Discussions with someone knowledgeable about the ongoing talks about the Pfizer – Allergan merger informed me that the deal is contingent upon Saunders becoming the Pfizer CEO. This is non-negotiable. Otherwise, if Pfizer wants Allergan it will have to do a hostile takeover.
As I was told, “Everyone knows how well that went when Pfizer tried to do a hostile takeover of Astra-Zeneca. Pfizer doesn’t want to repeat that.” Given that doing a tax-inversion has become Pfizer CEO Ian Read’s “great white whale” and that he and the Pfizer Board of Directors are anxious to make this happen, it is safe to assume that Saunders will get his wish.
So, what can Pfizer R&D expect from a new CEO who has taken pride in building pharmaceutical companies without in-house discovery research? After all, this is the same person who earlier this year told Forbes that “The idea that to play in the big leagues you have to do drug discovery is a fallacy.” Well, Pfizer is certainly the big leagues. Is discovery research about to be abolished at Pfizer?
In a recent interview, Saunders gave some hints to his thinking. When asked about his philosophy about investing in drug discovery, he said the following:
“ When I look at discovery research, I look at it as an area in health care that has struggled; but that doesn’t mean I am against it; it means I want to do it with caution and with a lot of examination. That being said, when I took over Allergan, I really spent a lot of time looking at our discovery capabilities and our discovery labs, and what I learned was we did have a comparable advantage. We did have a group that was being productive. Therefore, I feel very comfortable investing in that group and in those programs.”
This is an interesting and nuanced answer. It sounds like Saunders is saying that he supports discovery research as long as it is productive. It also sounds like he plans a full review of Pfizer’s discovery research programs in order to learn for himself whether these groups offer a “comparable advantage”. That would certainly be his prerogative and, in fact, it would be disappointing if he didn’t take this kind of action. Furthermore, I am sure that the Pfizer Board of Directors loved this answer as my guess is that he has been asked this by them. Of course Pfizer wants to do discovery research, it just wants it to be productive. One assumes, however, that the current administration has always sought a productive research organization. In fact, the entire Board of Directors serves on the company’s Science & Technology Committee which meets twice a year. Thus, they have all owned the oversight of the company’s R&D operations. Theoretically, Saunders might be pleasantly surprised by what he finds at Pfizer.
But there are some areas of research that have historically been very difficult. Take Alzheimer’s disease, where more than 99% of drugs that entered the clinic have failed. Will Saunders decide this is an unproductive area of research and discontinue all internal efforts? Such a move would be a blow to the people with this disease who are desperate for a cure. Conversely, Pfizer exited a number of research areas some years ago, a charge led by Ian Read, to focus on key areas of major medical need. Interesting, most of the areas abandoned by Pfizer – dermatology, ophthalmology, GI, incontinence – are areas of focus for Allergan. Will Saunders move Pfizer R&D back into these areas? Will he be more attracted to areas where the clinical proof-of-concepts are simpler and don’t involve risky and expensive clinical trials that require tens of thousands of patients? That could take Pfizer out of areas like heart disease and diabetes.
When Ian Read’s predecessor, Jeff Kindler, spoke to the Pfizer Board of Directors about his vision for Pfizer if he were to be anointed as CEO, he said that he wanted Pfizer to become known as the “Science Company”. The Board loved this vision. Unfortunately, under Kindler’s watch, thousands of scientists lost their jobs, both before and after the Wyeth acquisition. Pfizer is now on the cusp of another merger potentially with another new CEO. R&D will again be under the microscope and, given Pfizer’s annual billions of dollars of investment in this endeavor, this is how it should be. But Saunders hasn’t exactly made his name as a staunch supporter of R&D – quite the opposite. It will be interesting to see how his philosophies translate to the “big leagues.”
By John LaMattina
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