Wednesday, December 15, 2010

2010 M&A Deal of the Year Nominee: Pfizer/King

It's time for the IN VIVO Blog's Third Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (four or five in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

One of the virtues of Pfizer's gigantism is that the company possesses a size and scale that will allow it to play virtually anywhere it likes in the pharmaceutical space. (Of course its size is one of its problems as well, but let's put that to the side for a moment.)

Pfizer's October acquisition of pain play King Pharmaceuticals for $3.3 billion (a deal not yet final, but one we are confident will close) demonstrates those advantages nicely and clearly has to be on anyone's Deal of the Year shortlist. It illustrates one possible future for Pfizer's business development strategy (the era of the bolt-on deal) while at the same time highlighting abuse-resistant opioids, a class of drugs at the center of commercial and regulatory brouhaha.

Why is pain, or at least the tricky, abuse-resistant space, a good fit for Pfizer? Not only are specialty areas the places where this and other Big Pharma are getting forced to dabble thanks in part to the genericization of some of their favorite primary care categories, but they may also be places where industry's largest companies can use their scale to their advantage. And for that you can thank the FDA.

More precisely FDA's Anesthetic & Life Support Drugs and Drug Safety & Risk Management advisory committees, which not long after the Pfizer/King deal completed a two-day discussion of endpoints for post-marketing studies to demonstrate abuse resistance in the opioid pain management class. The committee recommended that FDA set a very high bar for explicit claims of abuse resistance—advice that, if FDA took it on its face, would make it exceptionally difficult for new entrants (like King) to break into the market dominated by Purdue Pharma LP's OxyContin.

However, as our colleagues wrote in the November issue of The RPM Report, with Pfizer-like resources those post marketing burdens begin to look like insurance against competition. Large and expensive studies? For Pfizer, for now, not necessarily a problem. It's hard to see a stand-alone King having the same nonchalance.

Of course Pfizer also gets King's auto-injectors and animal health businesses, further helping it diversify. But in addition to the resources necessary to drive forward those abuse-resistant opioids like Remoxy, it's King's specialty marketing sales force that can now go off and market some of Pfizer's pain franchise and the added heft Pfizer's primary care reps can give to some of King's portfolio that really drives this deal.

So in this year's DOTY competition, vote for the big guy, who makes you an offer you can't resist.
image from flickr user chrisblakely used under a creative commons license

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