ddn Online

The Blog of Drug Discovery News

Leaders, layoffs and losses

It’s been an interesting month in the pharmaceutical industry, with a few of the top pharma’s leaders leaving, more pink slips piling up and stocks morphing in the face of all of the change.

On Nov. 30, Merck & Co. Inc. announced its appointment of President Kenneth Frazier, who as Merck’s former chief counsel was instrumental in helping the pharma overcome its Vioxx litigation, as its new CEO. Frazier will succeed current CEO Richard Clark, who will reach Merck’s mandatory retirement age next year. Clark will continue as chairman of the board. Although analysts are optimistic that Frazier will see Merck through its next big challenge—the expiration of the Singulair patent, which accounts for 11 percent of the company’s sales—and continue Clark’s work on investing in the next generation of blockbusters, the announcement prompted a 4 percent drop in Merck’s shares to $34.64.

Recently retired Pfizer CEO Jeffrey Kindler speaks at the Reuters Health Summit in New York

Days later came the news that Pfizer Inc. Chairman and CEO Jeffrey Kindler abruptly announced his resignation after four years of leadership at the company. Although Kindler said he needed to “recharge my batteries,” analysts have speculated that he was forced out by a board and investors who are unhappy with Pfizer’s languishing stock price, late-stage clinical failures and a strategy emphasizing repeated acquisitions to boost revenue and cut costs as a way to improve the bottom line. The appointment of Ian Reid, Pfizer’s head of global pharmaceuticals, as Kindler’s replacement has also raised analyst concerns about Pfizer’s long-term performance and leadership. With Pfizer’s shares down 9.6 percent over the last year of Kindler’s tenure, shares rebounded on the resignation news, gaining 20 cents to $16.92.

With the holidays upon us, and many analysts taking a look at the highlights of 2010, layoffs are also making headlines. Fierce Pharma recently unveiled its annual top 10 layoffs list, highlighting the 10 largest job cut announcements by company. Counting the year’s total pink slips at more than 50,000 jobs, the list begins with AstraZeneca, which let 8,550 employees go this year, and counts job losses in the thousands at Pfizer, GlaxoSmithKline, Roche, Bayer, Abbott Labs, sanofi-aventis, Takeda, Novartis and Bristol Myers-Squibb. Given how often these companies made the front page of ddn this year with their merger and acquisition activity, these cuts are no surprise, as all of these transactions inevitably mean consolidation of resources.

With new leadership, more modest operations and the pressure of patent expirations, all of this should make for a very interesting 2011 in Big Pharma. As the Yieldpig blog notes, “with the dicey situation in Europe, stubborn domestic unemployment, a housing market that’s bottoming at best, and the great unknown of interest rates, equity portfolios should probably continue to play defense. Big, cheap, pharmas with sick dividend yields should help.”


December 10, 2010 Posted by | Corporate | , , , , , , , , , , , , , , | Leave a comment

Oversaturation vs. tunnel vision

One of the things that drives me nuts when I go to the grocery story is heading down the aisles and seeing a slew of new products that seem to be designed solely to part me with my money and make less space for established items that I already like more than they do to enhance my life. Truly, I have to wonder if adding marshmallow bits to a cereal or making a chocolate version of a healthy oat-based staple of the breakfast table is really necessary. And cheeseburger flavored Doritos? Don’t get me started.

I admit that I sometimes feel the same way when I see multiple iterations of drugs, whether over-the-counter or prescription, or when I see large-scale research efforts that cover the same ground but with different budgets and different researchers.

Then I realize that it’s just that growing “grumpy old guy” persona that started to kick in just before I officially entered middle age. Yes, sometimes pharma companies do simply re-tool a product or create a knock-off version of something for the sole purpose of capturing market share and providing something that seems new but really isn’t.

But so many other times, products that seem similar (particularly when it’s a new chemical compound from the same company for the same target or a similar-acting one from a rival company) need to be pursued for the very reason that subtle differences can have big impacts in terms of efficacy, adverse reactions and off-target effects. I was reminded of that in writing a story yesterday for the web site on Amarin’s promising new omega-3-based triglyceride-lowering drug, which on the surface seems a lot like GSK’s Lovaza.

On the research side, I also got the reminder of how looks can be deceiving when I wrote two stories for the upcoming December issue of ddn that cover the 1000 Genomes Project and the PGP-1K, respectively. When you have two high-profile projects doing complete human genome sequencing with the magic number 1,000 involved, you start to ask questions like: “How is your project different from that one?”

But the fact is that they do have different focuses and different approaches, and because of that, they aren’t duplicated efforts that are redundantly spending money, but rather two projects doing work that will likely provide support to each other’s efforts in the long run, as well as each provide distinct and unique contributions to genomics.

Because, in the end, if there’s anything we’ve learned from decades of pharma and biotech breakthroughs, failures and other newsworthy outcomes, the human body and human diseases are an arena where we aren’t ever likely to have all the answers, and might be lucky to get even a handful of them, no matter how many similar or even duplicative efforts we have.

Too much money poured into certain areas, even important ones like cancer, can mean oversaturation and dilution of research dollars that might be needed on other disease areas. But too little diversity in the research and development sphere, and we can end up with tunnel vision…and look where that got us when we took our eyes off new antibiotic research and ended up with a whole lot of resistant pathogens and not enough ways to fight them.

November 30, 2010 Posted by | Corporate, Government, Labwork & Science | , , , , , | Leave a comment

For M&As right now, Glaxo seems a no-go

I know I reported on this in early September (right here), but apparently the news bears repeating—and elaboration—since the company in question is again being pretty blunt about its view of M&As right now:

GlaxoSmithKline doesn’t want to acquire Genzyme.

Either that, or GSK is engaging a stealthy distraction of such grace and magnitude that it would make a team of elite ninjas commit ritual suicide in jealous disgrace.

Glaxo, of course, has been noted as one of several companies contacted by Genzyme to determine its value as it fends off an $18.5 billion hostile takeover bid by sanofi-aventis. But speaking late last week to reporters in Cambridge, Mass., where Genzyme is based, Patrick Vallance, senior vice president of medicines discovery and development for GSK, along with other Glaxo executives, gave an overview of their drug discovery and development strategies, and they were pretty clear that large M&A deals aren’t really a focus right now.

Vallance described such big deals as often being destructive to R&D efforts, and instead Glaxo has been toying with some new business models in discovery and development to reduce its risk and maximize its successes, something I’ll touch upon in the coming days and weeks as I share information from GSK R&D Day last week in Cambridge, which I had the pleasure to attend along with other members of the mainstream, business and pharma media.

GSK is increasingly looking outward for new ideas and new compounds to fill its pipelines, but it doesn’t seem eager to want to just buy companies based on potential, and certainly not for huge sums, as Moncef Slaoui, the British pharma’s head of research and development, noted when he said in September that “An offer by GlaxoSmithKline for Genzyme does not make sense. It is too expensive.”

So, for those still holding out that GSK is simply waiting to pounce in from the shadows to duel with sanofi over Geznyme, you’d probably be better making a bet that Glaxo might make a partnership deal with the company one day. Because Vallance and Slaoui have both been pretty clear that GSK is willing to look for the best ideas outside the company, but it isn’t that fired up about spending a mint to bring them in-house unless they look like they’re already on the way to big payoffs.

November 21, 2010 Posted by | Corporate, M&A activity | , , , , | Leave a comment

One less suitor for Genzyme?

Well, it looks like GlaxoSmithKline may be removing itself from any potential bidding war over Genzyme Corp. based on Moncef Slaoui, the British pharma’s head of research and development, telling French newspaper Les Echos recently, “An offer by GlaxoSmithKline for Genzyme does not make sense. It is too expensive.”

The reason analysts have even been predicting a bidding war was because sanofi-aventis made public a non-binding offer Aug. 30 to buy Genzyme Corp. for about $18.5 billion in cash, with Genzyme refusing the offer less than a day later and sanofi-aventis hinting at possible hostile takeover action.

“If the best idea is to be found outside the company, it is better to conclude a partnership agreement.” Slaoui added in the interview with Les Echos. His statement is in line with GSK’s stated goal of looking to balance its R&D portfolio more or less evenly with drugs developed through in-house research along with outside partnerships. Also, while Genzyme has a foothold in niche disease areas, GSK, already has a presence in rare diseases through its partnership with JCR Pharmaceuticals.

According to coverage by Reuters, analysts are now saying it looks far less likely that any “white knight” would emerge to trigger a bidding war to either force sanofi to significantly its offer or give Genzyme a more desirable suitor.

Genzyme is considered attractive to sanofi partly because its pipeline includes promising drugs for treating high cholesterol but also because of treatments for other disorders that are in late development. Also, Genzyme already sells some lucrative drugs for rare genetic disorders, and sanofi, like so many pharmas, has been buying smaller companies or paying for rights to experimental drugs as generic competition to blockbuster drugs continues to heat up.

Dr. Brian Abrahams, an analyst with Oppenheimer Funds, has said that he thinks a better deal than the $18.5 billion one will be negotiated between sanofi and Genzyme, despite the former implying it is considering a hostile bid. Abrahams says the price could range between $72 and $74 per share, given historical biotech acquisition premiums and Genzyme’s products. At the moment, sanofi’s offer stands at $69 per share.

Genzyme has said that in unanimously rejecting the sanofi offer, its board of directors felt that they were “not prepared to engage in merger negotiations with [sanofi-aventis] based upon an opportunistic proposal with an unrealistic starting price that dramatically undervalues our company.”

For its part, sanofi has publicly expressed doubts over Genzyme’s performance under its chief executive, Henri Termeer, noting in particular manufacturing problems that have created challenges for the company bringing products to market.

As MarketWatch noted Sept. 5, “Genzyme’s stock plunged in early 2009 after the U.S. Food and Drug Administration found problems relating to microbiological monitoring at a manufacturing facility. The FDA’s scrutiny led to the company effectively losing control over one of its largest production facilities, in Allston, Mass., and contributed to the company cutting 2009 earnings expectations. The unwanted regulatory scrutiny has prompted the attention of some key shareholder activists who will be watching Sanofi’s moves carefully. Earlier this year billionaire activist investor Carl Icahn said he planned to nominate four directors to the Genzyme board, including himself. Genzyme also agreed to name Ralph Whitworth, head of Relational Investors to the board.”

The notion that GSK might have been interested in entering a bidding tug-of-war with sanofi-aventis wasn’t at all far-fetched, though—even if it does seem unlikely now. After all, as the Wall Street Journal reported in July, GSK made a “very casual approach” to Genzyme asking to be notified by the company’s officials if they considered selling to anyone.

September 7, 2010 Posted by | Corporate, Dealmakers, M&A activity | , , | Leave a comment

GSK out more than $2 billion in settlement

GlaxoSmithKline PLC recently took a $2.36 billion charge to settle most Avandia product liability cases and other litigation facing the company. The settlements include lawsuits regarding the diabetes drug Avandia (rosiglitazone) and liability and antitrust litigation over its drug Paxil (paroxetine). For Avandia, which a joint U.S. Food and Drug Administration (FDA) advisory committee voted should remain on the market with labeling or prescribing restrictions, a “substantial majority” of product liability cases has been resolved, the company says. The FDA also recently announced that it is investigating whether GSK failed to fully inform the agency about heart risks associated with Avandia. According to the FDA, GSK defended the drug’s safety to the agency and the public while debating internally about data and analyses pointing to increased cardiac risks. Later, after the drug was approved, GSK produced two separate sets of new data, finding that heart side effects jumped by 29 percent and 31 percent in Avandia patients, but did not disclose this data until May 2006, the FDA says.

September 5, 2010 Posted by | Corporate, Government | , , | Leave a comment