Should Pfizer buy Wyeth?

Pfizer has reached the top of the pharmaceutical ladder in large part thanks to mega-acquisitions. The Warner Lambert acquisition most notably brought Lipitor which Pfizer grew into a $ 12 billion brand. The acquisition of Pharmacia brought a more diversified portfolio, although Celebrex felt to reach full blockbuster status because of post-marketing safety issues.
Yet, despite a $ 7+ billion budget, Pfizer’s R&D productivity has remained dismal, with no blockbuster or not even enough product launches to replace Lipitor when it loses its patent starting in 2010. Bigger was not better in pharmaceuticals, or at least it was not sustainable.
Under the new CEO Jeffrey Kindler, Pfizer promised to re-invent itself, targeting specialty areas and re-deploying its legendary mass marketing approach into a more focused customer-centric communication.
Wyeth has a gone the same trajectory, although from a smaller revenue base, building specialty mega-brands, such as Arthritis biological drug Enbrel and pneumoccocal vaccine Prevnar. Wyeth’s oncology pipeline is also particularly promising, in particular breast cancer drug neratinib (HKI 272) which has the potential to reach over $ 3 billion in sales.
Analysts like the Pfizer-Wyeth combination, because it strengthen the Biotech portfolio of Pfizer. At $ 50 a share, or $ 65 billion valuation, Wyeth is still considered a good buy.
The official agreement to merge could come as early as next week. Once a gain, Pfizer will buy its way in, but doubts remain that this will transform its corporate culture and make a more nimble company with a productive R&D.

Is it time to buy Schering Plough stock?

Shares of Schering Plough (NYSE:SGP) and Merck & Company (NYSE:MRK) have dropped 40% and 25% respectively since January 2008 when first news of negative results were made public. The downward spiral accelerated in the past week since ENHANCE was presented at the meeting of the American College of Cardiology. Full publication and comments have published in the New England Journal of Medicine.

Schering Plough CEO Fred Hassan did not wait more than a few days to announce a major restructuring, including 5 500 lay-offs of 10% of worldwide staff, for total annual savings of $ 1.5 billion. mostly in the US.  That gave an immediate boost to Schering Plough stock which jumped 11% on Thursday to $15.32 having hit a record low of $ 13.83 the previous day.

Yet, Wall Street worries that that may not be enough and that Vytorin and Zetia will never recover the $ 5.2 billion in sales reached in 2007. However some analysts are bullish at the prompt reaction of Fred Hassan to cut costs, accelerate Organon’s integration and improve productivity. Credit Suisse C.Arnold reaffirmed an “outperform” rating and a target price of $ 32. Others like Mad Money’s Jim Cramer also sticking with Schering Plough stressing that SGP trades at less than 10 times earnings, that the company is valued at the price of Organon plus Remicade sales, while it has another $ 15 billion in sales and the second best short term pipeline in the industry based on potential launches in the 2008-2012 period.

Will Negative Media Hype on Vytorin eventually harm patients?

Is the media hyping the negative result of the ENHANCE study beyond the actual scientific evidence available? We believe so, and so does FDA’s Center for Drug Evaluation and Review Office of Medical Policy director Robert Temple.

In an interview with FDAWebview, he comments: “The only ‘finding’ I’m aware of is failure to show an added effect on carotid plaques, a surrogate endpoint at best, and one that rates, as a surrogate for predicting coronary events, in my book below LDL cholesterol, in a study that was far too small to be an outcome study. It does appear that the ezetimibe did lower CRP (c-reactive protein) some, something many people would think desirable.”

Dr Temple is also concerned that the continuing backlash on cholesterol drugs may affect the use of statins:” As the recent Crestor story remind us (for people without known cardiac disease, by the way) we sure do know it is beneficial and people who need that treatment will pay with their lives if they’re encourage to avoid treatment”.

The bottom line is that, while full outcome data will not be available for several years, Vytorin is safe and physicians may want to consider the glass half full and offer the potential additional benefits of ezetimibe in addition to simvastatin to all appropriate patients.

Will Genentech’s Avastin be approved on February 23, 2008 by the FDA for Metastatic Breast Cancer ?

While the FDA Advisory Committee voted 5-4 last December, against approval of Avastin in Metastatic Breast Cancer, one of the committee members may have changed his vote, leading to a 5-4 in favor of approval, according to a recent Conference Call of Roche. Roche is the parent company of Genentech (NASDAQ:DNA) and the marketer of Avastin in Europe. The European Regulatory Agency, EMEA, has expressed a favorable opinion. The FDA Approval decision is expected on February 23. If there is any doubt, the AVADO study, to be released by mid-2008, should demonstrate progression-free survival and convince the skeptics. Breast Cancer labeling is worth $ 1 billion in Avastin sales.

Genentech’s stock is trading at below $ 70 a share, assuming the worst scenario. The good news on February 23 as weel as other developments such as  adjuvant treatment of Colon Cancer with Avastin and Lupus and Multiple Sclerosis with Rituxan, should support a ride upwards for DNA.

Teva Moves into Biologics

Generic Giant, Israel-based, Teva Pharmaceuticals (NASDAQ:TEVA) buys for $ 400 million in cash, CoGenesys, a 2006 spin off of Maryland-based Human Genome Sciences. CoGenesys’s pipeline of biologic drugs includes treatments for cardiovascular disease, cancer and autoimmune disorders.

Teva announced in 2007 his strategic decision to move into biologics. The obvious opportunity is to build an early leader position in Bio-Similars. Europe has already approved Novartis version of J&J’s Eprex ( marketed in the US by Amgen as Epogen). Teva, which has a market cap in excess of $ 30 billion, has clearly the financial resources to step up its investments in follow on biologics and possibly move into more innovative bio-pharmaceuticals. Copaxone, Teva Multiple Sclerosis drug, may actually benefit from CoGenesys albumin technology inorder to improve and prolong its activity.

How much damage did ENHANCE cause for Merck and Schering Plough’s Vytorin?

After much delays and controversy due to attempts to re-consider the study ENHANCE end point, top line results have been released according to the initial design. Bottom line: Vytorin, a fixed combination of 10 mg of ezetimide, a cholesterol absorption inhibitor, and 80 mg simvastatin did not due better than 80 mg simvastatin alone in reducing Intima Media Thickness (IMT) or atherosclerotic plaque at 3 sites in the carotid arteries in patients with Familial Hypercholesterolemia. Meanwhile, LDL-C, a key marker of heart disease, was down 68% at 24 months in the Vytorin group versus 41% in the simvastatin group. What can we conclude? Atherosclerosis is multi-faceted and particularly difficult to study. Statins anti-inflammatory effect – in addition to LDL-C lowering- may be a significant contributor to their efficacy. Inflammation is a key component of atherosclerosis and heart disease. Vytorin remains a safe and superior efficacy drug to agressively reduce LDL-C.  Dr Steven Nissen, a leading cardiologist from the Cleveland Clinic and often critic of the industry, recommended to limit the use of Vytorin to patients not responding to simvastatin. We believe hat this is an over-reaction since LDL-C remains the best marker of heart disease prevention and  the consensus is that “lower is always better”.

More definitive conclusions will determine the long term future of Vytorin when the results of three larger cardiovascular end pont studies are available in 2010-11.

Merck & Co  (NYSE:MRK) and Schering Plough (NYSE:SGP) have been down 1.3% and 8% respectively on January 14 upon release of the unfavorable news. Negative publicity for Vytorin may have a short term impact on sales but long term Vytorin remains a winner and a major revenue contributor for both Merck and Schering Plough.

Schering Plough’s CEO showed his confidence by personally purchasing $ 2 million of Schering Plough stock on the open market.