The news wires, Twitter and emails were all a-flutter this morning with the big announcement that Pfizer are buying Wyeth after agreeing a deal yesterday. The announcement in the WSJ this morning summarises the position admirably when they quoted Tim Anderson of Sanford Bernstein:
The NYT got a little excited and opined on the mega deal
a rarity in the current financial tumult: a big acquisition that is not
a desperate merger of two banks orchestrated by the government."
'Pharmaceutical behemoth?' It's interesting that the companies and
the analysts are talking up the deal and yet for many of us in the
industry, Wyeth was not considered a big pharma or biotech company, but
very much a niche player slow to develop new therapies and often marginal ones in specialist areas such as oncology, viz Mylotarg for AML and a new drug in research, bosutinib for Gleevec failures due to the T315i mutation in CML, where there are very few failures in reality.
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Let's look at what Wyeth actually have:
– A thriving consumer division
– A portfolio of vaccines (useful to Pfizer for their primary care division)
– HRT/women's health products with problems (do they cause breast cancer with long term use?)
– A weak oncology franchise of marginal products soon to be overtaken by other competitors with better efficacy data
– An interesting pipeline full of CNS products for Alzheimers, but question marks over whether any will be effective
Let's look at the hard numbers. How many blockbusters do Wyeth currently have? None bring in over a billion dollars globally at present.
The single biggest gain for Pfizer is the addition of the vaccines to their portfolio, which was considered a glaring gap.
– Probably layoffs for Wyeth and an exodus much like we saw at Pharmacia when few people wanted to stay with Pfizer.
– Inertia and introversion – mergers are always disruptive to work, quality of life and productivity.
Overall, it's hard to see how this deal benefits Wyeth other than a few
golden parachutes for senior management and the Board members. For Wyeth employees they may
gain very little other than increased uncertainty and anxiety. Pfizer
gain a few cash cows in primary care, some useful vaccines (eg Prevnar), intravenous anti-biotics (Zosyn) and an undeveloped pipeline that may bear some
fruit in the long, rather than short, run.
For the future?
The biggest problem plaguing the pharma and biotech industry is a chronic lack of new innovation and promising pipelines to replace old products and blockbusters going off patent. More major mergers and consolidation isn't always a good thing as it stifles creativity and innovation.
Meanwhile, Congress is looking to curb DTC advertising, which will hurt primary care products more than specialty ones. Lipitor goes off patent in 2011, so by 2015 the sales revenues will be lagging unless Pfizer can find some replacements to fill the void but Wyeth's future doesn't appear to be much brighter. Its two biggest
drugs, Effexor for depression and Protonix for heartburn, are scheduled
to lose patent protection in 2010 and 2011 respectively.
My overall take is that while the Wyeth products will fill a few short term gaps and sales revenues, in the long run Pfizer will not be much better off, unless one of the Alzheimers drugs in development hits pay dirt, but that's a high risk strategy indeed.