Big Pharma

Report: GSK to beat Pfizer by 2012

Tracy Staton — Fri, 07 Nov 2008 11:00:46 -0500

Who's No. 1 in Big Pharma? Well, in a few years it won't be Pfizer, according to a new industry report. URCH Publishing predicts that GlaxoSmithKline will overtake Pfizer as the world's largest by 2012. Pfizer won't even be able to hang onto second place, the report says; that will belong to Roche.

Currently, it's Pfizer in the lead with a market share of 6.2 percent. GSK comes in second with 5.4 percent, and Roche boasts a third-place 4.3 percent. That's all going to change, though, as only two of today's top 10 are expected to post industry-beating growth: Roche and Novartis. The global pharma market is poised for compound annual growth of 5.5 percent over the next four years, to $929 billion, the report states. Roche is expected to rack up 6.2 percent and Novartis 6.1 percent.

What about other big-name drugmakers? Johnson & Johnson and Merck are expected to generate only "stagnant growth" through 2012, URCH predicts.

The report's reasoning behind its sales projections is familiar: Future growth will be limited by increased generic competition, a lack of new blockbusters and high prescription co-pays for insured consumers.

- see the release from URCH Publishing

How will Obama change pharma?

Christe Bruderlin-Nelson — Wed, 05 Nov 2008 09:10:14 -0500

Good morning and welcome to a new day in America. Barack Obama will be the next person to lead our nation--backed by a Democrat majority in the House and Senate--and already industry experts already are wondering what the change will mean for big pharma and for the biotech industry.

Obama, as well as McCain, had both promised to target health care costs if elected, and those in the know in the pharma industry knew pharma would become a major target. Pharma dropped significant cash into the pockets of both contenders as a result, but perhaps predicted Obama's victory, as the piece of the campaign financing pie shifted towards the Democratic candidate more than it had in previous election cycles. In fact, the industry gave the Democrats 49 percent of its contributions for the 2008 election, donating to both parties nearly equally for the first time in nearly two decades.

While it looks like big pharma and the advertising and PR agencies that get the pharma word out are prepping for tighter regulation over direct-to-consumer advertising following Obama's January move into the White House, both will do so with little surprise.

Obama's plans include controlling prices on expensive biotech drugs, plans to regulate DTC advertising and a push toward generics. While lobbyists have thus far been successful in keeping DTC regulations at by, with a strong democratic presence, their success might be limited. Likewise, generic options, re-importation and greater price controls might be on the horizon.

Nonetheless, it seems that pharma industry marketers predicted early on that Obama was a better choice for it, as they increasingly relinquished their traditional Republican nods away from McCain. Obama, for his part, is likely to focus on the economy first, since it is the number one priority for voters on both sides of the election.

Contributions to both candidates totaled about $20 million for the 2008 election.

- read more at the Pharma Times
- see the Media Post story

When will the deluge of M&As hit?

Tracy Staton — Mon, 27 Oct 2008 11:39:05 -0400

Buttonhole most any market-watcher these days, and you'll find someone eager to tout the current turmoil as the perfect environment for Big Pharma to make a deal. Credit markets seizing up, banks failing, and derivatives lurking--never mind all that. Drugmakers are in the catbird seat.

The logic goes something like this: Big Pharma is cash-rich. Big Pharma needs to stuff its pipelines full of drug candidates. Small biotech companies of the sort that could do just that--they're either already bargains or soon will be as their funding dries up. "The No. 1 driver of why we think there are going to be more deals is the patent cliff that is beginning to drive the industry starting around 2011," Moody's senior vice president Michael Levesque told the Philadelphia Inquirer. "And then because of recent stock market events, valuations globally are much lower than they were six months ago, so that could favor even more mergers and acquisitions or faster M&A."

It's true that pharma is sitting on a cache of cash. Nine of the biggest U.S. drug and biotech firms count a combined j$105 billion in cash and investments as of June 30. And there's no doubt that several big-name drugmakers are on the prowl; just last week, GlaxoSmithKline said that it would give stock buybacks a rest so it can reserve cash for deals. "Opportunities are surfacing with some frequency on the small to medium scale," CEO Andrew Witty told analysts during a third-quarter earnings call. And Bristol-Myers Squibb, which lost out to Eli Lilly on the ImClone buyout, says it has a long list of companies it could buy with its $7 billion in cash.

Bottom line, we should hear some announcements soon. Unless the market suddenly rockets upward, pricing pharma out of the biotech market. But the chances of that, we fear, aren't very good.

- read the story in the Inquirer

Pharma is cash rich abroad, but debt will rise

Christe Bruderlin-Nelson — Wed, 15 Oct 2008 10:44:27 -0400

Amidst consistent reports that there is plenty of cash in the U.S. pharmaceutical industry, analysts are fretting about the challenges of accessing that cash--due to the serious tax implications--for use in the U.S.

But will companies need much cash? Well, it's more likely than not, since big pharma as a whole is poised for acquisitions (e.g. Eli Lilly will borrow a few billion to purchase ImClone), particularly in light of the fact that some leading companies have quite weak pipelines and are facing patent expirations.

Overall, Moody says the industry looks fairly safe, despite the U.S. financial crisis, but others say that because of the potential tax hit, U.S. drug companies are more likely to go into debt than to repatriate cash.

The Moody report looked at nine companies; Amgen, Bristol-Myers Squibb, Eli Lilly, Genentech, Johnson & Johnson, Merck, Pfizer, Schering-Plough and Wyeth, noting that almost 70 percent of the companies' rise in investments is in offshore cash and that bring it back could cost nearly 30 percent in taxes.

- see the Wall Street Journal story
- read the related Wall Street Journal blog post

Crunch paves way for pharma deals

Tracy Staton — Thu, 09 Oct 2008 10:41:33 -0400

Lots of folks have been looking for the glimmer of a silver lining in the immense cloud hanging over global financial markets. They might look no further than Big Pharma. According to a new Datamonitor report, cash-rich drugmakers are poised to take advantage of the credit crunch, in part because they didn't overdose on the cheap debt that has trapped so many companies now that credit has dried up.

How might this play out for pharma? Acquisitions and licensing deals, Datamonitor says. We all know that drugmakers have been looking to thicken up their pipelines by buying up biotech companies, licensing biotech drugs, and otherwise setting up development deals with the smaller, more innovative firms. And with so many drugmakers--not to mention private equity firms and other investors--chasing these deals, prices have been pretty favorable for biotech.

Now, that could change. Biotech companies are getting caught in the credit crunch, watching their access to capital dry up. And Big Pharma has cash. Biotech could be forced to take less favorable terms in licensing deals, Datamonitor predicts. Either way, pharma is sure to use the market turmoil to snap up their favorite biotechs and biotech products. "[T]he credit crunch provides big pharma with exactly the opportunity it needs to rebuild its ailing pipelines," the report concludes.

- see Datamonitor's release
- read the story at Pharma Times

Pharma's deep pockets means more M&A

Christe Bruderlin-Nelson — Wed, 01 Oct 2008 04:07:58 -0400

The folks over at the Motley Fool are once again waxing positive for big pharma.

Despite thinning pipelines, relentless job cuts and rollercoaster share prices, the Fool says the pharma companies still have plenty of cash on hand and give some numbers to prove it. For example, Pfizer has $26.2 billion in cash and short-term investments with $14.8 billion in free cash flow, and Novartis has $16.2 billion in cash and short-term investments with $14.0 billion in free cash flow. On the lower end of the spectrum, Eli Lilly has $5.2 billion in cash and short-term investments with $5.2 billion in free cash flow, which is no small potatoes, either.

What might big pharma use all this cash for?

Acquisitions, perhaps, especially when taking advantage of some deals in the struggling-drug-developer arena. Companies might also buy more marketing rights or acquire drugs directly. Either way, the Fool says, having cash on hand--especially when its in the billions--says more than an earnings report ever will, because cash is either there or it isn't.

- read the story at the Motley Fool

Moody's downgrades Euro-Pharma

Tracy Staton — Thu, 11 Sep 2008 11:30:05 -0400

European pharma companies aren't looking too rosy, either--at least according to Moody's. The ratings agency says the drugmakers--including heavyweights Roche, GlaxoSmithKline, Sanofi-Aventis, AstraZeneca and Novartis--won't be as credit-worthy in the coming 18 months. The problems Moody's cites are familiar: pipelines, patent expirations and a tough U.S. regulatory environment.

And then there's pharma's penchant for biotech companies, because those deals don't tend to send much to the bottom line at first. Plus, Moody's doesn't like the fact that drugmakers have been buying back their own stock to prop up the share price.

But Moody's isn't completely dejected about pharma's prospects. The industry is still profitable, after all.

- read the Wall Street Journal Health Blog item

Pharma finds deals aren't so easy

Tracy Staton — Thu, 11 Sep 2008 10:28:54 -0400

While the market speculates just which "major pharma firm" submitted that $70-a-share mystery bid for ImClone, analysts are saying that Bristol-Myers Squibb should just up its offer to $70 from $60 and be done with it. "This is a good strategic and financial deal for BMS at that price," Deutsche Bank's Barbara Ryan wrote to clients. After all, the rival offer is subject to due diligence, and as ImClone's partner on Erbitux, BMS already has a lot of the inside skinny on the company.

Meanwhile, King Pharmaceuticals is taking its bid for Alpharma to the shareholders. Spurned by its target's management, the Tennessee company is undeterred, saying it's making a sweetened $37-a-share offer to stockholders "to deliver significant value to them as expeditiously as possible," CEO Brian Markison said. At that price, King values Alpharma at $1.6 billion, a 12 percent increase over its initial offer of $33 per share. But it's just two cents more than Alpharma's market price this morning; in pre-market trading, the company's shares were up 3.5 percent to $36.98.

And just in case you were wondering why speculation that other Pharma-Biotech partnerships would turn into buyout deals hasn't come to fruition: In Vivo looked at 12 of those collaborations and found that two-thirds of them are governed by contracts that prohibit unsolicited buyout offers. For instance, Eli Lilly's deal with Amylin on Byetta includes a "standstill" proviso. But Biogen Idec could buy Elan, its Tysabri partner, if the mood struck.

- read Mike Huckman's take at Seeking Alpha
- see King's release
- check out In Vivo's partnership analysis
- see the Wall Street Journal story

Tough times put screws on drug market

Tracy Staton — Fri, 05 Sep 2008 09:58:01 -0400

Times are tough all over. That's no news in the drug biz, which has been fighting familiar battles--generic competition, pricing pressure, et al--for a couple of years now. But they may be about to get tougher, thanks to the troubled economy. In fact, Walgreen CEO Jeffrey Rein says this is the tightest market for prescription drugs in his 27-year career.

Conventional wisdom has always pegged pharma as a defensive play, given that folks have to take their meds whether they're feeling flush or not. But that reasoning doesn't necessarily hold true for certain drugs, such as cholesterol meds and blood pressure pills; patients sometimes choose to skip a few to stretch out the time between refills. In July, a poll by the National Association of Insurance Commissioners found that 11 percent of Americans had cut back on their dosages to make meds last longer, Rein said.

Walgreen is hurting from this tightening up, and Rein says the trend is accelerating across the drugstore industry. Can it be long before that pain is felt by drugmakers, too?

- read the article in the Wall Street Journal
- see the WSJ Health Blog post

Pharma money on display for Dems

Tracy Staton — Thu, 28 Aug 2008 11:02:20 -0400

Big Pharma has ponied up big bucks to help finance the Democratic National Convention--and the companies have sent their CEOs to Denver to put their mouths where their money is.

The list of health-oriented sponsors reads like a roll call of drugmakers: Merck, Amgen, Pfizer, AstraZeneca, Novartis, Mylan, Abbott and Eli Lilly. Five of those companies--Pfizer, AstraZeneca, Lilly, Amgen and Merck--have put CEO power behind their cash. AstraZeneca and Lilly dispatched their CEOs--David Brennan (photo) and John Lechleiter (photo), respectively--to receptions and luncheons the companies sponsored. Pfizer's Jeff Kindler (photo) and Amgen's Kevin Sharer (photo) participated in a health roundtable. And at a PhRMA-sponsored brunch, Merck CEO Richard Clark (photo) and AstraZeneca's Brennan mingled with the invitation-only crowd.

And tonight, when Barack Obama accepts the Democratic nomination, Pfizer folks will be on hand in coveted skybox seats reserved for those donors who've given more than $1 million. Let's see who turns up for John McCain's Republican star turn next week.

- read the WSJ Health Blog post
- see the FDA Legislative Watch piece
- get the skybox article from the Dallas Morning News

Big pharma to close 26 more plants

Christe Bruderlin-Nelson — Wed, 23 Jul 2008 10:40:49 -0400

Well, big pharma doesn't appear to be the safe haven for investors or employees these days. The Industrial Info Resources' Pharmaceutical Tracker has revealed that there are at least 26 plants poised for shutdown. This is in addition to those J&J, Pfizer and Schering-Plough and other layoffs we keep hearing about, and employees in pharmaceutical advertising and marketing might take the biggest hit.

Why the slump? The combination of a down economy coupled with patent expirations, negative press about popular medications, fewer prescriptions being filled and some FDA difficulties might be to blame. Continued rumors about layoffs and plant closures are unlikely to help much, either.

- read the report
- get the story in BusinessWeek
- see more at Market Watch
- here's World of DTC Marketing's take

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Pharma finds promise, peril in biotech revolution

Maureen Martino — Wed, 02 Jul 2008 13:32:21 -0400

The problem with the European pharmaceuticals industry--at least in part--is biotechnology. Or that's what the European Federation of Pharmaceutical Industries and Associations believes. The big trade association says that the slowdown in new drug approvals seen around the world can be directly linked to the biotech revolution. Report

Pharma drops again in public opinion

Tracy Staton — Mon, 30 Jun 2008 10:01:05 -0400

It's not pleasant company at the bottom of this list. According to a new Harris Interactive poll, only 26 percent of Americans have a favorable view of the drug industry--a record that's even worse than Big Oil, and better only than tobacco companies. It's a low point, following a slow-but-steady decline in consumer opinion.

Fair? That's not the point. The question is, do drugmakers intend to do whatever it takes to reverse the trend? Or should they just accept the dubious honor? Given the challenges pharma faces these days, improving public opinion may not be number one on the priority list.

- find Harris Interactive's release
- check out the analysis at DTC Perspectives
- see the Pharmalot item

Pharma a defensive play no more

Tracy Staton — Mon, 23 Jun 2008 10:19:35 -0400

Some big stocks were down to multiyear lows last week--including Pfizer and Merck, a deveopment that runs counter to pharma's traditional position as a defensive stronghold. Typically, investors see drugmakers as "safe" during down markets because patients need their meds no matter what the economy does.

Not so anymore, analysts are saying. Big Pharma's woes are well-known by now--patent expirations, aggressive generic competition, reimbursement pressures, fewer brand-new meds to tout. In Pfizer's case, it took the huge settlement with Ranbaxy over Lipitor to goose the stock upward last week. And then it fell back again. Merck got a setback with its new cholesterol med when the FDA asked for more data. To one big investor, the market's reaction to last week's news just shows how far pharma needs to go to get back into investors' good graces.

- see the item at Wall Street Journal's MarketBeat blog

Silver lining in Big Pharma's cloud

Tracy Staton — Tue, 10 Jun 2008 10:36:40 -0400

Lately it hasn't been a love-fest among analysts and investors and Big Pharma. A few drugmakers have won their kudos, but overall the mood has been somewhat grim. Not so today. Going contrarian, a BusinessWeek columnist touts Pfizer, and a former analyst is launching (drum roll, please) a pharma-based hedge fund.

Both men essentially believe that the downside on pharma is already built in to the stock prices. (With Pfizer languishing in 52-week-low land, one would hope so.) The upside, on the other hand, has been overlooked. You know the old buy low, sell high strategy. Well, now they're low. And these optimists believe higher times are coming. "[L]ong term, people want to get better and drug companies want to make money," says Mike Krensavage of Krensavage Asset Management. "So it seems like there’s still plenty of opportunity."

- see the BusinessWeek piece
- check out the item at Pharmalot

U.S. pharma in a blue Moody over bad credit

Christe Bruderlin-Nelson — Wed, 04 Jun 2008 07:33:54 -0400

Moody's Investors Service says U.S. drug manufacturers can expect to see their credit ratings drop over the next year, despite respectable cash flow and decent profitability. Companies such as Schering-Plough, J&J, Genentech and Pfizer were major debt drivers, according to Moody's semi-annual report. The report looked at the ability to pay debts in addition to the often-mentioned issues of patent expirations, generic competition and regulatory challenges.

The report cites concerns about increasing levels of offshore cash by the companies, which held $58 billion in the U.S. and $27 billion offshore in 2006, but increased offshore holdings to $63 billion in 2007, with just $29 billion in the U.S. that year. Couple this with an increasing debt level from $75 billion to $94 billion in the same time-frame and the pharma industry's usually strong credit rating is likely to fall.

- read the WSJ piece
- check the report from Forbes

Big Pharma changes rules in emerging markets

Tracy Staton — Wed, 21 May 2008 11:04:31 -0400

If that well-meaning advice-giver in The Graduate were speaking to pharma today, he might well say, "Two Words: Emerging Markets." That phrase is getting more and more traction these days, as drugmakers wake up to the fact that the coming growth areas on the globe aren't found in North America or Europe. And as the importance of countries such as India, China, and Brazil grows more evident to Big Pharma, so is the fact that the strategies that work in the super-industrialized world won't serve in countries where the middle class is just now growing by leaps and bounds.

We all know that the pharma majors are moving into R&D in places like India and China, and that more and more are outsourcing their manufacturing to emerging countries. But to sell products there, on the ground, they're trying things that they'd never do elsewhere. "Differential pricing," for one thing, which takes into account per-capita income in setting prices; soon, there might even be different prices for middle class Indians, for instance, and the subcontinental poor. Standard arguments against it--that these cheaper meds will get resold on the black market, for instance--are falling by the wayside. What else might Big Pharma do to gain a major foothold? We'll have to watch and see.

- see the story in The Economist

Top 17 Paychecks in Big Pharma

Mon, 19 May 2008 14:35:44 -0400

by Tracy Staton and Maureen Martino

Few statistics are as hotly debated as CEO pay reports. Investors, analysts, and the just plain curious all want to know how much the head honcho makes--and how one company's chief stacks up against another's. So here for your rubbernecking pleasure are the 17 highest-paid CEOs in Big Pharma. While the names themselves probably won't be a surprise, their pecking order might. For instance, the biggest drugmaker by sales--Pfizer--doesn't have the highest-paid executive, and one of the relatively small fry counts its chief among the top 10.

We've already ranked CEO pay at the industry's top five biotechs, but it's worth noting that if they had been included on this list, Amgen's Kevin Sharer and Genentech's Arthur Levinson would have ranked fifth and sixth behind Wyeth's Bob Essner. Genzyme's Henri Termeer made $14.6 million in 2007, coming in ahead of Merck's Richard Clark, and Gilead's John Martin made $10.8 million, slightly less than Roche's Humer.

For U.S. companies, FiercePharma's numbers are based on total compensation reported in their proxy statements. The numbers include base salary, bonus and "other" compensation in 2007. For overseas companies not required to file proxies in the U.S., we gleaned executive pay information from various press reports. Though we did as much due diligence as we could to make sure these reported totals were apples-to-apples comparisons, there's a chance we may have missed something. Feel free to let us know.

1. Miles White - Abbott - $33.4M

2. Fred Hassan - Schering-Plough - $30.1M

3. Bill Weldon - Johnson & Johnson - $25.1M

4. Bob Essner - Wyeth - $24.1M

5. Robert Parkinson - Baxter - $17.6M

6. Daniel Vasella - Novartis - $15.5M

7. Richard Clark - Merck - $14.5M

8. Frank Baldino - Cephalon - $13.5M

9. Sidney Taurel - Eli Lilly - $13M

10. Jeff Kindler - Pfizer - $12.6M

11. Jim Cornelius - Bristol-Myers Squibb - $11.3

12. Franz Humer - Roche - $11.1M

13. Robert Coury - Mylan - $8.5M

14. Jean-Pierre Garnier - GlaxoSmithKline - $6M

15. Werner Wenning - Bayer - $4.77M

16. David Brennan - AstraZeneca - $4.3M

17. Gerard Le Fur - Sanofi-Aventis - $3.27M

Pharma CEOs mull industry "trust deficit'

Thu, 24 Apr 2008 06:59:57 -0400

We love it when pharma CEOs depart from their usual talking points about financial results and restructurings and pipelines, to wax philosophical on their place in the word. This week, we heard an entire trio musing on the state of the industry: Merck chief Richard Clark, GlaxoSmithKline's putative chief Andrew Witty (photo), and Pfizer's Jeff Kindler (photo). Some choice bits:

Pharma's equilibrium is "shattered," Witty told the Academy of Medical Sciences this week. To fix it, drug makers need to listen more--and talk more--particularly with drug buyers (about the true value of new meds) and with government. Pharma and regulators are "like two ships missing in the night," he said.
"There is a trust deficit we have to fix," Merck's Clark told The Star Ledger, when asked about lessons learned from the Vytorin controversy. "I think everyone has a lesson to be learned from this. Drug makers "may have to become more transparent" about their spending and their relationships with docs, he said.
"There's a lot of public concern about the pharmaceutical industry," Kindler told the Wall Street Journal. "But...everybody recognizes that you can't solve the healthcare reform problem without an innovative, healthy pharmaceutical industry. We have to be a part of the solution." He went on to talk about truth-telling: "It's important for the industry to communicate with integrity and to do everything it can do to insure the integrity of the data and the science."

Sounds like these guys are all picking up on the same vibe: communication, transparency, telling the truth. And that they recognize that the "shattered equilibrium" and "truth deficit" need to be fixed. What will they do to make that happen, that's the question.

- check out the Witty story in the Financial Times
- see the Clark interview in the Star-Ledger
- read Pharmalot's take on Clark's remarks
- read the WSJ's Q&A with Kindler

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Say goodbye to Big Pharma's gilded age

Under pharma earnings, basic problems

Wed, 23 Apr 2008 06:59:55 -0400

You've heard of see-through buildings. How about see-through pharma earnings? Though drug makers have been reporting increases to their bottom lines, investors are looking past the foreign-currency gains and one-time earnings boosts to the fundamental problems the industry faces.

"Each company generally has had somewhat of the same narrative... limited pipeline visibility, patent expirations, and decelerating growth in their main products," one analyst told the Associated Press. Thus Wyeth lost Protonix revenues; Roche suffered from falling Tamiflu sales; Merck's Singulair, Vytorin, and Fosamax dropped off; Pfizer saw Zyrtec and Norvasc decline; and Lilly's top seller Zyprexa deflated.

Of course Big Pharma also confronts a larger problem, just as most other U.S. companies do: the economy. As Steve Brozak of WBB Securities pointed out, the lackluster quarter is just one more sign of an overall market shift. "This proves to us that we're in a recession," he said.

- read the Associated Press story