January 19, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Pfizer ’s merger with Allergan for $160 billion has analysts pondering what the company might look like in a decade. Since the two companies have been quite straightforward about the idea that once merged, the strategy is likely to be to break into two or more companies, perhaps the questions is—what will the companies look like in 10 years?
Not surprisingly, the chief executives of both Pfizer and Allergan have focused on the benefits of the deal, with both saying they are “underappreciated.” Of course, Pfizer will shift its domicile to Ireland, which will cut its corporate tax rate to about 15 percent, which is projected to save about $2.1 billion in U.S. taxes by 2017.
In a round-table discussion with The Motley Fool, Todd Campbell believes that patent expirations will be the driving force behind Pfizer in the next 10 years. He points out that Pfizer has done okay despite losing its patent for Lipitor in 2011. Sales dropped by more than 20 percent as a result, but the company’s shares are still trading high. “Therefore,” Campbell wrote, “investors may want to give the company the benefit of the doubt in being able to overcome its current patent risk, which is arguably far less worrisome than it was five years ago.”
At least in the next 10 years. He notes that “most of Pfizer’s top-sellers will see their patents expire by 2025, but none of these drugs account for more of the company’s total quarterly revenue than Lipitor did in 2010. In fact, among drugs losing patent protection during this period, only Lyrica represents more than 10 percent of Pfizer’s quarterly sales (Prevnar’s patent expires in 2026).”
Pfizer’s Mikael Dolsten, head of research, focused on the merged companies’ pipeline at the recent J.P. Morgan conference. Also referring to the pipelines as underappreciated, Dolsten mentioned Allergan’s rapastinel for depression, Vraylar, for schizophrenia and bipolar disorder, and relamorelin, for diabetic gastroparensis and constipation. Allergan has projected $2 billion in peak annual sales for rapastinel, up to $1 billion for Vraylar and relamorelin each. Also projected for $1 billion in potential sales are pipeline drugs Esmya for uterine fibroids and a recently approved Viberzi for irritable bowel syndrome.
Allergan also has pipeline products for migraine headaches and macular degeneration, each of which could hit annual sales of $2 billion.
But Allergan indicates it has 70 products in mid- to late-stage trials.
Keith Speights, as part of The Motley Fool’s round table, focused on Pfizer’s late-stage pipeline of biosimilars. He noted that Pfizer has five biosimilars for Humira, Avastin, Remicade, Rituxan/MabThera, and Herceptin. “Assuming the Allergan merger closes successfully,” he writes, “other biosimilars could be added to the mix.” The worldwide biosimilars market is projected to hit about $20 billion by 2020. He does add, however, “While I don’t expect the lion’s share of Pfizer’s revenue to stem from biosimilars 10 years from now, it’s likely that they will make up a significant part of the company’s portfolio by then.”
Cheryl Swanson, in the round table, says she is in the club of skeptics, stating that “Pfizer’s track record in research and development is woefully unimpressive.”
She cites Pfizer’s oncology sales as only accounting for 4 percent of its $50 billion annual revenue. “Despite all the money Pfizer has poured into oncology, it lags well behind competing cancer powerhouses.”
Immuno-oncology drugs are all the rage these days. AstraZeneca PLC is going strong, Regeneron Pharmaceuticals and Paris-based Sanofi inked a deal to focus on programmed cell death protein 1 (PD-1) inhibitors, Amgen and Roche collaborated on combination therapies for breast cancer and colorectal cancer, and Merck is working with Amgen on combinations using Keytruda (pembrolizumab). Pfizer seems to lag a little bit behind, according to Swanson.
“Here’s the reality,” Swanson writes. “Pfizer’s immuno-oncology drugs are all in Phase I, or even earlier, stages of development. The solitary exception is Pfizer’s checkpoint inhibitor avelumab, which it developed in partnership with Merck. Avelumab is unlikely to win approval until next year. Meanwhile, Merck and Bristol-Myers Squibb have already debuted potent drugs in that area.”
It also seems possible that once the merger is completed and then spinoffs accomplished, Pfizer, as such, won’t exist. The most oft-stated strategy is to create two companies, one that focuses on research and development and innovative drugs—sort of the Allergan component—and one that handles the established brands and generics—sort of the Pfizer component. If that occurs as early as 2018, as the two companies’ executives have indicated, then by 2026 the idea of Pfizer as a standalone company may be a footnote in the history books.
