Prospecting for next goldmine

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Much has been made of Pfizer's penchant for acquiring other pharmaceutical marketers with strong brands or potential blockbusters in the pipeline.

But as the opportunities for further pharma acquisitions or mergers begin to dwindle, Pfizer must now look to its own pipeline.

Especially now: The drug company is looking at a reduction of more than $5 billion in annual sales over the next year when Neurontin, Diflucan, Zithromax and Accupril come off patent protection.

Sluggish research and development has been an industrywide problem in recent years. The Food & Drug Administration approved only 19 new molecular compounds in 2003, when in past years approvals would typically top 30. Still, analysts are buoyed by what they've seen in pharma company pipelines, including that of the world's largest drugmaker.

combo drug

Already this year, Pfizer has launched hypertension drug Inspra and Caduet, a combination of its cholesterol-lowering Lipitor and blood thinner Norvasc. Expected later this year: Lyrica, Pfizer's successor to $2.4 billion-seller Neurontin, for treating neuropathic pain.

Pfizer could receive approval in the next 12 months for several other drugs, including Macugen, for treating macular degeneration and edema, and insomnia medication Indiplon.

"We're certainly happy with the progress we've made in our research and development," one Pfizer executive says.

And the company can lay to rest all the claims that its direct-to-consumer ad spending negatively affects research and development.

Last year, Pfizer's measured media was nearly $1 billion. Its spending on R&D was $7 billion.

Still, Pfizer Chairman-CEO Hank McKinnell dampened the news last month of a 50% jump in third-quarter net income by saying revenue and profit growth would be "tempered" next year. He also declined to give a profit forecast for 2005.

Several of Pfizer's competitors have blockbuster potential in the pipeline. Bristol-Myers Squibb Co. had its colon cancer-fighting drug Erbitux approved earlier this year, and on the horizon is Muraglitazar. Although approval for Muraglitazar is likely more than 18 months away, it's getting good buzz as a diabetes drug that not only lowers blood sugar but cholesterol as well.

amgen move

Amgen, which makes and markets anemia medication Aranesp, has at least three products in late-stage testing, including a drug for chemotherapy patient side effects that has been well-received by the medical community so far.

Pfizer has been able to stem the tide of generic competition for now with its own generic drug subsidiary, Greenstone. The pharmaceutical giant acquired Greenstone last year when it bought Pharmacia Corp. in a $57 billion deal.

Greenstone has already launched what Pfizer calls "authorized generic" versions of Pfizer products that have come off patent protection in the last year.

Pfizer also acquired Warner-Lambert Co. for $100 billion in 2000.

And though the days of the big mergers might have ended with Sanofi-Synthelabo's hostile takeover of Aventis earlier this year, Pfizer still continues to use acquisitions as a cornerstone of its business practices.

Two days before Christmas of 2003, Pfizer acquired Ann Arbor, Mich.-based biotechnology experts Esperion Therapeutics for $1.3 billion, and folded the company, now a Pfizer division, into its global research and development base in Ann Arbor.

Esperion was founded by a group of scientists who worked on the discovery and development of Lipitor. Pfizer saw potential in the small company, which had in Phase II trials two drugs that were garnering attention for their treatment of cardiovascular disease.

"The additions of Warner-Lambert and Pharmacia were unique opportunities to integrate large, fast-growing and strategically similar businesses into our Pfizer business model," says J. Patrick Kelly, Pfizer's VP-president, U.S. Pharmaceuticals.

"The result of both these acquisitions has been to make us a stronger company better positioned for what the future holds," he says. "We will continue to look for strategic acquisitions such as Esperion with a focus on novel products, technologies or geographic expertise to complement our existing portfolio and areas of strategic focus."

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