Wednesday, November 2, 2011

Investopedia: Should Pfizer Forget R&D Altogether?


For quite a few years, I've been beating the drum that Big Pharma could not indefinitely cost-cut its way to prosperity. After all, if you fire all of the marketing reps and the scientists, you will certainly boost your margins, but where will tomorrow's growth come from? Pfizer (NYSE:PFE) clearly has some challenges ahead in refilling its pipeline, but perhaps more long-term value can come from pulling back on early-stage internal research and development (R&D), and using the money saved to buy compounds and companies that have already put in the time and money to show real promise.
A Surprisingly Strong Third Quarter 
A company like Pfizer shouldn't surprise people all that often (or by all that much), but surprise the Street the company did. Revenue rose 7% on a reported basis, and not only beat the average Wall Street guess by about 5%, but also surpassed the high end of the range. Real operating growth was a more sedate 1%, though, and U.S. revenue fell 3%.


Read more here:
http://stocks.investopedia.com/stock-analysis/2011/Should-Pfizer-Forget-RD-Altogether--PFE-MRK-ABT-LLY-VRTX-CELG-SHPGY-FRX-BIIB1102.aspx

4 comments:

Anonymous said...

Pfizer has tried the buying compounds route over the years. A few years back they paid a huge sum for Esperion, a small biotech which had a drug that raised HDL cholesterol. That drug was going to be the "successor" to Lipitor, but something went wrong, the drug had bad side effects or something and Pfizer ended up flushing the whole thing down the tubes.

Drug development is a risky strategy but so is trying to buy other companies with candidates. After all, every other big pharma company is out there looking for the same candidates. There just isn't a foolproof strategy here so perhaps the best choice is to remain flexible, if possible.

Stephen Simpson said...

@PI -
That's true, but that's also why I was pushing the "companies w/ approved drugs" angle a little harder.

Anonymous said...

Pursuing that idea, what do you think of Pfizer (or somebody else) buying Dendron? Would DNDN's assets (not necessarily just Provenge but perhaps even the manufacturing process or the underlying technology behind it) be worth a lot more to someone with more financial resources or marketing clout? I have no inkling myself but there has been some speculation.

Stephen Simpson said...

The biggest problem w/ Provenge is that it doesn't shrink tumors and a lot of docs don't trust the survival data because of that.

Could Pfizer's marketing resources fix that? Maybe. I certainly think a Big Pharma should be able to produce Provenge at a better internal cost.