PFE: Buybacks No, Acquire Ph2 Drugs Yes
Jan 29, 2020 16:42:29 GMT
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Post by icemandios on Jan 29, 2020 16:42:29 GMT
January 29, 2020 07:43 AM ESTUpdated 09:13 AM
John Carroll
R&D
Putting buybacks on hold, Pfizer’s CEO is plotting a string of important PhII deals in the year ahead. You’ve been alerted
Pfizer shares took a beating on Tuesday, dropping 5% as investors found out that the pharma giant fell short on revenue projections and wouldn’t be riding to the rescue with their usual campaign of buybacks.
So what gives? Buybacks have been part of the culture at the company for years.
Pfizer CEO Albert Bourla, who’s been steering the company to a leaner, meaner biopharma outfit shorn of its consumer ops, is taking that buyback money — in part — and handing it to the BD team to do a string of mid-stage development deals as they line up a string of shots on goal.
The strategy here is centered on volume. Bourla wants his R&D group to go after a string of the ever-popular bolt-on deals that gives them a chance to put potential blockbusters in registrational studies. And he expects a healthy number of these to be blockbusters.
The focus now is on the pipeline, Bourla explained to analysts in their Q4 call, which will be augmented “with mid stages R&D programs through targeted bolt on business development opportunities. As I referenced before, we should continue seeing these type of activities in the first and second half of this year.”
As for the budget, Bourla said he’s spending more on R&D, but evidently plans to shave that some in 2020. According to the quarterly numbers, Pfizer registered $8.6 billion in R&D expenses last year, up from $8 billion. In the year ahead, that should be $8.1 billion to $8.5 billion, Pfizer projected. The money added last year was being spent on more clinical studies, he emphasized, not on infrastructure. That leaves open how R&D chief Mikael Dolsten will cut costs next year if they’re bringing in more drugs — at a company known for unceremoniously amputating any underperforming units.
Here’s Bourla on the call:
Pfizer has had a string of successes over the last couple of years, marking a major improvement in what had been a lackluster research operation. And if the company can stay on the industry average of a 50% success rate in Phase III, then the CEO can deliver on his promise of a 6% CAGR.
Bourla again:
Mikael Dolsten
Along those lines, Mikael Dolsten flagged more upcoming pivotal data on the atopic dermatitis drug abrocitinib, where they’re looking for evidence of faster relief than Dupixent provides.
“Historical data suggests that we should be very optimistic about abrocitinib outperforming biologicals, such as Dupixent on itch relief at earlier time points and provide the potential benefit of early onset of relief for disease,” he said on the call.
Author
John Carroll
EDITOR & FOUNDER
John Carroll
R&D
Putting buybacks on hold, Pfizer’s CEO is plotting a string of important PhII deals in the year ahead. You’ve been alerted
Pfizer shares took a beating on Tuesday, dropping 5% as investors found out that the pharma giant fell short on revenue projections and wouldn’t be riding to the rescue with their usual campaign of buybacks.
So what gives? Buybacks have been part of the culture at the company for years.
Pfizer CEO Albert Bourla, who’s been steering the company to a leaner, meaner biopharma outfit shorn of its consumer ops, is taking that buyback money — in part — and handing it to the BD team to do a string of mid-stage development deals as they line up a string of shots on goal.
The strategy here is centered on volume. Bourla wants his R&D group to go after a string of the ever-popular bolt-on deals that gives them a chance to put potential blockbusters in registrational studies. And he expects a healthy number of these to be blockbusters.
The focus now is on the pipeline, Bourla explained to analysts in their Q4 call, which will be augmented “with mid stages R&D programs through targeted bolt on business development opportunities. As I referenced before, we should continue seeing these type of activities in the first and second half of this year.”
As for the budget, Bourla said he’s spending more on R&D, but evidently plans to shave that some in 2020. According to the quarterly numbers, Pfizer registered $8.6 billion in R&D expenses last year, up from $8 billion. In the year ahead, that should be $8.1 billion to $8.5 billion, Pfizer projected. The money added last year was being spent on more clinical studies, he emphasized, not on infrastructure. That leaves open how R&D chief Mikael Dolsten will cut costs next year if they’re bringing in more drugs — at a company known for unceremoniously amputating any underperforming units.
Here’s Bourla on the call:
Right now we are increasing R&D investments. But we are increasing R&D investments only for programs only for projects, we are not increasing infrastructure, not increasing the research centers. At large we maintain a very strong presence there and we keep that very strong. But what is driving the increase R&D is more Phase III or Phase II studies, is very clear.
As regards the M&A. Yes, the M&A is a very important part of our strategy. And as I just alluded before, this is why also we are not diluting our firepower with stock purchases right now. Because we do believe that we can create significant value with the right strategic moves.
Now, we never say never to anything, but strategically we’ve have made very clear that we are not interesting for a big M&A that will have cost synergies as value driver. Because first of all that will be like diluted in our top line growth. I don’t think there are many companies that they can have this type of growth trajectory that we have the next few years.
Secondly it could be destructive. Because having a big M&A means that the thousands of people will have to work on integrations rather than supporting all these products that we just saw that they’re growing 20s and 30s. And also all this pipeline that is coming up. So this – we never say never but this is not our strategy.
Our strategy for M&A it is to be able to have Phase II, Phase III programs priority Phase II Phase III, which could become potential medicines in the period ’25, ’26, ’27, ’28 so that we can augment our internal pipeline and be able to maintain the 6% growth for the long term, actually, for the very, very long term because it’s right now five years I would say it’s so long term.
As regards the M&A. Yes, the M&A is a very important part of our strategy. And as I just alluded before, this is why also we are not diluting our firepower with stock purchases right now. Because we do believe that we can create significant value with the right strategic moves.
Now, we never say never to anything, but strategically we’ve have made very clear that we are not interesting for a big M&A that will have cost synergies as value driver. Because first of all that will be like diluted in our top line growth. I don’t think there are many companies that they can have this type of growth trajectory that we have the next few years.
Secondly it could be destructive. Because having a big M&A means that the thousands of people will have to work on integrations rather than supporting all these products that we just saw that they’re growing 20s and 30s. And also all this pipeline that is coming up. So this – we never say never but this is not our strategy.
Our strategy for M&A it is to be able to have Phase II, Phase III programs priority Phase II Phase III, which could become potential medicines in the period ’25, ’26, ’27, ’28 so that we can augment our internal pipeline and be able to maintain the 6% growth for the long term, actually, for the very, very long term because it’s right now five years I would say it’s so long term.
Pfizer has had a string of successes over the last couple of years, marking a major improvement in what had been a lackluster research operation. And if the company can stay on the industry average of a 50% success rate in Phase III, then the CEO can deliver on his promise of a 6% CAGR.
Bourla again:
Now, if all the Phase III goals end the right way and they are all successful, it’s not going to be 6%, it is going to be double this: 12%, 13%, 14%, 15%.
Now, if everything fails, it also will not be 6%, it will be very low. But if statistics works and the studies, let’s say at 50% more or less are successful. That means that we will achieve 6%. That’s why I want to emphasize that there is no binary event in our projections. Binary event would be if that 6% was dependent or two or three major regards that if they could go one way or another could affect. Right now they are dependent on 15, 16, 17 blockbusters. And then many others but they’re much small.
Now, if everything fails, it also will not be 6%, it will be very low. But if statistics works and the studies, let’s say at 50% more or less are successful. That means that we will achieve 6%. That’s why I want to emphasize that there is no binary event in our projections. Binary event would be if that 6% was dependent or two or three major regards that if they could go one way or another could affect. Right now they are dependent on 15, 16, 17 blockbusters. And then many others but they’re much small.
All that means that the BD team must be very busy right now identifying and bidding on Phase II assets while R&D pursues its top prospects.
Along those lines, Mikael Dolsten flagged more upcoming pivotal data on the atopic dermatitis drug abrocitinib, where they’re looking for evidence of faster relief than Dupixent provides.
“Historical data suggests that we should be very optimistic about abrocitinib outperforming biologicals, such as Dupixent on itch relief at earlier time points and provide the potential benefit of early onset of relief for disease,” he said on the call.
Pfizer execs also planned to add 1 new gene therapy to the pipeline every year, for a string of years to come, as they build up that end of the business. And on one other note, the company heralded a filing for tanezumab, an NGF pain drug that’s been in and out of the clinic for years. Pfizer execs are bullish that the drug can be big, offering a non-opioid approach to pain. The trouble is that statistically, it’s clear that more patients are blowing their joints out on this drug — the same issue that caused the whole field to be put on pause for a while. And that could cause a big double-take at the FDA and EMA.
John Carroll
EDITOR & FOUNDER