Pfizer: More Big Pharma R&D Work Fails

Pfizer (PFE) and other big pharma companies have been under assault for several years as some of their most profitable drugs lose patent protection which creates low-priced generic competition. Pfizer has not been able to replace some of its most successful products fast enough to keep its margins high and has cut costs and laid off  tens of thousands of people to maintain its financial health.

Aside from cost cuts, Pfizer and its peers have taken two paths. One is to buy small biotech firms which are creating potential new blockbuster drugs. Pfizer is using its balance sheet to do what its R&D operations cannot. The other path Pfizer has taken is to limit its research to a few drugs which seem to have the greatest potential.

The flaw in Pfizer’s plan is that some drugs for which it invests large sums of money don’t work out. Yesterday, the company dropped development on two late-stage treatments which only recently has appeared to be promising. One drug was designed to treat small cell drug cancer. A Data Safety Monitoring Committee told Pfizer that the product was not likely to be more effective than current drugs.

Pfizer’s second failure of the day was its treatment for advanced breast cancer which also proved ineffective when compared with treatments already on the market.

Pfizer’s news is not only a setback for the company; it is a reversal of fortune for the firm’s peers, especially those who have decided that sharply focused R&D on a few drugs is the best way to improve earnings. But, that may not work, which means the acquisition of promising biotech firms will increase. That will probably push up the prices that will have to be paid for the real gems in that industry.

Douglas A. McIntyre