Wednesday, August 15, 2007

Wyeth's Leaky Pipeline

Poor Wyeth. The bad news just keeps coming. First came the FDA's July 24 letter asking for an additional year-long study of the company's menopause drug Pristiq. Then on August 10, the company announced it's own "daily double": a non-approvable letter for bifeprunox, a Phase III schizophrenia drug it's developing with Solvay Pharmaceuticals; and the preliminary halt of a study of HCV-796, a Hepatitis C drug Wyeth is co-developing with ViroPharma.

In addition to this negative trifecta, there's an on-going legal battle with generic-drug maker Teva over Wyeth's Protonix patent. (Wyeth has asked for an injunction to prevent the launch of the generic prior to the drug's patent expiration in 2010. A decision on the matter could come any day between now and September 7.) Perhaps it's no wonder the stock has been sliding. As of yesterday, Wyeth shares had fallen nearly 24% from their May high of $59.

Coming hard on the heels of the Pristiq news, the announcements about bifeprunox and HCV-796 must have been hard for Wyeth execs to swallow. DrugResearcher reports that just a few days prior, at the Drug Discovery & Development of Therapeutics Conference in Boston, Tom Hofstaetter, Wyeth's head of business development, told attendees that the pharma industry's productivity woes were a thing of the past. "The pipelines are more diverse and better quality than ever before," claimed Hofstaetter.

Ah, sweet irony. Seems like Wyeth's "diverse pipeline" has sprung a sizeable leak. And that puts additional pressure on the success of on-going collaborations with Progenics and Elan in pain and Alzheimer's disease. You don't have to be a brain surgeon--or even a lowly Windhover reporter--to know that the company is going to have to act--and fast--to shore things up. Investors are a flighty bunch and few these days are patient enough to endure a protracted turn-around.

Barbara Ryan, an analyst with Deutsche Bank, summed it up in her investor note: "While our expectations for Wyeth's pipeline have been relatively modest, it is now clear to all that the combined commercial potential of these products won't be sufficient to replenish revenues that will be lost at the end of the decade to generics." In the immortal words of Homer Simpson:"Doh."

I'm a glass full kind of gal. Earlier this year Wyeth won approval for Torisel, it's kidney cancer drug, and Lybrel, it's birth-control pill. More importantly, Wyeth is sitting on $12.19 billion in cash--money it could use to in-license some much needed late stage compounds or acquire smaller outfits to build up it's existing neurological or large-molecule franchises.

Still it's tough to see how Wyeth can quickly plug it's leaks through M&A or alliances. The company simply doesn't have much of a history as a deal-maker. (For a review of Big Pharma's acquisitive nature see these April and May IN VIVO articles, but be warned: Wyeth only gets mentioned in discussion of Big Pharma out-licensing [Wyeth's Hofstaetter tells us that Wyeth has to outlicense because it is over-productive in internal R&D] and as a non-acquirer.)

In fact, a quick search of Windhover's Strategic Transactions Database shows that, historically, Wyeth favors research-stage alliances over acquistions. In the past six years, the company has brokered only two deals for Phase III products--a $416.5 million deal for Progenics' pain drug methylnaltrexone and a $145.5 million deal for Solvay's bifeprunox. The other big deals? A 2004 alliance with Plexxikon for rights to its Phase I drug PLX-204 for Type II Diabetes worth $22 million, and a 2006 deal with Trubion Pharmaceuticals for rights to CD-20 targeted therapies worth $41 million. (See chart below.)

And you have to go back to the mid-1990s--a time when the names Wyeth-Ayerst and American Home Products were still in use--to find a buy-out linked to the company. Compare that with AstraZeneca and Pfizer, which, in the past five years, have spent $17 billion and $4.2 billion respectively snapping up biotech companies.

It's going to be an interesting few months for Wyeth. You can bet the IN VIVO Blog will be watching--and writing. And Wyeth execs, if you want to talk strategy, we are all ears.

(click chart to enlarge)

1 comment:

Anonymous said...

Pipelines would be more productive if the companies such as Wyeth would focus less on marketing and re-wrapping old drugs and more on R&D. I don't see how big pharma doesn't understand that if they would take such and approach, the money would follow. On top of that, they gouge the American public with rediculous prices until we are forced to turn to foreign pharmacies. Until the day comes when big pharma focuses more on research and developement than marketing, we will continue to see companies like Wyeth buying out small pharmaceutical developement companies to fill their companies lack luster pipelines.