Why another Pfizer reorganization? Bigger bets on biosimilars, maybe—or finally a generics selloff

Pfizer’s shaking itself up again, with some moves that have put its branded drug business in charge of two big challenges: biosimilars, which need brand-level attention, and injectable hospital drugs, now beset by manufacturing woes. That leaves consumer health as a solo unit and a generics business with “substantial autonomy.”

The New York pharma said Wednesday it will divide the company into three parts, rather than its current two, beginning in 2019. Biosimilars and injectable generics will jump out of the generics portfolio in Pfizer’s established medicines unit and into the innovative medicines group. Consumer Health—a business Pfizer put on the block in vain this year—will hive off into its own unit whose fate will be decided by year’s end.

The third unit, established medicines, will encompass all off-patent branded medications and generics—and it’ll have “substantial autonomy” within Pfizer.

The established medicines business, of course, is the very unit analysts had hoped Pfizer would sell or spin off into its own company, at least until the company decided against that move last year. Consumer Health’s the unit that failed to sell earlier this year. And the hospital drugs now under the innovative unit’s tutelage have recently suffered much-publicized shortages, manufacturing problems and recalls.

Painting the new structure as “a natural evolution,” CEO Ian Read said it will help each business achieve better growth “[a]s we transition to a period post-2020 where we expect a higher and more sustained revenue growth profile” that could cushion the looming loss of exclusivity for Lyrica in the U.S.

It isn’t a complete surprise that Pfizer wants to switch biosimilars to sit alongside its innovative drug-development group. It’s not just that the biological copycats require more R&D investment than small-molecule generics, but they’re branded products launched and marketed as such, a complicated task that Pfizer’s Remicade knockoff Inflectra has struggled with. Plus, biosims are generally more lucrative and promising revenue-wise.

Plus, while most of its established products are a drag on Pfizer’s top line, biosimilars are driving growth. In the first quarter, Pfizer’s biosimilars revenues grew 53% to $173 million. Besides its approved Remicade and Epogen/Procrit copycats, Pfizer is developing biosimilars to some of the industry’s other best-sellers, including Humira, Avastin, Neupogen, Rituxan and Herceptin. Other companies like Amgen and Biogen have also doubled down on biosimilars recently.

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Pfizer’s also setting up a new hospital business unit for anti-infectives and sterile injectables under the innovative brands umbrella, too. The move comes after the Washington Post and other mainstream media highlighted ongoing shortages of hospital drugs, many of them sourced only from Hospira. The switch allows “better focus and customer centricity,” the company said in a release.

Indeed, some legacy Hospira products have encountered seemingly incessant troubles recently, including several recalls, drug shortages and FDA warning letter-level manufacturing problems. The warning letter slapped on its McPhearson, Kansas, fill-finish facility derailed several drug applications for manufacturing clients, including a Sandoz generic of Teva’s multiple sclerosis blockbuster Copaxone.

Without biosimilars, the new Established Medicines business is left with generics and legacy brands like Lipitor and Viagra, which have seen dramatic sales declines as generic competition hit the market. And now that the consumer health sale isn’t going to happen any time soon—potential buyers such as GlaxoSmithKline and Procter & Gamble pulled out one after another earlier this year—could generics be next on Pfizer’s cutting board?

Pfizer is giving the unit “substantial autonomy,” meaning it is a stand-alone business with its own dedicated manufacturing, marketing, regulatory functions. It's move that could be argued as a prelude to a selloff, but Pfizer said the change is meant to “allow this business to act with speed and flexibility.”

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“[T]his design gives us a sharper focus on diverse patients in diverse markets,” said COO Albert Bourla in a statement. “In addition, the structure will enable the Established Medicines business to optimize its distinct growth opportunities, while also providing the future flexibility to access opportunities that enhance value.”

The company reasoned that the addition of Lyrica and increasing demand coming from emerging markets like Asia could generate “sustainable modest” revenue growth for the business.

As part of the reorganization, John Young, currently Pfizer Innovative Health group president, will be in charge of the new innovative portfolio’s internal medicine, oncology and rare disease units. Angela Hwang, the group president of essential health, will take care of inflammation and immunology, vaccines and hospital medicines, as well as the new consumer healthcare side. The established medicines business will be led by Michael Goettler, currently the company’s president of inflammation and immunology.