February 2, 2009
Commercial synergies clearly are not driving Pfizer’s pending acquisition of Wyeth. The companies have said that their marketed products are largely complementary with little overlap, and analysts agree.
The deal’s message is stark: the aim is to maintain existing sales and stave off disaster (see related story, page 8). Its chief benefits lie in cutting costs, restructuring the remaining organization, culling the best products and pipeline candidates from each company, and expanding in biologics and emerging markets.
The result of that effort will be flat growth through 2012, when the company hopes that new products and business opportunities will start to kick in. Pfizer has previously pegged about 10 therapeutic areas for heavy investment as part of its “Invest to Win” strategy, and many of the investments will be in biologics, where Pfizer is not currently a strong presence (“The Pink Sheet,” Oct. 13, 2008, p. 11).
During the next few years, competition for the merged company – and for all industry players – is likely to get a lot tougher, with new products with real clinical value few and far between, government clamp-downs on abusive marketing practices, and payers tightening their purse strings.
The industry is in the midst of grappling with how best to restructure its commercial model in response to these changes, with major reductions in sales force size under way. This deal is only a first step in addressing those issues, although it gives Pfizer more flexibility in determining what to cull and what to keep. Many of the cost savings, which the companies expect to realize, are going to come from commercial operations, including heavy hits to sales and marketing.
That said, Pfizer has entered into its next phase fighting. Pfizer CEO Jeff Kindler said, in announcing the deal Jan. 26, that “with this acquisition, we remain the leader in primary care, of course. We will also advance our CNS, infectious disease, and specialty franchises to become number two in those important areas. … Geographically, the company’s combined global footprint will be unrivaled. Going forward, we will lead the pharmaceutical markets of United States, Europe, Latin America, Japan and the rest of Asia. In addition, we will have leading market share positions in important growth areas, such as Brazil, Russia, India and China.”
Some Opportunities For Steady-But-Slow Products
As of last week, market research and financial analysts were still sorting out the fine points of the deal’s commercial implications, but some preliminary observations are possible.
Pfizer will continue to be the biggest player in primary care markets, even as it moves to cut its dependence on that space and reduce expenditures there. Pfizer can use its massive size, aggressive sales and marketing organization, and formidable resources to help Wyeth products exploit opportunities or fend off challenges – some believe even in areas where Wyeth is already successful and where Pfizer has little expertise, such as biologics.
“The combination creates a tremendous competitive force,” said Stan Bernard, president of Bernard Associates, a pharmaceutical consulting firm. “I anticipate that the Pfizer sales and marketing machine will turn on to support Wyeth products. Wyeth did a great job before Pfizer, but Pfizer can take Wyeth compounds up to the next level.” Pfizer’s sales force is intense, competitive and results-oriented, he added.
Even if the combined company isn’t counting on getting “needle-moving” growth out of most products in its newly diversified portfolio, the ability to exploit opportunities for its slow-growth, steady revenue-producers is crucial to maintaining the combined company’s pro forma revenues through 2012, points out Stephan Gauldie, director of Pharmaview, which is a unit of the consulting firm Decision Resources.
Pfizer is diversified, but particularly strong in cardiovascular (Lipitor, Norvasc, Caduet/Cardura), central nervous system (Lyrica, Zoloft, Aricept, which it sells through an alliance with Eisai, and Gideon), arthritis and pain (Celebrex), infectious disease (Zyvox, Zithromax, and Vfend), and urology (Viagra, Detrol/Detrol LA) therapeutic areas.
Wyeth, on the other hand, has traditionally been strong in women’s health, through its hormone replacement therapies (Premarin) and contraceptives, certain areas of CNS (Effexor/Effexor XR, Pristiq), and gastrointestinal conditions (Protonix, Relistor) (see chart of key products). The company also launched several drugs in 2008, which could benefit from Pfizer’s muscle (“The Pink Sheet,” Jan. 26, 2009, p. 3).
Wyeth also has garnered great success in biologics, through its deal with Amgen, which enables it to co-promote the blockbuster Enbrel in North America and to sell the therapeutic overseas (“The Pink Sheet,” Dec. 8, 2008, p. 18). Enbrel leads the anti-tumor necrosis factor category in treatment of rheumatoid arthritis and psoriasis, with total global sales (from both Amgen and Wyeth) exceeding $7 billion in 2008.
It’s not clear how much more Pfizer can bring to Enbrel, said Gauldie. “Maybe more advertising and promotion money,” he added. That might help, because although Enbrel is already one of the world’s most successful biologics, Abbott’s Humira has been gaining ground against it and Remicade, the other anti-TNFs.
Gauldie has his doubts, but Bernard points out that while Pfizer doesn’t have biologics experience, that may be less of an issue on the sales and marketing side than in drug development. “Biologics are products, and Pfizer already sells to doctors who use Enbrel, so they’ll be quick to focus on those markets,” predicted Bernard. “I do think there is a Pfizer mentality, which is very competitive,” he added.
Overlap In Infectious Diseases, Oncology
Both companies also have anti-infective franchises, which generate slow but steady growth and worthwhile revenues – about $5 billion a year for Pfizer, and less, but still substantial revenues for Wyeth, Gauldie said. The combined company would have a roughly 9 percent share of that market, he estimates (see chart).
There could be some synergies to exploit in this market, he notes, because each company’s drugs focus on different indications. Pfizer is strong in anti-fungals (Diflucan, Vfend), but also sells antibacterials (Zithromax, Zyvox), while Wyeth sells only anti-bacterials (such as Zosyn). Zosyn had sales of $1.3 billion in 2008, but it faces generic competition this year.
There is some overlap in the antibacterials the companies sell to hospitals, said Decision Resources analyst Sylvia Eash. She pointed out that Zyvox (linezolid), which generated sales of $944 million in 2007, is better known among physicians than Wyeth’s broad-spectrum glycycline antibiotic Tygacil (tigecycline IV), which had sales of $137 million in 2007, and which is a newer product. Many doctors don’t know Tygacil, which launched in 2005. Doctors who are familiar with it are concerned that its broad applications—it is indicated for cSSSI, including those caused by MRSA, and complicated intra-abdominal infections, but works against both Gram-positive and Gram-negative bacteria—can promote antibacterial resistance, she says. Pfizer therefore could theoretically help position Tygacil, she suggested.
The combined company, for example, could play up Tygacil’s effectiveness against Gram-negative pathogens (although not more serious kinds), since Zyvox covers only Gram-positive pathogens. Thus, Tygacil would be pitted against cephalosporins, penems and quinolones, while Zyvox would compete against vancomycin and Cubicin (daptomycin), two other anti-infectives that are used against MRSA.
The marketing message could then downplay Tygacil’s activity against MRSA to avoid competing with Zyvox. Alternatively, the company could develop the drug against C. difficile organisms, a new indication that would have limited competition and one that Wyeth was considering pursuing, she said.
Likewise, the companies both have important CNS drugs, but their indications by and large don’t overlap. One exception may be anti-depressants, where Wyeth has been very successful with Effexor and Pfizer with Zoloft. It’s not clear if Pfizer can help Wyeth sell Pristiq, the drug Wyeth was hoping might be a next-generation Effexor, but which has been a disappointment (“The Pink Sheet,” Jan. 12, 2009. p. 12).
Still, Pristiq may have potential in combination with neuropathic pain therapies and could be nurtured as combination therapy with Pfizer’s Lyrica, because depression is often a co-morbidity with pain, said Gauldie. In that case, by 2010, Pristiq and Cymbalta would be the only two branded drugs in a big market, and Pfizer could use that to leverage its position in neuropathic pain. Cymbalta has similar mechanism of action, and to date is the only anti-depressant indicated for neuropathic pain.
Both companies are small players in the oncology market, with combined share of 4 percent, Decision Resources estimates. Pfizer has three drugs, Sutent (2008 worldwide sales of $850 million, a 46 percent jump from 2007), Camptosar, which has generic competition, and Aromasin, a treatment for breast cancer. Wyeth sells Torisel (temsirolimus injection), launched in 2008, and two small products, Neumega and Mylotarg.
Pfizer’s Sutent and Wyeth’s Torisel are both indicated for advanced renal cell carcinoma, but Sutent is the clear market leader in that space, with an indication for first-line therapy. Torisel is used as third-line therapy in RCC patients with poor prognosis after failure on Sutent and Nexavar. As doctors get more familiar with Torisel, however, they’re increasingly interested in using it earlier, said Decision Resources analyst Kiran Meekings.
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