Forget megadeals, Pfizer CEO-to-be Bourla says. They're just too distracting

In Pfizer's farewell earnings report for outgoing CEO Ian Read, successor Albert Bourla gave a first glimpse into what he has planned for the Big Pharma—and it doesn’t include big M&A deals.

With what Bourla called “the best pipeline in our history,” the company needs to deploy its capital to the right places, keep its pipeline flowing and execute on its drug launches, the incoming CEO said, as it enters “an era of sustained growth.”

“In this context, I would reiterate that we continue not to see the need for any large-scale M&A activity at this time,” Bourla said on the company’s third-quarter earnings call.

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Just like that, Bourla put to rest whatever megadeal speculation might remain among pharma watchers, who've come to expect a major Pfizer buyout—or buyout attempt, in the case of AstraZeneca and Allergan—at regular intervals.

Make no mistake, this decision isn't about Pfizer’s ability to come up with the money for a megabuyout. In fact, Bourla pointed out it has plenty of balance sheet power to buy whatever it might want. Instead, it's about how destructive such deals can be.

“We’re going to enter into a period of growth post-2020, and we need to make sure we execute right now on our pipeline [and] on our commercial launches and market preparations,” said Bourla on the Tuesday call. “And large M&A typically comes with a big integration that's destructive to operations.”

But he added that the company will still scan for smaller deals that could enhance its growth trajectory or its pipeline.

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Pfizer has suffered unprecedented losses of exclusivity in recent years. But Bourla said he expects that will be capped by pain drug Lyrica, which turned in $3.46 billion in U.S. sales last year but will lose patent protections in the U.S. in December.

Give it another two years, he said, and the impact from generics will stabilize—and it’ll be showtime for several of the potential breakthrough sellers already on the market or in the company’s deep pipeline, which together comprise 15 potential blockbusters in five years, he said.

Before those pipeline products kick in, the company’s growth is coming from breast cancer drug Ibrance and rheumatoid arthritis treatment Xeljanz—the two marketed assets that Bourla said excites him the most, though both fell short of analyst expectations in the third quarter.

For the third quarter, Ibrance ginned up $1.03 billion in sales, up 17%, even though the U.S. posted a $5 million decline. Outside the U.S., sales almost doubled, driven by continued uptake in Europe and a recent launch in Japan. And the next phase of growth has yet to come for Ibrance, according to Pfizer Innovative Health chief John Young. It is in the adjuvant—or early breast cancer—setting, which encompasses a population roughly double the size of the current metastatic population, Young said on the call.

Xeljanz third-quarter sales were up 24% to $432 million. Another bright spot was Inflectra, the company’s biosimilar to Remicade. The drug climbed 48% to $166 million in the three months.

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Revenue from China also rocketed by double digits. The country breathed some new life into the company’s legacy established products (such as Lipitor), which, along with some generics, are part of the newly rejigged Established Medicines business. Bourla said he sees great potential in China and plans to relocate some top managers there because it's delivering most of the growth in the established business.

Heading into 2019, the company will have a new CEO, a new company structure and management team, as announced recently by Pfizer. And Bourla said it is already taking steps to simplify the organization, increase expense control and reduce organizational layers to generate savings and expedite decision making.