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In Wyeth, Pfizer Saw Drug Pipeline: biologics, vaccines
  NY Times
January 26, 2009
That's the single word that might best sum up Pfizer's pursuit of Wyeth.
Most other traditional big drug companies that have been seen as takeover candidates lately, like Bristol-Myers Squibb and Schering-Plough, still concentrate heavily on so-called small-molecule drugs - medicines made of small chemical molecules and typically dispensed as pills.
But about seven years ago, Bernard J. Poussot, then the chief of Wyeth's pharmaceuticals business who became chief executive of the whole company, decided to reduce Wyeth's reliance on small-molecule drugs. He steered Wyeth down a path more typically trod by pure-play biotechnology companies, which develop biologics - drugs that are derived not from small chemical molecules but from living cells and are often given by injection or infusion.
The trouble with small-molecule pills - including Pfizer's own blockbuster, Lipitor, the world's best-selling drug - is that when their patents expire it is easy for generic companies to swoop in with low-priced knock-offs based on the same chemical recipe. The looming expiration of Lipitor's patent in 2012, in fact, is a big reason Pfizer felt compelled to buy a company like Wyeth.
In contrast, biologics, whose molecules can be 100 to 1,000 times as large as those of traditional drugs, are difficult and expensive to replicate. And because there is no established regulatory pathway for approval of generic versions of biologics, companies that make large-molecule drugs have been able to charge monopoly prices.
Wyeth, for example, sells Enbrel, a biologic treatment for rheumatoid arthritis and plaque psoriasis whose wholesale cost is $19,000 a year. Enbrel has become Wyeth's second-best-selling drug, bringing the company $3.8 billion in revenue last year. The company sells Enbrel jointly in the United States with the biotechnology company Amgen while holding sole rights overseas.
Pfizer's acquisition of Wyeth is a validation of Mr. Poussot's decision to refocus Wyeth on biologics - and on vaccines, drugs that are also derived from biological material. One of Wyeth's other cash cows is Prevnar, a vaccine for children against life-threatening illnesses like meningitis and pneumonia that are caused by pneumococcal bacteria. Prevnar had worldwide revenue of about $2.7 billion last year.
"We became very attractive to a company like Pfizer, because you cannot be the No. 1 pharmaceutical company in the world and have not yet started in biotech," Mr. Poussot said in an interview on Monday.
Mr. Poussot's push into biologics was a survival strategy against the eventual lapsed patents on Wyeth best sellers like Effexor, a small-molecule antidepressant that had worldwide sales of $3.9 billion last year. Its patent is due to expire in 2010.
After the Food and Drug Administration approved Enbrel, Mr. Poussot made a big gamble by deciding in 2001 to build a $2 billion plant outside Dublin, Ireland, to make the drug in high volume.
At the time, Wyeth was still working through legal settlements from the debacle over the fen-phen diet drug combination, which was found to damage heart valves. Then, in July 2002, a big National Institutes of Health study found that Wyeth's best-selling small-molecule menopause drug Prempro could raise the risk of breast cancer and heart disease. A menopause products franchise that had sales of $2 billion in 2001 for Wyeth would eventually drop to half that level.
But the Dublin plant, which opened in 2003, has helped offset the Prempro damage. Mr. Poussot said it was the largest factory of its kind in the world.
To a pharmaceutical giant like Pfizer, such big-molecule assets looked particularly attractive, analysts say. William Tanner, a biotechnology analyst and a managing director of Leerink Swann, a health care investment bank, said it took five years and at least $1 billion to build a biologics plant.
"You either have to make or buy," Mr. Tanner said. "In Pfizer's case, they decided to buy."
There has been a pattern in recent years of traditional pharmaceutical giants buying smaller biologics companies. In 2007, Schering-Plough bought Organon BioSciences for about $14.4 billion, and AstraZeneca bought MedImmune for more than $15 billion. Last year, Eli Lilly bought Imclone Systems for $6.5 billion.
But in acquiring Wyeth, Pfizer is buying another big pharmaceutical company that has built up a sizable business in large molecules.
"We want to become a leader in biotherapeutics and vaccines," Jeffrey B. Kindler, Pfizer's chief executive, said Monday at the Manhattan news conference where the deal was announced.
David S. Moskowitz, a pharmaceuticals analyst with Caris & Company, an investment bank, said that Wyeth's diverse portfolio made it more interesting to Pfizer than a pure-play biologics manufacturer like Amgen or other traditional drug makers like Bristol-Myers or Schering-Plough.
"We think Wyeth is the much better play," Mr. Moskowitz said.
While the deal has the potential to turn Pfizer into a vaccine and biologics powerhouse, it also has potential pitfalls in the form of bapineuzumab, a Wyeth biologic drug for Alzheimer's disease that is in clinical studies. While current drugs for the disease treat symptoms, Wyeth intends for bapineuzumab to try to attack the underlying causes of Alzheimer's, a treatment that could be worth billions of dollars if it proved effective.
But the results of a clinical trial made public last year raised questions about the drug's safety and efficacy. The study showed, among other shortcomings, that the drug did not benefit people who carry a genetic variant that raises the risk of getting Alzheimer's.
Mr. Poussot said Wyeth had 10 different Alzheimer's treatments in development, including small-molecule drugs and vaccines.
Wyeth's Prevnar childhood vaccine, meantime, is seen as successful and destined to become even bigger. The company is working on expanding federal approval for Prevnar to include infants and is studying the drug's use in adults. It costs about $336 for a series of four injections.
"Prevnar could do $5 to $6 billion by 2015," said Dr. Tim Anderson, a pharmaceuticals analyst with Sanford C. Bernstein & Company and a former practitioner of emergency medicine. "That's pretty good for a meningitis vaccine."
To solidify the business, Pfizer could also choose to pursue Crucell, the world's largest independent vaccine company, in a courtship that Wyeth had already initiated, Mr. Moskowitz said. Crucell is a Dutch company that makes flu, typhoid and hepatitis vaccines and has a market capitalization of only $1.4 billion.
Analysts also said that companies with even a few biologics could be in a better position to weather efforts in Washington to overhaul the health care system because biologics are often aimed at rare, grave diseases that have no other treatments. Even though biologics can be much more expensive than small-molecule drugs, their total cost to the health care system is markedly less than drugs that millions of people take for widespread problems like high cholesterol.
Only about 300,000 people in this country take Enbrel, for example.
"In the face of changes in health care reform," said Mr. Tanner of Leerink Swann, "these drugs might do well."
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