Pfizer and Antibiotics - Less is More

Here we go again.  Pfizer and Geno Germano hit the news again with the announcement that they were combining their four business units, oncology, primary care, specialty products and established products into two business units. The precise organization of this was not clear from the report, but what seems clear is that the analysts think that this presages a split of the pharmaceuticals business from the generics business.  According to their thinking, this could even presage further spin outs from Pfizer.  This follows the line of thought that Pfizer would be more valuable as multiple companies rather than as a single behemoth.  I (as a financially naïve observer) am in complete agreement with this logic. 

Apparently, the generics business will generate about $17B and the pharma business about $36 B in sales in 2013.  The split could occur in 2015 via a spin off or sale of the generics business.

My interest in this is that this represents an important opportunity for Pfizer to reconsider their hasty and ill-advised exit from antibiotic R&D.  They still have the possibility to spin out their existing antibiotics business (seems less and less likely).  But as they consider their new structure and their future bottom line, the antibiotics business would seem a perfect fit. 

On the regulatory and pricing front for antibiotics, things are changing faster than many expected.  On the regulatory front, the Pew Charitable Trust will be reviewing the concept of an accelerated development pathway for needed new antibiotics as proposed by IDSA- called LPAD (Limited Population Antibacterial Development) the end of this month.  The FDA is holding public hearings on this concept on February 4-5.  This approach will provide a pathway for approval of antibiotics active against highly resistant pathogens via small, focused trials with a rapid approval process, but a restrictive label.  This, by definition, will mean a high price (See Lew Barret’s blog on this). But wait!!! Is this oncology or antibiotics?

Europe has already embraced such an approach.  Even the FDA signaled that a limited label is OK after the telavancin advisory committee last month.  Questions remain around what kind of trials would provide the appropriate value to payers to support an oncology-like pricing strategy.  But antibiotics actually cure disease.  If we can take patients with highly resistant infections from the brink of despair to reasonable hope with new, effective antibiotics – what is that worth?

When you combine this with the power of sales growth of antibiotics (including branded products) in emerging markets, antibiotics start to look like the next oncology.  If you put all this on top of a smaller, leaner company with less than half its prior revenues (as the new Pfizer might be), antibiotics should be looking pretty good.  Of course, in the case of Pfizer, they would have to rebuild after getting rid of most of their internal expertise – but Sanofi is doing that.  Why not Pfizer? And if not Pfizer – what about Roche, Lilly, Abbott (also splitting), BMS and the rest of you?  Lets get going!  Lets try and get ahead of the curve instead of staying forever behind it.

I have written a note to Geno Germano of Pfizer (whom I remember from my Wyeth days) – but I haven’t heard back yet . . . .