Following news of the Pfizer-Allergan merger, the pharma world is united in predicting a split, according to analyst Mark Schoenebaum, whose company Evercore ISI surveyed 448 industry insiders and found more than 90% believe Pfizer “should split eventually.”
Chrisoph Bieri, an M&A advisor to the pharma industry, backed up this claim. He told us mid-to-large pharma is increasingly specialising to survive, and the biggest players are choosing either low-cost generics, or shedding their off-brand portfolios to become originator specialists.
Just as Allergan in July sold to Teva the generics programmes it had amassed after mergers with Actuis and Watson, Bieri predicts Pfizer is likely to do the same.
“We know that Pfizer also has a number of products off-patent and is trying to find a way to manage them. We hear now that Pfizer is considering selling all the Pfizer generic drugs – perhaps via a spin-off […] to focus on originator strategy.”
Pfizer’s previous generics policy was to try to commercialise what it calls its “established products” programme through the same channels as original drugs. It then tried to split generics and branded pharma within each country – “that didn’t work either,” says Bieri.
“The latest we heard is they tried to build an established products unit, the same as Novartis. Novartis have their generics drugs business [Sandoz] clearly separated – it’s clearly far away, even geographically. You cannot mix your generics business – it’s a disaster.”
On the market – but who wants to buy?
As for who Pfizer might sell its generics to, Bieri said there are few large generics players currently who might want to take up the offer. Teva, Sandoz and Mylan are the current biggest off-patent manufacturers.
He suggested it “could make sense” for Sanofi and Pfizer to merge their generics businesses into a new company, as Novartis and GSK funnelled their over-the-counter units in 2014 into a “Consumer Healthcare” joint venture.
Another question is “whether Pfizer would sell Hospira [so soon after acquiring it] – it wouldn’t make a lot of sense,” says Bieri. “Hospira is niche – with sterile injectibles.”
What is a ‘generic’? Changing views
Talk of splitting big pharma between old and new drugs brings up some questions about terminology – what counts as an originator drug these days? Small changes and add-ons intended to extend IP – such as new formulations or different dosages of an existing API – are “not reimbursed any more as an original drug in Europe,” says Bieri. “They look at it as a generic.”
Regulators are likely to become stricter in their definitions for new drug submissions, he predicted: “We assume that over time, having a new drug will mean a new chemical entity or biological entity.”