With Patents Expiring, Eli Lilly Looking for Deals

As the pharmaceutical industry is preparing for the expiration of several key patents, Eli Lilly & Co. is apparently ready to try and diversify their portfolio.  According to Forbes.com, Lilly’s Chief Executive has stated that they will pursue deals that cost between $5 billion and $15 billion, while staying away from any bigger acquisitions.  Lilly will also reportedly stick to acquiring drugs, rather than branching out in the medical device or diagnostic fields. 

This news may not come as a surprise, as the company will lose patent protection for Zyprexa, their best selling drug, in 2011.  Lilly will also lose patent coverage for Cymbalta, Humalog, and Gemzar in 2013.

Any of Lilly’s potential deals will follow what has already been a slew of deals in the pharmaceutical industry.  In January, Pfizer agreed to buy Wyeth for $68 billion.  Meanwhile, Merck & Co. will buy Schering-Plough Corp for $41.1 billion.  Lastly, Roche has paid $46.8 billion in cash to buy the 44% of Genentech that it didn’t already own.

Pfizer Looking To Biotechnology

In a recent interview with the Chicago Tribune, Pfizer Chairman and Chief Executive Jeffrey Kindler stated that Pfizer is in the midst of changing its business model.  The company will no longer rely on blockbuster medications such as Viagra and Lipitor.  Instead, Pfizer will be targeting unmet medical needs through biotechnology.

Lipitor is the world’s best-selling cholesterol drug, but Pfizer will begin losing more than $6 billion when the pill’s U.S. patent expires near the end of 2011.  Many speculated that losing the Lipitor patents were a key reason why the deal with Wyeth was signed.  Yet, Kindler leads one to believe that the deal was also struck in order to diversify Pfizer’s portfolio.  He said, “The dependence on a couple of large blockbuster products is not a good model.  If Pfizer of the past was best known for a few very large blockbuster drugs, then the new Pfizer is vastly more diversified.”

Kindler believes that the acquisition of Wyeth will do wonders for future products, as he believes that Wyeth’s technology is as good, if not better, than current market leaders.  Pfizer will be gaining Wyeth’s platform to treat Alzheimer’s in different ways.  Pfizer currently sells Alzheimer’s pill known as Aricept, but “it doesn’t cure the disease; it modifies symptoms over time.”

Hopefully the joining of these two companies will produce future breakthroughs in medications.

Pfizer-Wyeth Merger a Preview of Things to Come?

Pfizer’s recent move to buy Wyeth should not have come as any major surprise.  With patents expiring in the near future, and revenue pools drying up, such a move made sense.  But according to Pharmafocus, more pharmaceutical mergers may be on the horizon.

One such company that is speculated to make a move is Merck, which still hasn’t found a product that equals the amount of revenue generated by Vioxx.  In 2004, Vioxx was withdrawn after concerns that the drug increased the risk of heart attacks.  Chief executive Richard Clark recently said, “I don’t think in today’s world any CEO can categorically rule out any type of transaction.”  Some speculate that Merck could potentially merge with Schering-Plough, after the two forged a successful partnership for the marketing of cholesterol drug, Vytorin.

Another potential merger could involve Sanofi and Bristol-Myers Squibb.  The two recently gained legal protection against any further attacks on their co-marketed drug, Plavix.  But with the patent for Plavix expiring in 2011, both will see a huge loss in earnings.

At the same time, GlaxoSmithKline has made it clear that they are not interested in any mega-merger.  Chief executive Andrew Witty recently said he would “not be distracted by large-scale M&A.”  Some believe that the company’s recent moves into emerging markets supports Witty’s statement.

While merging companies may cut costs, it may only buy time.  The real cure for big pharma is to continue innovating and diversifying their research.

Pfizer Inc. in Talks to Buy Wyeth

In the latest set of rumors to surround the pharmaceutical industry, Pfizer is reportedly in talks to buy rival drug maker Wyeth.  According to the Wall Street Journal, the deal could be valued at more than $60 billion.

Reportedly, the two sides have been in discussion for months and the deal isn’t imminent.  However, given the recent economic uncertainty, the talks have been classified as “especially fragile.”

Like other major pharmaceutical companies, Pfizer and Wyeth face the expiration of patents in the coming years.  As a result, both companies will see avenues of revenue dry up when their most lucrative drugs face generic competition.  Also, a tougher regulatory environment in the U.S. and overseas has made it more difficult to win approval for new treatments, forcing companies to narrow their research focus.

Pfizer has been built through big acquisitions.  It gained control of the drug Lipitor after a $116 billion takeover of Warner-Lambert Co. in 2000.  However, not all acquisitions have worked out as Pfizer bought Pharmacia in 2003 for their painkiller Celebrex, only to see sales plunge after a rival drug, Vioxx, was withdrawn in 2004 over heart risks.

Meanwhile, Wyeth has established a foothold in biotechnology.  The company had strong success with Prevnar, its pediatric pneumococcal vaccine, which brought in $2.11 billion in sales for the first nine months of 2008.  Another staple of Wyeth’s portfolio is the anti-inflammatory biologic Enbrel.  If the deal with Pfizer goes through, Wyeth would also include its consumer health unit whose brands include Advil, Robitussin, and ChapStick.