Pfizer's grand plan to spin off its lagging Upjohn generics business into a merger with Mylan has run into a roadblock: COVID-19 derails even the best-laid plans. If the spinoff goes through, it would leave a reimagined—and faster-growing—Pfizer behind, but keeping the band together could still drive modest growth in the coming years.
Pfizer as currently constructed could see 2.83% annual growth through 2026 to reach $56.1 billion in revenue, a more than $5 billion jump from the drugmaker's 2019 total, according to Evaluate's forecast.
To get there, Pfizer would certainly need to lean on its lucrative biopharma brands, which turned in impressive 12% growth in the first quarter at just over $10 billion in revenue. Meanwhile, Upjohn turned in a dud once again with a horrific 37% drop in sales to just over $2 billion on the quarter.
With those numbers in mind, it's no wonder Pfizer is willing to take the chance on dumping Upjohn and striking out with its branded drug portfolio and equally pitiful—but tiny—consumer health business in tow.
However, the Pfizer that would come out on the far end of that spinoff/merger would be far different from its current iteration and would likely switch up Evaluate's rankings.
Upjohn pulled in $10.22 billion in revenue in 2019, and saying goodbye to that would take a big bite out of Pfizer's top line. However, the company on the back end could hit 6% growth per year through 2016, according to RBC Capital Markets analyst Randall Stanicky—a significant bump over the 1% decline the drugmaker saw in 2019.
In the first quarter, Pfizer's biopharma unit rode a strong launch for ATTR-cardiomyopathy therapy Vyndaqel and continued growth for blood thinner Eliquis and breast cancer med Ibrance. Even aging pneumococcal vaccine Prevnar 13 saw an unexpectedly strong quarter, but maybe not for what you think.
Pfizer reported international sales of Prevnar were up 11% in Q1, an increase primarily tied to "physicians apparently prescribing...to treat or prevent COVID-19 infections or related conditions," the drugmaker said.
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In all, Prevnar 13 saw a 1% operational decline in sales to $1.49 billion. CEO Albert Bourla said Pfizer expects to see Prevnar sales decline in the second quarter amid the pandemic with an expected "resurgence" in the second half of the year.
Meanwhile, Vyndaqel, which launched stateside in May 2019, and sister formulation Vyndamax hit $231 million in sales in the first quarter. The drugs had combined for $473 million in sales in all of 2019. Pfizer didn't expect a major hit on Vyndaqel, Vyndamax, Eliquis or Ibrance from COVID-19 because they're oral meds with established brand reputations, Bourla said.
Pfizer's "core 5" products—Vyndaqel, Eliquis, Ibrance, Prevnar and Xeljanz—will likely spell a bright future for the drugmaker, which RBC Capital Markets analyst Randall Stanicky said in January would likely survive a "messy" breakup with Upjohn.
Those five products don't face a meaningful patent loss until after 2025, Stanicky noted, giving Pfizer plenty of room to identify a strategic acquisition or invest further into its pipeline to keep growth on the uptick in the following years.
Among those pipeline candidates is Pfizer's next-gen, 20-valent pneumococcal vaccine meant as a follow-up to blockbuster Prevnar 13. In March, the drugmaker
touted positive phase 3 data for the vaccine that could lead to a regulatory filing by year's end.
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Having those strong performers on board should help a slimmed-down Pfizer post much better growth than 3%, but if its Upjohn spinoff doesn't go through, it could just be more of the same.
EU regulators blessed the merger in April, after the pair of drugmakers agreed to sell some Mylan generic drugs across 20 countries in the European Economic Area and the U.K. The European Commission noted that Mylan and Upjohn have overlaps in several disease areas such as cardiovascular, musculoskeletal, nervous system and urinary tract.
Meanwhile, the U.S. Federal Trade Commission's review of the merger continues and has already
forced a delay due to COVID-19 restrictions.
If the merger does go through, the combined generics maker, Viatris, would take its place as the single largest company of its kind in the world, Pfizer said. The board of the new company has already been well-populated with Pfizer veterans, including former CEO Ian Read.