All that glitters ISN'T gold - Pfizer buys Wyeth

The writing's been on the wall for some time now. It doesn't take a rocket scientist to figure out that if your revenue growth is shrinking (alarmingly), then the best fixit strategy is to go out and buy a competitor - finance the deal through your investment bank buddies on Wall Street, and then add the revenues together and chop the employee strength in the name of cost 'efficiencies'.

Bloomberg has the details of the acquisition(http://bloomberg.com/apps/news?pid=20601087&sid=aBY36rmTcqOk&refer=home), but I do recall a feature on CNN, oh about a year and a half ago where a number of people question the wisdom behind a Pfizer-Wyeth merger.

Here's the link to the article:

http://money.cnn.com/2007/08/24/magazines/fortune/simons_pharma.fortune/index.htm

In summary, its not to going to solve the basic problems faing the drug industry. Wyeth has a troubled pipeline - so there's some common ground already. Wyeth also has some of its bestsellers (depression / heartburn) coming off patent in the 2010 - 2011 window.

So what's the logic? 'Rightsizing'?

Or plain and simple - run out of ideas...

Time will tell, but big mergers are fraught with BIG PROBLEMS - and its difficult to integrate two large companies in any industry. Whether its a good decision to not stick to your core business, accelerate the development of your potential bestsellers in the pipeline - and go after the competion (dog eat dog) remains to be seen.

Where will the 'growth' come from once the dust settles and the cost savings / earnings additions are all realized?

That's the trillion dollar question.

I'm not holding my breath.

Are you?

- oRiOn

4th Quarter Results - Genentech

Genentech profits are up, and US Sales of Avastin are pretty much par-for-course at 731 Million $ against analyst expectations of 740 Million $, but its share price fell by 2% on the street.

Dunno what transpires in the minds of folks who buy stocks these days, but in my book if a company meets expectations, give or take a few - especially in the depressed pharma sector, its reason for optimism.

Here's the report from Reuters: http://www.reuters.com/article/businessNews/idUSTRE50E7XC20090115

Not that this will matter too much to Genentech - as Roche prepares its sweetened bid for the chunk of Genentech it doesn't already own, which I reported a few days ago.

There are some concerned people in the industry who believe that the takeover will spell the end of Genentech's reputation and record for converting scientific innovations into bestsellers. There are a number of drugs in late-stage development in the Genentech pipeline, and Roche would take over the responsibilities for taking the drugs (or not taking them, as the case may be) to market.

Make no mistake - this one is about revenues, and not innnovation (drug pipelines, etc) - Roche clearly has its eyes on the revenues that it would gain from sales of Avastin and its colleagues in lucrative markets instead of the current fractions.

WSJ's Health Blog reports that Genentech's CEO, Art Levinson, at Tuesday's JP Morgan Healthcare conference didn't mention a word about the Roche bid.

Thats pharma business for you!

http://blogs.wsj.com/health/2009/01/14/genentechs-levinson-sets-the-record-straight-on-dna/

- oRiOn

Twitter and Healthcare

I came across a fascinating presentation by a health sciences librarian at the University of Michigan about the applications of Twitter in healthcare - therapeutic, doctor-patient dialogue, crisis management et al.

Ever heard of Qwitter - the tool that helps you quit smoking, or for that matter how 'support' from Twitter peer groups helps you embark on that oh-so-hard diet regime?

Here's the presentation and I'm sure you'll gain some fascinating insights from it.

- oRiOn

Twitter for health and healthcare

View SlideShare presentation or Upload your own. (tags: activism modification")

Pfizer continues with its downsizing

The bad news coming out of Pfizer just keeps coming. Not a particularly good time to be a scientist, after having invested in so many years of study and research...

Or a medical rep.

Or a pharma CEO.

The healthcare industry is running out of promising careers at this rate. Which is a shame, because they have been one of the highest net job creators for a long, long time.

AP reports a fresh round of job cuts, this time affecting scientists in its 'non-core' areas. The company had earlier announced it would now focus on 6 disease states - Alzheimer's, cancer, schizophrenia, pain, inflammation and diabetes and abandon all other research areas.

One of the areas abandoned is cardiovascular diseases - Lipitor, Pfizer's 13 Billion USD bestseller has already seen revenues dip and it remains to be seen whether Pfizer can somehow fill a gaping hole in its revenues which will start to kick in well before 2011, when Lipitor comes off patent.

Jeff Kindler, their CEO has already gone out on a limb by stating that he is looking for acquisitions which will impact earnings positively, but given Roche's Genentech bid setting a trend in the new year, such acquisitions will not come cheap - recession or not.

Research areas that Pfizer is exiting include anemia, bone health, gastrointestinal disorders, obesity, liver disease, osteoarthritis and peripheral artery disease -

Read the complete story here: http://www.washingtonpost.com/wp-dyn/content/article/2009/01/13/AR2009011301300.html

- oRiOn

Signs of Life in Pharma M & A

Well, M & A is alive, it seems - and kicking!

Fierce Pharma reports that Roche is considering a sweetened bid of around 44 Billion USD for Genentech (http://www.fiercepharma.com/story/roche-readies-sweetened-genentech-bid/2009-01-12)

FT reports that Roche has access to funding from a JP Morgan / HSBC-led consortium. It also has the option of foregoing this years dividend (but that would run contrary to Roche's assertion last year that it would increase dividends for the next 3 years - i.e. through 2010) and a line of revolving credit.

So money's not the issue here - the valuation is more significant, given Genentech's leadership position in cancer treatment drugs led by Avastin, Rituxan and Herceptin. Cancer is the number two cause of mortality in developed countries and accounts for a hefty chunk of public health expenditure - so Genentech's market is growing, and its revenues remained pretty solid last quarter - even in the current economic climate.

Genentech management, according to the Wall Street Journal's Health Blog have consistently maintained that their company is worth at least 90 USD per share - which Roche are now apparently prepared to pay with the new bid, which values Genentech shares at 95 USD per share.

Watch this space, but this is definitely one of the big deals by size for 2009.

- oRiOn

Blogs are the future of pharmamarketing

Are they really?

Now, Centocor started its 'corporate blog' (http://cnto411.com/)not so long ago - and after a few posts, the enthusiasm of the corporate communications team seems to have fizzled out. The last post was in October, 2008 - and there have been a grand total of two posters till date - Michael Parks, VP, Corp Commm, and Scott McNealy, presumably a pointman in the same department.

GSK's Alliconnect blog, (http://www.alliconnect.com) launched to promote the user community for Alli, the only FDA approved anti-obesity drug seems to have befallen a similar fate. The last post was in September, 2008. VP Karen Scollick 'took over' the blog a few months ago, supposedly as part of a handover of strategic marketing assets connected with Alli, but there hasn't been much activity since then (2 posts in total).

Alli hasn't really been the blockbuster drug that GSK hoped it would be - but then sometimes, marketers are guilty of over-hype and over-expectation. Perhaps country music singer Wynona Judd will give Alli the boost it needs. See www.myalli.com but its doubtful whether a drug that has total sales of 88 Million US in the first nine months of 2008 will skyrocket simply because of a celebrity brand association. And of course, there are the whispers about side-effects...

Watch this space for further news updates, but in my opinion its rather un-cool to embark on an initiative like a corporate blog and then not update it regularly - it smacks of taking your readers for granted, at the very least.

Thats my two cents on the subject.

- oRiOn

Brand Revitalisation

Given that the global pharma industry is going through a period of significant upheaval, I thought its appropriate to provide a definition of brand revitalisation. Quite a few blockbuster brands are in a period where their marketers try and infuse a bit of extra life into their pedigree creations - to garner some extra revenues and to flog a few extra miles out of a dead / dying horse :)

Here is an excellent summary, courtesy The Value Engineers (http://www.thevalueengineers.com/tve/uploads/40/40_Document_1.pdf)

Brand revitalisation: the business of taking a brand that is losing consumer
resonance and relevance, and re-energising it via a compelling new proposition or
idea.

Key points:

1. Its big business – as the pace of change and weight of competition threatens
longstanding brands with marginisation.

2. It’s generally a cheaper and less risky process than building new brands from
scratch.

3. It can be the first step in a program of “brand turbo charging” – the elevation of a
brand from product–brand to cross–category power-brand status.

4. It’s a complex process involving up to 5 stages: problem diagnosis, startpoint
definition, development option creation, proposition selection/ refinement and
marketplace execution – and then there’s product innovation…

5. Insight is a sine qua non - to get to the heart of the brand and what it stands for,
and to identify new market-led opportunities that the brand can tap into.

6. “Connectivity” is crucial – even when a brand re-orientates to meet a new need,
there should be a line of connection back to the original brand construct.

7. Target markets change with the revitalisation program – this can be either
“modification” or “clean break”.

8. Brand architecture – the structure of brand/sub-brands/products – will probably
require reorganising.

9. Build business assessments into the process – new proposition concepts may
look exciting, but how wide is its appeal and how much volume will it generate?

10. Early steps in market executions are critical – mistakes at a later stage can be
tolerated, but at an early stage they can prove terminal.

- oRiOn

Foot in Mouth (Disease)?

Jeff Kindler, CEO, Pfizer went on record in a recent interview with FT, claiming that Pfizer is "willing to acquire" a large pharmaceutical firm in order to "improve its financial health." Kindler adds that "the real goal is to grow revenues...We are open to opportunities and constantly looking at those which are big, small and in-between."

Now, if I were holding any Pfizer stock (which I don't), I'd probably be questioning Pfizer's take-no-prisoners strategy. If you can't beat 'em, acquire them.

Kinda reminiscent of a certain company in Redmond, WA...

- oRiOn

Job Cuts at Bristol Myers Squibb

David Moscovitz, an analyst with Caris and Co. probably sums it up best when he says "Unfortunately, for drug companies it's come down to trying to reduce costs in reaction to difficulty they're having developing and successfully launching new products, and also dealing with generic competition in a healthcare system that values cost management more than innovation."

Reuters reported recently that BMS plans to further trim its global workforce by 10% - this is on top of the 10% reduction announced in Dec 2007.

Lemme see if I've got my math right - 90% of 90 % = 19% of BMS staffers are in the job market soon-ish.

For a company that employed 43,000 before the 2007 announcement, thats quite a significant number.

Here's the Reuters story (http://www.reuters.com/article/ousiv/idUSTRE4BF7KL20081216)

- oRiOn

It's not ALL Doom and Gloom!

Well, maybe it is and maybe it isn't...

But you gotta find some humour in it somewhere, somehow.

I'm a big fan of Hugh MacLeod (http://www.gapingvoid.com/) who essentially draws cartoons on the back of business cards and is now working with Microsoft (yes, the one and only) to 'find new ways to get the company tell its story better).

In other words, have a few laughs whilst discussing serious business.

Now, the pharma industry could well take a leaf out of Microsoft's book - when your whole existence centres around extracting your pound of flesh for providing 'cures', it can be somewhat depressing (especially during those moments when you contemplate the meaning of life).

I'll leave you with one of Hugh's classics.

Enjoy -

oRiOn

Pfizer's Woes Highlighted

Derek Lowe, in a November post on his blog about pharma pipelines - (http://pipeline.corante.com/archives/2008/11/03/pfizer_strategy_layoffs_and_money.php) highlights a statement made by Jeff Kindler, Pfizer's CEO in an interview with FT.

'We're facing a very significant loss of exclusivity in Lipitor at the end of 2011. We have a clear plan for positioning the company for strong, profitable growth after that. That plan consists of pursuing significant new opportunities for increased revenues starting with our internal pipeline, getting further growth out of our existing products, growing in the emerging markets, growing our business on off-patent products. We sell billions of dollars of off-patent products and in many parts of the world that's the most important opportunity to meet unmet medical needs and looking for other potential sources of revenues.'

Judge for yourself - but it isn't exactly the kind of comment which would inspire confidence in the investor community. Pfizer's stock hasn't exactly been a shining star in recent times - and its obvious from some of the comments to Derek's post that folks out there are very sceptical about Pfizer's ability to generate profits from 'internal pipelines' or generics, where they face stiff competition from low-cost manufacturers.

And of course, the layoffs continue at Pfizer... despite statements to the contrary issued by official sources in the know, the fact that the severance-package program (due to expire end 2008) has been extended to mid-2009. All of this on top of the 10,000 job cuts and plant closures announced in Jan 2007 (http://www.fiercebiotech.com/story/pfizer-cuts-10000-jobs/2007-01-22). There's been a lot of chatter on pharma blogs about this, especially on Pharmalot - but its clear that these are trying times indeed for Pfizer, once the darling of investors.

-oRiOn

Quotable Quotes :)

The December 2008 FT Global Pharmaceutical and Biotechnology Conference (that was a mouthful, indeed!) threw up some interesting comments by some rather well known delegates.

Health on the Net:

I particularly enjoyed the one by William Burns, CEO, Roche - 'The internet will be to patients around the world what the satellite dish was to the fall of the Berlin Wall'

The R-word:

'There are actually more pressing things for pharma than the recession.... pharma is driven more by biology than economics.' - David Brennan, CEO, AstraZeneca

- oRiOn

Focus on NovoNordisk

NovoNordisk is the world leader in diabetes treatment - and although it has competition in this segment from Eli Lilly, it is widely acknowledged to provide patients a better alternative (controls on blood sugar levels and blood pressure, weight loss) than most of its rivals.

In these despondent times for global industry (including the pharma sector), NovoNordisk is a beacon of hope - and rightly so, for it is onto something BIG!

Scheduled for release in H1, 2009 in the US, UK and Germany, after it secured approval from the FDA and the European Medicines Agency (EMEA), Liraglutide is going to change the whole way diabetes is treated', according to Viggo Birch, NovoNordisk's UK MD. Why? Well, according to Birch, its an intelligent hormone drug which stimulates beta cell production when exposed to glucose intake and then signals the pancreas to produce insulin.

Quite different from the traditional modes of diabetes treatment - where lifestyle changes (diets, exercises) in conjunction with pills, and later insulin are the preferred treatment methods.

In anticipation of the launch, the company is increasing its US sales force significantly, from its existing headcount of 2000. Currently Novo covers 80% of US doctors prescribing injectibles for diabetes, and 75% of those prescribing tablets.

Its not like the company hasn't done its hard work in terms of clinical trials - 6,500 individuals were included, of which 4,200 received Liraglutide in more than 40 countries.

And now its the big bash!

There is a flurry of ads on job sites, both at its Copenhagen HQ and Princeton, NJ for brand and sales related positions - and its obvious the company is preparing for a big push ahead of a significant first blockbuster drug. A departure from the past, as NovoNordisk has always focused on holistic therapies - rather than getting into direct competition with the likes of Lilly in the GLP-1 (Glucagon-Like-Peptide-1) class of drugs.

Birch has moved to the UK and given up responsibility for the Nordic region - and has doubled the UK headcount to 150, such is the expectation ahead of the UK and German launch.

The cost of diabetes treatments account for 7 - 10% of global healthcare expenditure, and if secondary effects are included, (blindness, kidney failure, cardiovascular diseases) then this figure is much higher.

NovoNordisk has always remained focused on treating a chronic disease like diabetes through its Novomix suite of products - but it has never had a blockbuster drug, instead focusing on therapy. Whether Liraglutide turns out to be a cure for Type 2 diabetes (which is creating havoc with health budgets the world over) remains to be seen, but its definitely time for the company to enjoy its moment in the sun in 2009.

Japan is next on the global bandwagon, but for now, the spotlight's on the US and UK / Germany.

Watch this space for more news on NovoNordisk and Liraglutide, as the story unfolds.



- oRiOn

Further reading:

http://www.novonordisk.com/include/asp/exe_news_attachment.pdf?sAttachmentGUID=a5e5a0f6-97af-4e0d-baae-9f60e16513fc
http://www.nxtbook.com/nxtbooks/advanstaruk/pharmexeceurope1208/#/17/OnePage
http://www.investindenmark.dk/visNyhed.asp?artikelID=19522
http://www.novonordisk.com/diabetes/novomix_splash.asp