David's New Book

Thursday, April 12, 2012

Shrinking Pfizer is Good for Antibiotics

Logo of Pfizer Incorporated.Logo of Pfizer Incorporated. (Photo credit: Wikipedia)
Pfizer stock price over 10 years.Pfizer stock price over 10 years. (Photo credit: Wikipedia)

There has been more talk in the news lately regarding Pfizer’s plans to spin off various businesses.  I have discussed the general issues I will cover today in two previous blogs. The recent news that Pfizer, in addition to spinning off its nutritionals and animal health franchises, is considering selling off its generics business. Talk of this breakup was spurred by Jami Rubin’s report a couple of weeks ago based on a briefing of Goldman-Sachs by Pfizer.  Some analysts suggest that this plan could increase the value of Pfizer by over 50%. But all will depend on Pfizer’s ability to advance its pipeline to marketed products.  And that remains to be seen.

As I have noted in the past, another approach would be to break things down further.  As it stands, there is no added value of the now almost non-existent anti-infectives effort at Pfizer.  But there are still early compounds and expertise plus Pfizer still sells linezolid, tigecycline and even piperacillin-tazobactam even though the latter is now generically available as well. These sales probably add up to about $2B in annual revenue.  Pfizer generated $67B in revenue in 2011 – so antibiotics remain a drop in the old bucket. On the other hand, a spin-off of the antibiotics business including their preclinical and early clinical assets would probably be worth much more outside of Pfizer than it is within Pfizer. Even with all the generic intrusion that will occur (linezolid loses patent protection in 2015), there will still be plenty of revenue to drive a small company.  Funding resources for such a spin-off could include both private equity as well as venture capital. The same strategy may work for other businesses within Pfizer – who knows? 
I am sure that Pfizer is not the only large pharmaceutical company where such a strategy would make sense.  I can think of several other good candidates off the top of my head – and so can you! The availability of non-dilutive funding through NIAID, BARDA or the Innovative Medicines Initiative or other sources adds to the attractiveness of the antibiotic spin-off.
But for the future of antibiotics, it is clear to me that the sales of current Pfizer antibiotics could drive new R&D in a new and much smaller company to bring new, novel and desperately needed products to patients and their physicians. What could possibly be wrong with this picture? Why can’t Pfizer bring itself to do the right thing? Is it that the problem is too small to deserve their attention?
I leave these questions in your capable hands – I do not have the answers.
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