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The Pulse of the Pharmaceutical Industry

Refocused On Success 2013

Written by: | | Dated: Tuesday, October 1st, 2013

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As Pfizer continues to be weighed down by Lipitor’s patent expiration, the company has sold off its animal health business and is moving to internally split its commercial operations into three business segments.

At Pfizer, there is a new slogan and a new attitude. As CEO Ian Read put it in his annual letter to shareholders, “I believe our culture can become a key sustainable advantage as we work to make Pfizer the premier, innovative biopharmaceutical company. That’s why we are investing time and resources to develop one unified culture that we call ‘OWN IT!’ We are committed to creating an ownership culture that unleashes the creativity of our colleagues around the world.”

According to Read, in 2012 Pfizer focused on building a culture in which employees apply their expertise to take appropriate risks to innovate, are accountable for their decisions, work collaboratively, deliver on their commitments, engage in constructive debate to help ensure each other’s success, and operate with integrity and in compliance with applicable legal requirements and company policies.

“Through new tools and companywide training, we are equipping leaders across the business to have open and candid conversations with colleagues and to encourage their active involvement in solving problems,” Read says. “We are seeing early signs of an ownership culture taking hold as colleagues become more entrepreneurial and seize opportunities to make a difference in the business.” For example, the initiative and accountability of our colleagues contributed to an earlier-than expected approval for Xeljanz in the U.S. Likewise, during 2012 the innovative approach of the teams managing the Lipitor loss of exclusivity resulted in a substantially greater market share compared to previous LOE analogue products in the industry.

“I firmly believe having an ownership culture is what will give us the ultimate competitive advantage and it is a key priority for me and Pfizer’s entire senior leadership team.”

Product sales and financial performance

In 2012, Pfizer made decisions and took actions that enabled the company to allocate its capital in ways that enhanced shareholder value. Pfizer continued its multi-year, companywide program to reduce expenses, cutting its total adjusted cost of sales, selling, informational & administrative (SI&A) expenses, and R&D expenses on an operational basis by about 10 percent, which was nearly a $4 billion reduction compared to 2011 levels.

Pfizer sold its Nutrition business to Nestlé for $11.85 billion, and renamed its Animal Health business Zoetis. In early 2013, the company completed an IPO in which it sold about 20 percent of Zoetis to the public and a related debt offering, generating approximately $6 billion in proceeds to Pfizer.

Read says during 2012, Pfizer continued to pursue “bolt-on” business development opportunities to supplement its research efforts and product offerings. “These are acquisitions or collaborative arrangements that we can readily integrate and that expand our reach or capabilities,” he comments.

Among the acquisitions was NextWave, a specialty pharmaceutical company focused on the development and commercialization of products for the treatment of attention deficit/hyperactivity disorder. With Zhejiang Hisun Pharmaceuticals, Pfizer launched Hisun Pfizer Pharmaceuticals Company Limited, a joint venture to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets. The company entered into an exclusive long-term collaboration with Mylan to develop, manufacture, distribute, and market generic drugs in Japan. To capitalize on the strengths of its Consumer Healthcare business, Pfizer signed an agreement with AstraZeneca to obtain the over-the-counter rights to the gastrointestinal drug Nexium. Pfizer also acquired Alacer, a company whose product, Emergen-C, fits well into the vitamins and supplements portfolio.

“I am pleased with our recent accomplishments focused on creating greater value for our shareholders, including the completion of the full disposition of Zoetis which generated over $17 billion in value as well as the announcement of our new commercial model,” Read says. “This new model represents the next step in Pfizer’s journey to further revitalize our innovative core, enhance the value of our consumer and off-patent established brands, and maximize the use of our capital to create value for Pfizer and our patients, consumers and shareholders.”

All of these moves are needed, as revenue in 2012 and the first half of 2013 was significantly affected by the patent expiration of Pfizer’s blockbuster cholesterol-lowering drug Lipitor. In 2012, company revenue was $58.99 billion, 9.6 percent less than in 2011. GAAP reported net income totaled $14.57 billion, an increase of 45.6 percent from 2011. GAAP reported earnings per share for 2012 were $1.94, 52.8 percent less than in the previous year. Pfizer spent $7.87 billion on R&D, 13.3 percent less than the 2011 total.

For the first half of 2013, revenue amounted to $25.38 billion, 9.1 percent less than in the same period of 2012. Because of the sale of Zoetis, net income in first-half 2013 was $16.85 billion, compared with $5.05 billion in first-half 2012. Earnings per share were $2.34 in the first half of the year, compared with 67 cents in the same period of 2012. R&D expenses reached $3.14 billion in first-half 2013, 2.9 percent less than in first-half 2012.

U.S. sales from biopharmaceutical products decreased 17 percent in 2012 compared to 2011, primarily reflecting lower sales of Lipitor, Geodon, Caduet, Xalatan and Aromasin, all due to loss of exclusivity; lower alliance revenue due to the loss of exclusivity of Aricept 5mg and 10mg tablets in November 2010; and lower revenue from Effexor, Zosyn, and Detrol/Detrol LA. The impact of these adverse factors was partially offset by the strong performance of certain other biopharmaceutical products, lower reductions related to rebates, the $593 million reduction in revenue related to the U.S. healthcare legislation’s higher, extended, and expanded rebate provisions and the Medicare “coverage gap” discount provision; and $336 million recorded in selling, informational and administrative expenses related to the fee payable to the federal government.

In the company’s international markets, revenue from biopharmaceutical products decreased 7 percent in 2012 compared to 2011, primarily due to the loss of exclusivity of Lipitor in most of developed Europe and the unfavorable impact of foreign exchange of 3 percent. Operationally, revenues decreased 4 percent in 2012, compared to 2011. In addition to Lipitor, the decrease in operational revenue was driven by the loss of patent exclusivity for Xalatan/Xalacom, Aricept, and Aromasin in certain markets. Alliance revenue also decreased, primarily due to the loss of exclusivity of Aricept in many major European markets, and lower revenue for Spiriva in certain European countries, Canada and Australia, which reflected the final-year terms of Pfizer’s Spiriva collaboration agreements relating to those countries; as well as lower revenues for Norvasc and Effexor. The impact of these adverse factors was partially offset by the strong operational growth of Lyrica, Prevnar 13/Prevenar 13, and Enbrel.

During 2012, international revenue from biopharmaceutical products represented 62 percent of total revenues from biopharmaceutical products, compared to 59 percent in 2011. With the loss of patent exclusivity for Lipitor, Pfizer’s best-selling product in 2012 was the CNS drug Lyrica, which recorded sales of $4.16 billion, 12.6 percent more than in 2011. For the first half of 2013, Lyrica sales amounted to $2.2 billion, 10.6 percent more than in the first half of 2012.

Lipitor was Pfizer’s second-best selling drug in 2012. The cholesterol reducer had sales of $3.95 billion compared with $9.58 billion during the previous year. Sales continued to decline in the first half of 2013, at $1.17 billion, which was a 55.2 percent decline from the same period last year.

No. 3 for Pfizer in 2012 was Enbrel, which the company markets outside of the United States and Canada. The drug earned the company $3.74 billion, 1.2 percent more than in 2011. First-half 2013 sales totaled $1.84 billion, 2.6 percent less than in first-half 2012.

The No. 4 product in 2012 was Prevnar 13/Prevenar 13 at $3.72 billion, 1.7 percent more than in 2011. First-half 2013 sales of the pneumococcal vaccine totaled $1.9 billion, 8.8 percent less than in the same period last year. Executives attributed the decrease to government purchasing patterns in various markets.

The No. 5 product for Pfizer in 2012 was the pain and inflammation drug Celebrex. Sales were $2.72 billion, 7.8 percent more than in 2011. First-half 2013 sales reached $1.37 billion, 5.8 percent more than in first-half 2012.

No. 6 in sales in 2012 was the erectile dysfunction drug Viagra, recording $2.05 billion in sales, 3.5 percent more than in 2011. In the first half of 2013, sales amounted to $945 million, 3.7 percent less than the same period in 2012.

The seventh-largest selling product for Pfizer in 2012 was the hypertension drug Norvasc. Sales of the drug for 2012 came in at $1.35 billion, 6.6 percent less than in 2011. For the first half of 2013, Norvasc sales were $614 million, 10 percent less than in first-half 2012.

The eighth best-selling product in 2012 was the antibiotic Zyvox. Sales were $1.35 billion, 4.8 percent more than in 2011. In the first half of 2013, Zyvox sales were $688 million, 3 percent more than in the same period last year.

No. 9 for Pfizer in 2012 was the cancer drug Sutent. Sales were $1.24 billion, 4.1 percent more than in 2011. In the first half of 2013, Sutent sales were $614, 1 percent less than in first-half 2012.

Pfizer’s 10th best-selling drug franchise in 2012 was the Premarin family of female hormone replacement products. Premarin products generated $1.07 billion, 5.9 percent more than in 2011. First-half 2013 sales were $517 million, 3.4 percent less than in the same period of 2012.

During the second quarter of 2013, sales generated by Pfizer’s Oncology business increased 28 percent operationally due to the uptake of new products, primarily Inlyta and Xalkori in several major markets. Various key products performed well, such as Lyrica, which grew 14 percent operationally in developed markets, and Celebrex, which improved 13 percent in the United States.

The company expected its Emerging Markets business growth to accelerate in the second half of 2013, led by China.

“From a total company view, we are tracking to our expectations for the full year and continue to capitalize on the investments we are making to better position Pfizer for long-term success,” Read says.

Pfizer has announced plans to move forward to internally separate its commercial operations into three business segments, two of which will include Innovative business lines and a third that will include the Value business line. Each of the three segments will include developed markets and emerging markets. The changes will be put into place in fiscal 2014 in countries that do not require a consultation with works councils or unions, and will be implemented in countries that require consultation after the successful conclusion of those processes. Beginning with the first-quarter 2014 financial results, the company will provide greater financial transparency for each of these three business segments, which will include a 2014 baseline management view of profit and loss for each segment.

Additionally in the first half of 2013, the board of directors authorized a new $10 billion share repurchase program to be used over time. This new program is in addition to the $3.1 billion of authorization that remained from the previous share repurchase program.

Pipeline progress and collaborations

According to Pfizer executives, 2012 was a pivotal year for pipeline developments, with five new therapies now available that have significant efficacy and safety as well as value for patients, physicians and payers.

Bosulif, a tyrosine kinase inhibitor, was approved in the United States for previously treated Philadelphia chromosome-positive chronic myelogenous leukemia. “With this approval, we continue to bring to patients targeted therapies that more precisely treat their illness,” according to executives.

In March 2013, Bosulif gained conditional approval in the European Union for the treatment of adult patients with chronic phase, accelerated phase, and blast phase Philadelphia chromosome positive chronic myelogenous leukemia previously treated with one or more tyrosine kinase inhibitor(s) and for whom imatinib, nilotinib, and dasatinib are not considered appropriate treatment options.

Conditional marketing authorizations in the EU are granted to medicinal products with a positive benefit/risk assessment that address unmet medical needs and whose availability would result in a significant public health benefit. These authorizations are renewable annually. As part of the conditional approval, Pfizer will be producing additional efficacy data for Bosulif. Following review of the data by the EMA’s Committee for Medicinal Products for Human Use, the EC will consider converting the conditional marketing authorization to a full marketing authorization.

Elelyso was approved in the United States as an enzyme-replacement therapy for type 1 Gaucher Disease in adults, a genetic disease characterized by anemia, low platelet counts, bone disease, and an enlarged liver and spleen. Pfizer licensed the drug from Protalix BioTherapeutics.

Eliquis was approved in the United States, Canada, the European Union, and Japan as an anticoagulant. The drug was jointly developed and is jointly promoted with Bristol-Myers Squibb (see profile on page 36). Executives say Eliquis has the potential to set a new standard of care in the high-need area of stroke prevention for patients with nonvalvular atrial fibrillation.

In the first half of 2013, FDA accepted for review a supplemental new drug application for Eliquis for the prophylaxis of deep-vein thrombosis, which may lead to pulmonary embolism, in adult patients who have undergone hip or knee replacement surgery. FDA will review the application and is expected to provide a decision by March 15, 2014.

The Phase III AMPLIFY trial presented at the 24th Congress of the International Society on Thrombosis and Haemostasis demonstrated that Eliquis as a single agent achieved the primary efficacy endpoint of noninferiority to current standard of care in the reduction of the composite endpoint of recurrent symptomatic acute venous thromboembolism (VTE) or VTE-related death and met the primary safety endpoint of superiority to current standard of care for major bleeding. Pfizer and Bristol-Myers Squibb plan to file for the initial and long-term treatment of VTE, as well as for extended prevention of recurrent VTE, with FDA and the EMA by the end of 2013.

Inlyta was approved during 2012 in the United States, Japan, and the European Union for advanced kidney cancer. Inlyta sales were $134 million in the first half of 2013.

Xeljanz was approved in the United States during November 2012 as the first new oral disease-modifying anti-rheumatic drug in over a decade. Xeljanz offers a totally new mechanism of action to treat rheumatoid arthritis and has a compelling clinical profile. Xeljanz sales were $33 million in the first half of 2013.

In the first half of 2013, FDA accepted for review a supplemental new drug application for the Xeljanz moderately to severely active rheumatoid arthritis indication seeking expansion of the label to include inhibition of progression of structural damage. FDA will review the application and is expected to provide a decision by February 2014.

The Committee for Medicinal Products for Human Use of the European Medicines Agency adopted a negative opinion for Xeljanz for the treatment of adult patients with moderate-to- severe rheumatoid arthritis. Pfizer appealed this opinion and sought a re-examination of the opinion by the CHMP. Upon re-examination, the CHMP reached a negative opinion. The company is evaluating the feedback from the CHMP, will determine next steps to resubmit a marketing authorization application to the EMA, and anticipates that this will result in a several-year delay.

Pfizer executives say the Phase III Xeljanz psoriasis program continues to progress, but due to the large size and complexity of the database, the company has encountered challenges in analyzing the data. As a result, Pfizer now expects to announce the top-line results from the first two Phase III studies by the end of 2013, and the top-line results from the two Phase III pivotal studies in second-quarter 2014. The company says this unexpected delay is not the result of any safety issues.

A Xeljanz once-a-day, delayed-release formulation is being developed. “We’ve had dialogue with the FDA on the development plan and we have determined that the registration package will be comprised primarily of pharmacokinetic data, PK data, without a requirement for a clinical Phase III trial which will accelerate the development of that program,” says Geno Germano, president and general manager, Specialty Care and Oncology. The company expects to file for approval the new formulation in early 2015.

During 2012 the company also advanced its early and mid-stage pipeline, most notably in the oncology and vaccines areas. Pfizer moved forward in Phase III studies with dacomitinib for non-small cell lung cancer, inotuzumab for aggressive non-Hodgkin’s lymphoma, and Xeljanz for psoriasis. Phase III studies were initiated for Xeljanz for ulcerative colitis, for inotuzumab for acute lymphoblastic leukemia, and for a Meningococcal B vaccine for individuals aged 11–25.

In the first half of 2013, the European Commission approved Prevenar 13 for an expanded indication to include adults aged 18 to 49 years for active immunization for the prevention of invasive disease caused by vaccine-type Streptococcus pneumoniae. The EC is the first regulatory authority to approve Prevenar 13 to offer protection against invasive disease at all stages of life.

In August 2013, Pfizer said accrual of pneumonia cases has been completed for the Community-Acquired Pneumonia Immunization Trial in Adults (CAPiTA) 65 years of age and older. CAPiTA, the largest trial of its kind, was designed to evaluate whether Prevenar 13 is effective in preventing community-acquired pneumonia (CAP) caused by the 13 pneumococcal serotypes included in the vaccine. Because the study is event-driven, a pre-specified number of community-acquired, vaccine-type pneumococcal pneumonia cases have to occur among study participants before the results can be determined.

All remaining suspected cases in review will be fully processed to allow the database to be locked. This case processing will take several months to complete and will be performed by Julius Clinical, a spin-off of the Julius Center for Health Sciences and Primary Care, a division of the University Medical Center Utrecht in the Netherlands, where the study is being conducted. Pfizer will be blinded to the data during this period. Once unblinding occurs, Pfizer, Julius Clinical, and the primary investigator will review the data and disclose the top-line results, which is expected to occur in early 2014.

In April 2013, palbociclib received breakthrough therapy designation by FDA for the potential treatment of patients with breast cancer. Also known as PD-0332991, palbociclib is an oral and selective inhibitor of cyclin dependent kinases (CDK) 4 and 6 for the potential treatment of patients with breast cancer.

“We appreciate the opportunity that breakthrough therapy designation provides to work closely with the FDA on the development of palbociclib,” says Dr. Mace Rothenberg, senior VP of clinical development and medical affairs for Pfizer’s Oncology business unit. “Palbociclib is one example of Pfizer’s commitment to identifying and translating innovative science into meaningful new treatment options for cancer patients.”

Pfizer has initiated a randomized, multi-center, double-blind Phase III study (known as Study 1008) evaluating palbociclib in combination with letrozole versus letrozole alone as a first-line treatment for post-menopausal patients with ER+, HER2- locally advanced or metastatic breast cancer. Study 1008 is open and enrolling.

The breakthrough therapy designation was based on preliminary Phase II data in this patient population. Interim data presented at the 2012 CTRC-AACR San Antonio Breast Cancer Symposium showed that women treated with the combination of palbociclib plus letrozole achieved a statistically significant improvement in median progression-free survival compared to women who received letrozole alone (26.1 months and 7.5 months, respectively).

Not everything in the late-stage pipeline has been progressing successfully. A Phase III study evaluating the safety and efficacy of inotuzumab ozogamicin in patients with relapsed or refractory CD22+ aggressive non-Hodgkin’s lymphoma who are not candidates for intensive high-dose chemotherapy was discontinued due to futility. This compound continues to be studied in adult acute lymphoblastic leukemia and other hematological malignancies.

The company received some good news from FDA about tanezumab in July 2013 when the osteoarthritis pain drug’s partial clinical hold was lifted. The partial clinical hold had been placed on the development of all NGF inhibitors back in December 2012 based on observation and some animal toxicity studies conducted on NGF inhibitors in development through other manufacturers.

The partial clinical hold was lifted on a commitment by Pfizer to submit nonclinical data before initiating dosing in clinical trials and to limit any dosing duration until the additional nonclinical data has been submitted and reviewed by FDA.

Nonclinical data studies have already been started and with the lifting of the partial clinical hold, and on the assumption of positive review of the nonclinical data by FDA, Pfizer is preparing for a resumption of Phase III clinical studies in 2014.

In the area of cholesterol inhibitors, Pfizer is continuing to develop its PCSK9 candidate, RN316. “We do believe there will be a limited number of entrants in this new drug class,” says Mikael Dolsten, president, Worldwide Research & Development. “We think it has potential to be a very important drug class with substantial clinical and commercial potential. Key here will be to over time demonstrate the important long term CV outcomes value for the patients, physicians, and payers. Our own antibody is now fully enrolled in Phase IIb and we’ll soon complete that study. We have seen interim results showing potent antibody with a competitive profile. And we will assemble all the data from the Phase IIb and look at the opportunity for subcutaneous delivery at various time intervals and make a decision at end of this year about the next step forward.”

Pfizer executives say its pipeline accomplishments are a result of actions set in motion early in 2011 to improve R&D productivity. The company’s scientists are now focused on the therapeutic areas where we have distinct advantages such as neuroscience and pain, cardiovascular/metabolic, oncology, inflammation, and immunology, and vaccines. The chief scientist of each therapeutic area is accountable for managing resources and delivering specific results.

Additionally, though Pfizer’s Groton R&D facility continues to provide important drug discovery and development expertise, many of the company’s scientists are now located in cities considered to be hubs of biomedical innovation, such as Boston, San Francisco, and San Diego.

“By working alongside their counterparts in academia and with biotech partners, Pfizer scientists are able to drive discovery efforts and expand our access to important enabling science and technology,” executives say.

The company is also using specific metrics to assess its success rate at every stage of the development cycle to help ensure Pfizer is allocating its capital to the programs that have the highest potential for delivering value.

“Through all of these actions, we are becoming increasingly rigorous in our choices of potential new medicines to move into the later, most expensive stages of development and much more agile in advancing our pipeline forward,” executives say.

The company continues to explore collaborations to expand its pipeline. In April 2013, Pfizer entered into a worldwide (except Japan) collaboration agreement with Merck & Co. (see profile on page 53) to develop and commercialize ertugliflozin and ertugliflozin-containing fixed-dose combinations with metformin and Januvia tablets. Ertugliflozin is Pfizer’s investigational medicine for type 2 diabetes. Phase III clinical trials were expected to begin during 2013.

“We are pleased to join forces with Merck in the battle against type 2 diabetes and the burden that it poses on global health,” says John Young, president and general manager, Pfizer Primary Care. “Through this collaboration, we believe we can build on Merck’s leadership position in diabetes care with the introduction of ertugliflozin, an innovative SGLT2 inhibitor discovered by Pfizer scientists.”

Under the terms of the agreement, Merck will continue to retain the rights to its existing portfolio of sitagliptin-containing products. Pfizer received an upfront payment and milestones of $60 million and is eligible for additional payments associated with the achievement of pre-specified future clinical, regulatory and commercial milestones. Merck and Pfizer will share potential revenue and certain costs on a 60/40 percent basis.

Product sales and financial performance

Lyrica $4,158 $3,693
Lipitor $3,948 $9,577
Enbrel $3,737 $3,666
Prevnar 13/ Prevenar $3,718 $3,657
Celebrex $2,719 $2,523
Viagra $2,051 $1,981
Norvasc $1,349 $1,445
Zyvox $1,345 $1,283
Sutent $1,236 $1,187
Premarin  family $1,073 $1,013
Genotropin $832 $889
Xalatan, Xalacom $806 $1,250
BeneFIX $775 $693
Detrol, Detrol LA $761 $883
Vfend $754 $747
Chantix/Champix $670 $720
Pristiq $630 $577
ReFacto AF, Xyntha $584 $506
Zoloft $541 $573
Revatio $534 $535
Medrol $523 $510
Zosyn/Tazocin $484 $636
Zithromax, Zmax $435 $453
Effexor $425 $678
Prevnar/Prevenar $399 $488
Fragmin $381 $382
Relpax $368 $341
Rapamune $346 $372
Cardura $338 $380
Tygacil $335 $298

All sales are in millions of dollars.

  2012 2011
Revenue $58,986 $65,259
Net Income $14,570 $10,009
EPS $1.94 $1.27
R&D $7,870 $9,074
  1H13 1H12
Revenue $25,383 $27,813
Net Income $16,845 $5,047
EPS $2.34 $0.67
R&D $3,139 $3,233

All figures are in millions of dollars except EPS.

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