Investors And Scientists Question Whether Brent Saunders Will "Get Religion" And Support Pfizer's Internal R&D

Investors And Scientists Question Whether Brent Saunders Will

Pfizer Scientists Concerned Over R&D Direction

February 10, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Mikael Dolsten, president of Pfizer ’s worldwide research and development, tried to address concerns by investors and Pfizer science staff that after its merger with Allergan , the merged company will still focus on internal drug development.

This concern was present prior to the deal’s announcement, when talks were occurring in October and November. This focused primarily on Brent Saunders, the head of Allergan, who will be the president and chief operating officer of the combined company.

Saunders has not generally been an advocate of significant research and development, whereas Pfizer has a very strong, and very expensive, research and development program. Some of the scrutiny over Saunders was inspired by a Forbes interview he gave, where he said, “The idea that to play in the big leagues you have to do drug discovery is a fallacy.” He also argued in an interview last year with The Financial Times, that smaller companies and academic centers were better at research and development activities.

And The Financial Times notes that Allergan only spends about 7 percent on research and development. Pfizer spends approximately 16 percent of its budget on internal development. The only other drug company to spend less than Allergan is Canadian firm, Valeant Pharmaceuticals International Inc. . Valeant has been dubbed a “serial acquirer,” for having bought more than 110 companies since 2008. It’s a business model based on acquisition more than development.

Allergan’s growth has been similar, with Saunders behind much of it. He was the chief executive officer of Bausch & Lomb in 2010, which he sold to Valeant in 2013. He then headed Forest Laboratories, Inc. , which was shortly afterward acquired by Actavis , at least partly to fend off a hostile takeover bid by Valeant and New York-based Pershing Square Capital Management. Then Allergan acquired Kythera Biopharmaceuticals, Inc. . It then sold its generic drug business to Israel-based Teva Pharmaceutical Industries Ltd. . In short, over a 20-month period, Saunders turned a $25 billion company into a $120 billion, or, if you count the Pfizer deal, a $160 billion company.

Perhaps because of this scrutiny and criticism, Saunders has modified his position on research and development a little bit, suggesting that it can work if the research has a good chance of success and focuses on diseases where the company already has a market presence.

Dolsten, according to The Financial Times, said Allergan executives had “opened their eyes” to the positive side of in-house drug discovery.

But Pfizer, as part of the acquisition, has indicated that it plans to cut $2 billion and that about $67 million of that will come from research and development. This has Pfizer scientists worried about their jobs, as well as the direction of the merged company. And investors are skeptical, thinking the $2 billion figure might be a low-ball one that doesn’t take into consideration various regulators and politicians, who haven’t been very enthused with the tax-inversion aspects of the deal.

Andrew Baum, an analyst at Citi, wrote in a recent note to investors that there was a “key risk from potential dislocation of Pfizer’s R&D efforts during the integration period, given debates over the R&D philosophies of the two companies.”

Although Ian Read will continue as chair and chief executive officer of Pfizer, it’s generally assumed that Saunders will take over eventually, although how that will specifically happen if the merged companies split into two as planned, hasn’t been detailed. It has been noted, however, that when the company announced the new executive leadership, that the person many thought was Read’s “heir apparent,” Geno Germano, is leaving the company.

Some are hopeful that Saunders will rethink his approach to research and development. John LaMattina, formerly head of Pfizer’s research and development program, told The Financial Times that Saunders had “been greatly moderating his comments” on the subject. “Back in November when I heard that deal was contingent on Saunders becoming chief executive on Read’s retirement, I was worried. Since that time he’s modified his view, leaving one to hope that he will in fact get religion and support internal discovery.”

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