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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

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October 17, 2007

Biogen on the Block?

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Posted by Derek

Well, Carl Icahn has been buying large boatloads of Biogen stock over the last few months, and as those of you who follow the biotech industry are aware, he’s got the company putting itself on the block. That’s one of the normal sequels to an Icahn buying spree, and it looks like it’s going to work out well for him again (see Medimmune for another recent example).

Will it work out for Biogen, though? Looking over the potential buyers, it should also come as no surprise that the serious prospects make a pretty short list. Let’s see. . .huge, but with little presence in biologicals. Loaded with cash, but with serious pipeline problems and some nasty patent expirations coming on. Not averse to doing great big acquisitions to pump up their numbers. Gosh, who does that leave? Yep, Carl Icahn is playing marriage broker between Biogen and Pfizer.

There are also rumors of Pfizer buying Genzyme, for the exact same reasons. (That deal would at least have the desirable side effect of not further enriching Carl Ichan). If Amgen were doing better, we’d be hearing about Pfizer buying them, too, no doubt, but for now takeover rumors are one of the few things they probably don’t have to worry about. (Although you can make a case that they're the value play in the market. . .)

Does a Pfizer deal make sense? Well, they apparently considered a run at Biogen a few years ago, but backed down. And now Biogen is a lot more expensive, so you’d think that would answer the question. But you have to remember that Pfizer’s more desperate than it was back then, too. The disastrous loss of what could have been the biggest drug ever, the CETP inhibitor torcetrapib, changed things most unpleasantly (witness the closure of the Ann Arbor research site). And the market failure of the expensively developed inhaled insulin Exubera isn’t helping, either.

Oh, I wouldn’t want to run Pfizer, even if you paid me. . .well, what people get paid to run Pfizer. Honestly, it wouldn’t surprise me to see them up and buy Biogen, even if they are already in the multiple sclerosis market. They have a bunch of people who know how to manage takeovers, just like the Mongols had, and they could use the revenue, which will be pretty safe until the FDA gets its act together on biogenerics. Pfizer’s used to buying wasting assets, since that’s what you get when you buy a drug company for its big selling productss and ditch most everything else, and biologicals are wasting more slowly than small molecules do. God knows the investment bankers are motivated to see something like this go through at these prices.

But it would be a shame for Biogen. It was a shame when it happened to Warner-Lambert, and Pharmacia-Upjohn, and Affymax, and Sugen. (Update - as pointed out in the comments, Sugen was purchased by P-U before the Pfizer deal.) A lot of people would lose their jobs, and a lot of good research would get crippled or lost in the clouds of dust. And Pfizer would hold itself together until the time came to feed again.

Comments (16) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Sleepless in SSF on October 17, 2007 11:30 PM writes...

Not to pick nits, but Pfizer didn't buy Sugen, did they? I thought Pharmacia bought Sugen, then Pfizer shut the whole thing down when they bought Pharmacia.

Love the comment about feeding again -- PFE does seem like something darkly insatiable from a horror movie.

But you're right, I wouldn't want to be in Kindler's shoes, even if they paid me better than him.

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2. ppp on October 18, 2007 2:20 AM writes...

Yes, Pharmacia&Upjohn bought Sugen in 1999 and PFE bought PHA in 2002. The reference to the mongols is really appropriate...

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3. Anonymous BMS Researcher on October 18, 2007 6:00 AM writes...


A recent trend at BMS has been people coming to us from Pfizer (as opposed to summer 2006 when folks were running the other way following the Plavix debacle).

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4. Ex-Pharmacia on October 18, 2007 7:50 AM writes...

When Pfizer came in with their "we are #1 attiude", it was a cold day from for the majority of Pharmacia folks. My best wishes are for the Biogen team.

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5. burt on October 18, 2007 8:13 AM writes...

"When Pfizer came in with their "we are #1 attiude", it was a cold day from for the majority of Pharmacia folks. My best wishes are for the Biogen team."

I second that. Fred made out well, though. Funny how that works.

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6. anon on October 18, 2007 8:20 AM writes...

Yeah, but were are they going to get the money? Do you think that they'd be able to borrow it in this climate?

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7. Al on October 18, 2007 8:49 AM writes...

If they can't raise the money they could just offer PFE shares instead.

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8. Tyrosine on October 18, 2007 9:14 AM writes...

It's well known (Check the latest financial statement) that Pfizer has $28 billion in cash. Sounds like a convenient number.

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9. Green Koala on October 18, 2007 11:58 AM writes...

"They have a bunch of people who know how to manage takeovers, just like the Mongols had..."

Now that's funny. But, sadly, apppropriate.

GK

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10. GC on October 18, 2007 7:09 PM writes...

Are there trade rags that follow this stuff, or are you people just watching individual stocks and the general financial press?

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11. Anonymous BMS Researcher on October 18, 2007 8:53 PM writes...

Google "pfired shirt" and see what comes up...

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12. The Pharmacoepidemiologist on October 19, 2007 1:20 AM writes...

Hmmm...the last big hit Pfizer developed on its own was Viagra way back in the mid-1990s. Since then, not much. So it implodes. Big deal. Is there really much lost for society? No. If you think about it, PFE closed Ann Arbor, its most productive site. Most of its managers have been lackluster who have no clue what to do. Why even waste the disk space on PFE. BIIB at least has been productive. On the other hand, if you want to discuss PDLI, there's a company which is realy @(#&ed up.

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13. anon on October 19, 2007 3:39 AM writes...

re, where's the money coming from? Pfizer has USD28 billion cash.

Thanks.

Another point ... from totally medicinal, there's this link, which provides:-

Top 5 layoffs of 2007.

1. Pfizer - 10,000 jobs

2. AstraZeneca - 7,600 jobs

3. Bayer - 6,100 jobs

4. Johnson & Johnson - 5,000 jobs

5. Amgen - 2,600 jobs.

Question is ... what is the overall rate of job creation in the pharma industry????

Anyone know?

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14. befuddled on October 19, 2007 9:18 AM writes...

Derek,

This post is shockingly un-capitalistic for you! Surely the market (and it's representative Icahn) knows best!

But it looks like you're right and that Biogen and all it's non-clinical research will go down the same tubes as others.

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15. Still Scared of Dinosaurs on October 19, 2007 11:33 AM writes...

BIIB has a very strong history in biologics manufacturing, both in building the plants and running them. I would go so far as to say that's the real strength of the company. Therefore an aquisition would set the stage for other buyouts, especially of earlier stage companies with promising candidates but little commercial infrastructure.

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16. George Laszlo on October 19, 2007 5:18 PM writes...

I'm guessing that Pfizer is not going to buy Biogen or any other expensive company in the near future. Wall Street would not be kind. Rather, expect more internal therapeutic area R&D autonomy and a focus on performance-based product investments, small biotech buys and expansion of internal biotech capabilities.
In reference to the Exubera debacle, here is my read on that situation: http://laszloletter.typepad.com/the_laszlo_letter/2007/10/pfizer-irration.html

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