Pfizer Dramatically Shuffles R&D Strategy
Stunning news with big implications for shareholders.
"Pfizer Abandons Heart Disease Research": I would have written about this Pfizer (PFE) headline yesterday, but (like a few others) I thought it was a fake.
Stunning: It's absolutely stunning for a company that used cardiology drugs to put itself on the map as the leading pharmaceutical company on the planet to abandon what got it there.
I guess that's what happens when you ignore basic science and drop $800 million on a clinical trial program for a single drug that eventually blows up in your face. That's the situation with torcetrapib (which Minyanville readers were warned for years was a disaster in the making). After all, what executive is going to stick their neck out to advocate spending that kind of dough on the next cardiology drug?
So Pfizer is dropping research and development on heart, cholesterol, and obesity drugs. It will shift research dollars over to cancer, Alzheimer's, diabetes, inflammatory ailments, pain, and diabetes.
The implications of this are huge. I'm not sure where to start, really: This is such a monumental shift.
Let's start with what Pfizer shareholders can expect in terms of changes in clinical trial risk from this move. Please see the following graphic:
This chart shows the percentage of drugs entering Phase I trials that end up being approved by the FDA. It's segregated by disease area.
Pfizer is dropping researching into cardiovascular drugs, which enjoy the highest percentage success rate at 20%. It is picking up research into oncology (5%), Central Nervous System (CNS) (8%), and metabolic diseases (11%). The first two are well below the 11% average success rate. Investors in Pfizer must get their heads around the fact their company is trading lower-risk therapeutic areas for higher-risk therapeutic areas. This will make a noticeable difference in the risk profile for the company.
Developing CNS drugs for pain and Alzheimer's is tough work, with a high degree of false negatives in the trials. Oncology is terribly difficult, although Pfizer is likely to run randomized Phase II trials that will make the Phase III failure rates smaller than normal. Diabetes is very attractive, but failures in this metabolic disease are common.
I'm struck by the chosen areas. I've written before about the need for big pharma to abandon high-volume lifestyle drugs prescribed by primary care physicians (PCPs) and shift to specialist drugs. The thinking here is lifestyle drugs prescribed by PCPs are much more likely to be held up by the FDA for ticky-tacky items. They are also the drugs most likely to first see price controls if the Feds decide to move in that direction. Pfizer is clearly thinking along these same lines, judging behind the quotes I read in wire stories about this shift.
It will be interesting to see whether Pfizer can buck the trends shown in that table. If not, Pfizer shareholders will need to get used to more frequent Phase III failures, or at least a lower return on their clinical trial spending.
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