Attack of the Monster Merger - Pharmaceutical Executive


Attack of the Monster Merger

Pharmaceutical Executive

Fears of Pfizerization

Critics say that Pfizer's fortune would have been better spent beating the biotech bushes for exceptional products, platforms, and technology. Prices have never been better.

But that view ignores Kindler's need for both a bump in revenue and a jump in size. Plus, the so-called string-of-pearls approach to acquisition is easier said than done. "It is very difficult to execute and eventually manage the disparate groups of small biotechs," says Cliff Cramer. "Wyeth, on the other hand, has one of the very few biologics franchises that would move the needle and provide the desired critical mass."

That franchise boasts something Pfizer could find nowhere else: the world's largest biologics development and manufacturing facility, built in 2005 outside Dublin. "Wyeth's manufacturing capabilities in biologicals are truly unmatched," says Jagmohan Ragu, a professor of marketing at the University of Pennsylvania's Wharton School. "Pfizer definitely needs that to get into that business fast."

That business includes not only today's biologics but tomorrow's biosimilars. In the next year or three, Congress will almost certainly force FDA to confirm a regulatory pathway for follow-on biologics. When that happens, biosimilars will likely become branded pharma's newest best friend. Novartis' Sandoz has already marketed three in Europe, while Merck launched a biotech unit in December and licensed Insmed's pipeline of biosimilars two weeks after word of the Pfizer-Wyeth deal.

The unique value of the Wyeth facility ratchets up the pressure on Pfizer to get the integration right. "The last thing Pfizer can afford is to compromise the future of that function," says Chuck Farkas. "Wyeth has very talented people in biologics who understand the potential for true innovation in follow-on biologics. And those people will have many other opportunities if they want to move on."

"We are not just buying assets and buildings and compounds, we are buying an enterprise that was created by people—great people that have done a fabulous job creating a great company—and we are very mindful of that," Kindler said on January 26, yet another in the litany of "nots" by which he framed the merger for public consumption.

The old Pfizer had a reputation of devouring its acquisitions. In the Pipeline blogger Derek Lowe put it this way: "The fear, among scientists like me, is that Pfizer is going to take another productive research organization, raid it for what it considers to be of immediate value, fire a lot of people, and then take the rest and do whatever it is they do to them to Pfizerize their productivity."

Under Kindler, Pfizer has sliced and diced both its R&D and its sales behemoths into smaller ("nimbler," "more entrepreneurial," etc.) groups, focusing on primary care, specialty pharma, emerging markets, oncology, and established products. The firm is also jettisoning all research into cardiovascular disease, among other areas, to focus exclusively on Alzheimer's, oncology, diabetes, inflammation, pain, and schizophrenia.

What Wyeth brings to the merged pipeline is significant expertise in immunology and inflammation, including rheumatoid arthritis, leukemia, and lymphoma, as well as the CNS category, especially Alzheimer's. Only 66 percent of its portfolio relies on small-molecule drugs, with therapeutic proteins accounting for 18 percent and vaccines for 16 percent. "This diversification creates a more desirable balance in our [combined] portfolio, reducing small-molecule dependence from 90 percent to 70 percent by 2012," Kindler told analysts on a January 26 earnings call.

Wyeth also pioneered the "learn and confirm" drug-development model, transforming the increasingly inefficient Phase I, II, and IIIs into a more predictive, two-phase approach designed to better adapt the potential value of the compound. Kindler has voiced his respect for Wyeth's R&D process as well as his intention to preserve it. But can "learn and confirm" be Pfizerized and survive?

"This integration will be different," says Pfizer's Ray Kerins. "It will be smoother and quicker because Pfizer has been restructured into many smaller units, and each will do its own integrating. We're not putting together two big companies as in the past." Still, the knowledge that 15 percent of the staff will get the boot has begun to degrade morale and productivity. Both companies' field offices reportedly will be hardest hit. Pink slips have already started to go out, and many more resumes.


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