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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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« Is Obesity An Infectious Disease? | Main | AstraZeneca Shakeup »

January 15, 2013

A Big Change at Pfizer? Or Just a Rumor?

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Posted by Derek

What's going on with Pfizer? I have a few questions, and a rumor that I've heard and would like to float.

There's been all sorts of speculation about what Ian Read is going to do with the company. He's been dropping hints for months about splitting it up. And with Abbott recently doing just that, it's no surprise that there are people on Wall Street making the case for Pfizer following along (after all, think of the fees and commissions to be earned). As of this morning, there's fresh talk of all this, since Pfizer seems to be reorganizing its constituent parts, in a way that makes you think it could all break in two.

Now for the rumor, which more directly concerns the company's med-chem research. As everyone in the industry knows, Pfizer's moving towards an outsource-all-the-early-work model. "Drug designers" will occupy that new building I see going up here in Cambridge, and they will cogitate fiercely, pick up their phones, rattle their keyboards, turn on the video-conferencing software, and tell a bunch of chemists twelve time zones away what to make. Repeat as necessary.

But I've been hearing something else recently, even beyond this. Rumor has it that the company is contemplating getting out of all their in-house small molecule drug discovery, and putting most of the focus on biologics and the like. I have not verified this, but that's what I've heard. Now, I didn't know what to think when this came up, but perhaps it has something to do with the possibility of the company splitting up? The small-molecule stuff gets spun out on its own, as a different entity with a different name? Or would Pfizer split between pharma (in one company) and everything else (consumer, generics, etc.) in the other, in which case - if the story I've heard is true - then the small molecule stuff doesn't spin out, it just goes away.

I'd be interested in hearing thoughts on this - its plausibility, its likelihood, and whether anyone else has heard anything similar. I'm not sure I buy into the idea myself, but (as usual) crazier things have happened.

Comments (44) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Anon on January 15, 2013 9:40 AM writes...

Pfizer and split? That would almost be like Pfizer not buying up and destroying other companies.

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2. Matthew Herper on January 15, 2013 9:44 AM writes...

I guess it might make sense from the perspective that small molecules have been far less likely to succeed in the clinic than biologics, and biologics have fewer IP issues to boot. But I've heard that success rates seem to be converging when you exclude things like insulin.

It makes very little sense given that Pfizer has had a lot more R&D success with small molecules (almost all of them TKIs) then with biologics. I would more expect them to get out of non-specialty, and perhaps that might involved narrowing their expertise in chemistry.

Could they not be eliminating, but instead largely eliminating small molecule? Outside of TKIs, have they had any success in small molecule discovery?

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3. Curious Wavefunction on January 15, 2013 9:51 AM writes...

So here's one thing I still don't understand about throwing your lot in with biologics. They are expensive, need to be injected and are largely only good for extracellular targets. These factors are not going to change anytime soon. Why would someone still pin all their hopes on biologics?

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4. Matthew Herper on January 15, 2013 9:55 AM writes...

@3 -- because, Curious, their success rates seem to be dramatically better. If you were starting a new company, it would make sense.

But small molecules can still be huge. Look at Merck. For all the failures they've had in small molecule, they've also had Januvia, which is huge, and Isentress, which is big.

What doesn't make sense to me about PFE killing small molecule is their success in TKIs. But if we exclude TKIs, how much has their small molecule discovery produced? That's kind of the question. At some point, it's not just bad luck.

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5. blixiv on January 15, 2013 9:55 AM writes...

That would be ironic since they just got a first-in-class small molecule approved for RA. Then again, this is Pfizer.

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6. See Arr Oh on January 15, 2013 10:07 AM writes...

Derek - If they're going to abandon small molecules, don't tell all the folks who just got hired! Word of mouth suggests they've added 15-20 new med chemists to the Groton site in the last 6 months...

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7. David Formerly Known as a Chemist on January 15, 2013 10:23 AM writes...

If Pfizer "...is contemplating getting out of all their in-house small molecule drug discovery, and putting most of the focus on biologics...", that doesn't necessarily mean they're getting out of the small molecule business. They may decide to focus all their in-house research on biologics and acquire all their small molecule products from small companies and academic centers. That makes much more sense than exiting small molecules altogether. I'd be surprised if this happens, but Pfizer has surprised me mightily in the past.

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8. Alex W. on January 15, 2013 10:34 AM writes...

Isn't this the same route that the US computer industry went down in the 2000s? Outsource all of the "boring work" to other companies, training them to outcompete you and paying them for it to boot.

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9. NoDrugsNoJobs on January 15, 2013 10:49 AM writes...

The biggest advanatge to biologics and it is a huge advantage is that even with the recent biologics legislation, it is much harder to get a generic to market and with 12 years of guaranteed data exclusivity it is much safer for the innovator. Yes, they cost more, have to be injected and will not solve many of our problems but the dimwits in Washington DC believe that their use should be encouraged over small molecules or at least that is what their own legislation accomplishes. If they simply gave small molecules a similar advanatge (12 years of data exclusivity) we could rescue many abandoned but promising small molecules from the ash heap of expired patent life. It is close to a tragedy except for the stupidity which makes it sort of a comedy too - Except I still cannot bring myself to laugh about it.

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10. blogaceutics on January 15, 2013 10:55 AM writes...

In my opinion the credit of TKI should be given to Sugen, adquired in 1999 by Pharmacia & Upjohn, subsequently acquired by Pfizer about ten years ago.

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11. eugene on January 15, 2013 11:22 AM writes...

Well, I know the Pfizer CEO personally, and he told me over a few beers yesterday, that he's thinking of dumping small molecules because of all the mean comments that the chemists left on the 'gold dust' thread. Turns out he's a reader of 'In the Pipeline' as well.

He also wanted me to wish hello to the rest of the reader crowd, but I wouldn't think too much of it because he was drunk by that time.

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12. CMCguy on January 15, 2013 11:24 AM writes...

#2 MH the "superiority" of biologics over small molecules has been argued for decades where anticpated Pharma industry would be dominated by biologics (and has not happened, yet is the question here?). I do not recall any indisputable evidence that they really succeed better in clinical trials even though scientifically in principle is the expectation of better MOA with probable of less side AE (always part of the story/hype) and even though many examples of new bio-drugs the past decades have seen great number of failures, most before even reaching advanced trials. I can not overlook the dismal (and worsening?) rate for sm development, which perhaps has been misdirected by frequent paradigm shifts, but really is apples and oranges. If Pfizer want to now change the Fruit basket to biologics I wonder if a few of the Wyeth people survived the purges since believe they had more experience in this field.

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13. just a cork bobbing on the big blue ocean on January 15, 2013 11:31 AM writes...

Well, it's been about two years since the last reorg, so I guess we're due...

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14. PPedroso on January 15, 2013 11:33 AM writes...

Let us wait for some comments on LaMatinna's blog...

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15. Shanedorf on January 15, 2013 11:59 AM writes...

@9 likely has it correct - its the growing generic competition from India/China and the recent compulsory licenses from India that has Pfizer looking hard at biologics over small molecules.
Small molecules are too easy to make cheaply in comparison to the biologics. The profit protection they used to get via IP / patents will now become profit protection via the immense investment in manufacturing costs and know-how.

We might also have to acknowledge the coming wave in stem cells/ cellular therapies and the ability to manipulate those cells fits better under the biologics umbrella.

Whether its a good idea or not is certainly open to debate, but after attending the Biotech Showcase in SF as part of the JP Morgan event, its clear that the next wave ( Tsunami) of cell-based therapies is on the horizon

Small molecules will continue to have a significant role in medicine, but the generics will eventually chase Big Pharma out of that arena .
Its all part of the transition from blockbuster small molecules to personalized medicine. There is simply more money and certainty available in biologics going forward and the use of companion diagnostics will add to both the profitability and exclusivity of the next wave of therapeutics.

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16. modality independent on January 15, 2013 12:06 PM writes...

The clinical success rate for large molecules most definitely is higher than that for small molecules:

http://www.kmrgroup.com/PressReleases/2012_02_28%20KMR%20PBF%20Success%20Rates%20by%20Molecule%20Size%20Press%20Release.pdf

And at least some of the highest market potential large molecule drugs are yet to be approved. Check the BMS and, better still, the Merck anti-PD-1 story for one very important example.

That said, dropping small molecules makes absolutely no sense. Do it better rather than not doing it at all.

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17. Anonymous on January 15, 2013 12:06 PM writes...

Inside sources in discovery and manufacturing say no word yet on reorganization yet (aside from Zoetis). We will see what happens in the coming months!

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18. Anonymous on January 15, 2013 12:06 PM writes...

Inside sources in discovery and manufacturing say no word yet on reorganization (aside from Zoetis). We will see what happens in the coming months!

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19. petros on January 15, 2013 12:44 PM writes...

But better success rates may not be sufficient. Look how long Amgen went without a new biological after PEGylating its original drugs. And it got into small molecules

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20. exchemist on January 15, 2013 2:29 PM writes...

@7, "focus all their in-house research on biologics and acquire all their small molecule products from small companies and academic centers. That makes much more sense than exiting small molecules altogether."

IMHO getting out of small molecules altogether would be cheaper and not much less productive than trying to develop dodgy leads bought in from small companies and academics. If Pfizer doesn't do any drug discovery itself, how is it supposed to be able to pick the winners from all the dross? Also, I don't think scientists in small companies or still at university will be better at small molecule drug discovery than the ones currently at Pfizer (unless, of course, they're prevented from doing their jobs by being reorganized constantly...)

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21. David Formerly Known as a Chemist on January 15, 2013 3:44 PM writes...

@20, I'm not suggesting it's a good idea or likely to happen, just saying it's more likely than getting out of small molecules completely.

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22. Anonymous on January 15, 2013 5:58 PM writes...

you know the old combichem method; pool, split, pool, split......and what happened to that strategy?!
Pfizer first pooled and now it is splitting time! and next they will start pooling again

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23. hibob on January 15, 2013 7:26 PM writes...

#3: since they are already large injectables adding a targeting moiety(peptide or Fab) is always an option and that moiety can include cellular uptake and BBB crossing activity (rabies RVG) as well. Some consultants actually push for injectable formulations since Dr. administered medications are covered by Medicare/Medicaid.

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24. hibob on January 15, 2013 7:27 PM writes...

#3: since they are already large injectables adding a targeting moiety(peptide or Fab) is always an option and that moiety can include cellular uptake and BBB crossing activity (rabies RVG) as well. Some consultants actually push for injectable formulations since Dr. administered medications are covered by Medicare/Medicaid.

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25. An. on January 15, 2013 7:39 PM writes...

ROFLMAO!!!! Best rumor I have heard in a while.

I do feel for my med chem ex-colleagues at Pfizer. I unexpectedly made out really well when I got laid off in the last reorg. It was good timing for me even though it was not aparent when it happened. I hope there are oportunities out there for my Groton people.

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26. SameOldStory on January 15, 2013 8:01 PM writes...

Same old song and dance, gotta reorg to distract everyone and buy a few more years of exorbitant "compensation". Bankers & consultants always willing to advise and charge huge fees-would they be the same ones that told Pfizer management it had to grow by acquisition?

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27. Anonymous on January 15, 2013 10:37 PM writes...

@6

You are right. They are trying to bring in new blood in chem...haha...OK just hire all the Roche nutley chem surfers and we'll see where you're at in 2 yrs. L0L !! Buyer beware....

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28. Anonymous on January 15, 2013 10:37 PM writes...

@6

You are right. They are trying to bring in new blood in chem...haha...OK just hire all the Roche nutley chem surfers and we'll see where you're at in 2 yrs. L0L !! Buyer beware....

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29. WB on January 16, 2013 12:07 AM writes...

They can call their spinoff Pfiffie. ;-)

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30. MDACC Student on January 16, 2013 12:35 AM writes...

Buy up companies, rearrange, and split...sound like an investment bank re-packaging bad mortgages...
If this is needed to stay "profitable" I think most investors would stay away.

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31. Ed on January 16, 2013 3:29 AM writes...

#10 - Pfizer did invent Tarceva although they were required to licence it out......just sayin'!

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32. Ed on January 16, 2013 3:53 AM writes...

#10 - Pfizer did invent Tarceva although they were required to licence it out......just sayin'!

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33. Anon on January 16, 2013 9:09 AM writes...

#31/32 - Actually Tarceva was invented by a small pharma company in NY - OSI Pharmaceuticals (they are now owned by Astrellas I believe).

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34. dtx on January 16, 2013 9:18 AM writes...

The link posted by modality suggests a higher success rate for large molecules in the clinic, but it would good to see more substantial information.

The most complete review I've seen was in a Wall St. J. article 5/20/2004. It discussed a study by Ernst & Young that concluded biotech was the most money losing industry in the history of the US.

From 1990 to 2003, the cummulative profit/loss of publicly traded biotechs was a loss of $41 billion. (To compare, the 2nd most money losing industry was airlines, who collectively lose only $5 bil since 1947.)

In addition, the study found that the rate of loss in biotech hadn't declined in most recent years of the study. 12 of the 50 largest biotechs in 2003 lost money. (compare this to "small molecule" pharma - profit decline is common, but losses are rare).

Note that the situation was actually much worse than the $41 bil loss because it didn't include the multitude of biotechs that folded before they went public.

It would be nice to see an update to this. However, there haven't been dramatic changes since 2004 other than that many small molecule patents have expired and as a result, biologics have moved up to become the "best selling drugs."

The WSJ concluded that the biotech industry was funded by "apparently boundless optimism of investors."

An aside: Biosimilars remain a very small source of revenue. Last year at a conference, one speaker said total worldwide biosimilar revenues were $300 mil whereas another said $600 mil. Either way, the revenues are tiny.

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35. sgcox on January 16, 2013 10:28 AM writes...

#33
From Wiki page of OSI:
"Tarceva was discovered by Pfizer as CP-358774 (Moyer et al. Cancer Research, 1997, 57:4838), renamed OSI-774 when Pfizer was required to divest the compound in order to complete the buyout of Warner lambert/Parke-Davis and subsequently developed by OSI in conjunction with Genentech."

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36. respisci on January 16, 2013 10:40 AM writes...

@#12 CMC guy. The finance team probably took a look at the drugs that had highest worldwide sales in 2012: Humira, Enbrel, Remicade, Rituxan, Lantus, Herceptin, Avastin....all biologics.

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37. Sisyphus on January 16, 2013 9:57 PM writes...

Just wait until Barry Soetoro's ACA beancounters run their cost/benefit analysis of biologicals and see that the costs are way too great for the benefits gained. Barry will then nationalize the biologicals market and your highest worldwide sales $$ will evaporate faster than Govt grants at Solyndra.

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38. Anonymous on January 16, 2013 11:24 PM writes...

@ #34

Your post is error-ridden to the point of barely merriting a response.

You exclusively site references dating to 2004 or earlier. Last I checked, it was 2013 or nearly a decade since your largely irrelevant references were published.

Moreover, your primary reference in the form of the '04 WSJ article does not discriminate between large and small molecules when analyzing "biotech" ROI.

The reality is that biologics currently offer investors a positive average NPV in contrast to conventional small-molecule drugs which currently offer negative returns. Additionally, the majority of top-steeling drugs are now biologics.

Again, the best strategy, IMO, is not to halt small-molecule discovery, but rather to strive to do it better.

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39. modality independent on January 16, 2013 11:26 PM writes...

@ #34

Your post is error-ridden to the point of barely merriting a response.

You exclusively site references dating to 2004 or earlier. Last I checked, it was 2013 or nearly a decade since your largely irrelevant references were published.

Moreover, your primary reference in the form of the '04 WSJ article does not discriminate between large and small molecules when analyzing "biotech" ROI.

The reality is that biologics currently offer investors a positive average NPV in contrast to conventional small-molecule drugs which currently offer negative returns. Additionally, the majority of top-steeling drugs are now biologics.

Again, the best strategy, IMO, is not to halt small-molecule discovery, but rather to strive to do it better while also developing biologics and vaccines, if possible.

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40. Lyle Langley on January 17, 2013 8:44 AM writes...

@39,
"Again, the best strategy, IMO, is not to halt small-molecule discovery, but rather to strive to do it better while also developing biologics and vaccines, if possible."

There's the rub. Nobody know how to "do it better". MBA's, medicinal chemists, biologists, nobody. Everyone has been "striving" for the past 10 years with no luck.

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41. modality independent on January 17, 2013 11:04 AM writes...

@ 40

Agreed. I don't claim to know how to 'do it better,' but do believe that unprecedented industry success in the 90s lead to hubris (shots-on-goal model, mega-mergers, etc.) during the lost decade of the aughts. Let's hope that a focus on quality clinical candidates leads to a turnaround despite increasing payer pressure and other macro issues.

Freudian typo (iPad auto correct) error in previous post (selling morphed to "steeling").

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42. dtx on January 17, 2013 10:14 PM writes...

The numbers & quotes I cited all came from the WSJ article, which was based on a study by Ernst & Young. Ernst had no reason to shade the numbers, nor did the WSJ (they weren't trying to get folks to invest).

The article was focused on companies that made large molecules. (Biotech was the common term at the time.) It emphasized that the last year of the study, i.e., 2003 had a net profit/loss of negative $3.2 billion.

Obviously, it's possible after 2003, the industry changed from the most money losing industry ever to a highly profitable one (it would be great to see the analysis).

The article is also relevant because the level of hype was very high then as well (and hence, the WSJ titled it "Dose of Reality -- Biotech's Dismal Bottom Line: More Than $40 Billion in Losses; As Scientists Search for Cures, They Gobble Investor Cash; A Handful Hit the Jackpot; 'The Ultimate Roulette Game'")

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43. modality independent on January 18, 2013 5:57 PM writes...

dtx,

I accessed the WSJ article you site from their archives. Although it highlights large molecule heavyweights Amgen and Genentech, it lumps small-molecule-only entrants like La Jolla Pharmaceuticals together with everything else under the "biotech" label.

Moreover, the premise of this dated article was rendered false in 2009 as covered prominently at the time (google "biotech industry turns profitable" for many supporting references).

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44. PorkPieHat on February 26, 2013 8:24 PM writes...

The same company that destroyed so many living breathing corporations in its sector starts a walk down a path of self-immolation, and this is a surprise?

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