, we have a pretty significant basket of legacy products from Pfizer and its acquired companies. Adding to that, we are developing non-Pfizer legacy products in two manufacturing facilities that have specific technical capabilities, in Kalamazoo, MI and Perth, Australia. Beyond that, we have a partnership with Strides in India, which is providing us with oncology and anti-infective products. In fact, we’ve been launching products. We have a large-format vancomycin entry that’s taking significant share in the U.S. So everything you’re seeing in the market is valid, and it’s an area that Pfizer is poised to compete well and be a leader in due to our manufacturing quality standards.”
Settle Down
Settle Down
Most every company in our ranks made some significant legal settlements in the past year. Pfizer’s was relatively low-key. In November 2011, the company agreed to pay the U.S. government more than $60 million to settle overseas bribe probes. According to a Wall Street Journal report, Pfizer and J&J’s cooperation in this probe led to investigations of a number of other companies in our Top 20 Pharma report. So much for pharm-omerta.
In June 2012, Pfizer noted that it has paid out $896 million to resolve Prempro breast cancer lawsuits, and has another $330 million set aside to settle the remaining 4,000 lawsuits.
In May 2012, the company paid a $450 million settlement with Brigham Young University over discovery of the Cox-2 enzyme, the pathway for Pfizer’s Celebrex painkiller (as well as off-the-market drugs Vioxx and Bextra). The settlement came days before the case was going to move to trial. As part of the settlement, BYU endowed a chair in recognition of Dr. Daniel Simmons, the scientist whose discovery of the enzyme was at the center of the case. With that big a settlement, BYU could have endowed a whole dining room set. (We stole that joke from Woody Allen. Please don’t sue.)
