Experts: Wyeth pipeline not that attractive

When Pfizer Inc. chief executive officer Jeffrey Kindler explained why he was spending $68 billion to acquire rival Wyeth, he said he was dazzled by the company's "robust pipeline of biopharmaceutical candidates."

But is Wyeth really bringing a rich dowry of drugs to this partnership? Or is the merger another sign of a waning industry whose years of flashy growth are behind it?

No one will know the answer to those questions for several years, but analysts said yesterday that the new company's enormousness - $70 billion in combined sales initially - would require billions in new sales to make Kindler's premise pay off.

"Because of its size, the new needle will be hard to budge unless many new, big drugs are simultaneously discovered, and Pfizer's longer-term research and development track record has been spotty," Sanford Bernstein analyst Tim Anderson told investors.

Finding best-selling drugs is extraordinarily difficult and expensive. The industry spent an estimated $58.8 billion on research and development in 2007, but U.S. Food and Drug Administration approvals of new drugs have lingered at record lows.

Drugs that rake in billions in sales must provide innovative treatments for illnesses that many people have. So companies, including Pfizer and Wyeth, are searching for drugs to treat Alzheimer's disease, which affects an estimated four million people.

Among the estimated 14 Alzheimer's drugs the two companies are developing, Wyeth's bapineuzumab has generated the most buzz. Current Alzheimer's drugs such as Aricept, co-marketed by Pfizer and the Japanese drugmaker Eisai Co. Ltd., treat symptoms. But bapineuzumab may slow the progress of the disease.

Wyeth is conducting Phase III tests of bapineuzumab even though earlier trials raised concerns about brain swelling in some patients. Earlier studies also suggested the drug may not work in patients with certain genetic traits. Phase III is generally the last phase of trials before a company asks for FDA approval to sell a drug.

"In the grand scheme of things, the results for Phase II were reasonably good," said Corey Davis, drug analyst at investment bank Natixis Bleichroeder Inc.

But Jon Lacroy, another analyst at Natixis Bleichroeder is skeptical.

"None of these disease-modifying Alzheimer drugs have worked yet," he said. He ranks Wyeth as having the poorest pipeline prospects of six pharmaceutical companies he covers, including Merck & Co. Inc., Eli Lilly & Co., Bristol-Myers Squibb Co., Pfizer and Schering-Plough Corp.

Wyeth spokesman Doug Petkus defended his company's drug development.

"In 2008, we achieved three product approvals - the most in our peer group," he said. "Moving forward, our discovery efforts will focus on opportunities that give us the best chance to develop innovative, differentiated and high-value medications."

Lacroy and many other analysts say they believe Pfizer went after Wyeth simply because Kindler had to replace revenue lost to the 2011 expiration of Pfizer's patent on Lipitor, which has about $13 billion in yearly sales. Lacroy predicts the company's stock price will remain flat for the next five years.

The other Wyeth drug whose prospects tantalize some investors is Prevnar, a pneumococcal vaccine used to prevent meningitis in children. Wyeth is working on a new version of the vaccine that will protect against a larger number of disease strains. The company is expected to apply for approval to use the drug to prevent pneumonia in older people.

With that approval, Prevnar sales could hit $6 billion or $7 billion, up from $2.7 billion now, said David S. Moskowitz, a pharmaceuticals analyst with Caris & Co.

Prevnar falls into a category of drugs known as biologics, because they are made from living organisms. Wyeth's ability to manufacture these kinds of drugs also appealed to Kindler.

Whether or not any of Wyeth's drugs become best-sellers, Moskowitz said the acquisition signified a fading industry. The companies are promising $4 billion in budget cuts, including 20,000 fewer jobs.

"The promised land in pharmaceuticals was 10 years ago," he said. "Until we see a major technological breakthrough in pharmaceutical development, for now it's all about working what you have."

Wyeth has eight drug therapies in late-stage, or phase III, testing - the step prior to asking for FDA approval. Some are already approved for other uses.

Drug                     For treatment of

Neratinib               Breast cancer

Tygacil                  Diabetic foot infection

Protonix (pediatric)      Gastrointestinal reflux disease

Bapineuzumab          Alzheimer's disease

Bosutinib               Chronic myelogenous leukemia

Inotuzumab             Follicular non-Hodgkin's

ozogamicin            lymphoma

Torisel                   Renal cell carcinoma

combination therapy

Prevnar 13               Invasive pneumococcal disease

Bazedoxifene/            Menopausal symptoms/

conjugated estrogens   osteoporosis

SOURCE: Global Insight