[Ip-health] NYT: Wyeth Deal May Slow Pfizer Biotech Acquisition

[Sarah Rimmington]

Credit goes to FierceBiotech for tipping me off to the story.
[snip] In deciding to buy one of its Big Pharma brethren, albeit one
with considerable expertise in biotech drugs, Pfizer dispelled the hopes
of some investors that it would acquire a major biotechnology company
like Amgen or Biogen Idec. ... But Amgen and Biogen are big enough to
fend for themselves. More precarious is the condition of many smaller
biotechnology companies, those without revenue-producing products and
profits. With capital markets frozen, many of these companies are
running out of cash and looking to sell themselves or their products to
a larger company. ...

Some experts say Pfizer=92s purchase of Wyeth might actually spur other
pharmaceutical companies to buy biotechnology companies. One reason
Pfizer was interested in Wyeth was the latter=92s expertise in
manufacturing biotech drugs and vaccines. ...

Big pharmaceutical companies are not the only ones who can buy companies
or drugs. In some cases, mid-size biotech companies like Cephalon and
Myriad Genetics are outracing larger companies to snap up some drugs.

That is why Mr. Nodelman, at the Biotechnology Value Fund, said he did
not expect the Pfizer-Wyeth deal to have much of a braking effect on
acquisitions of small companies or their drugs. =93All it means is there
is one less company that might do a deal with them,=94 he said. [snip]


http://www.nytimes.com/2009/01/27/business/27biotech.html?ref=3Dbusiness
January 27, 2009
Wyeth Deal May Slow Pfizer Biotech Acquisitions
By ANDREW POLLACK

This month Pfizer=92s chief executive, Jeffrey B. Kindler, held a
breakfast for venture capitalists atop a hotel in San Francisco. Some
guests took it as a sign that Pfizer was serious about buying young
biotechnology companies or licensing their technology.

But Pfizer=92s deal to buy a big pharmaceuticals rival, Wyeth, raises
questions about how willing =97 or able =97 Pfizer will be to enter deals
anytime soon with biotechnology companies, many of which are struggling
to stay in business.

Wyeth itself will also now be unlikely to buy other companies. On
Monday, it withdrew from talks about buying Crucell, a Dutch vaccine
maker, sending Crucell=92s shares tumbling about 14 percent in Nasdaq tradi=
ng.

In deciding to buy one of its Big Pharma brethren, albeit one with
considerable expertise in biotech drugs, Pfizer dispelled the hopes of
some investors that it would acquire a major biotechnology company like
Amgen or Biogen Idec.

Amgen=92s shares fell nearly 4 percent on Friday, when news of a possible
Wyeth deal surfaced, while Biogen shares, also hurt by positive news
about a competitor=92s drug, fell 7 percent. Both stocks recovered
somewhat on Monday.

But Amgen and Biogen are big enough to fend for themselves. More
precarious is the condition of many smaller biotechnology companies,
those without revenue-producing products and profits. With capital
markets frozen, many of these companies are running out of cash and
looking to sell themselves or their products to a larger company.

=93There are probably 5,000 biotech companies out there that are waiting
for a deal to save them,=94 said Oleg Nodelman, portfolio manager at the
Biotechnology Value Fund, which invests in smaller biotechnology
companies. Pfizer executives say they remain interested in alliances and
deals. =93We are going to continue to look at opportunities for innovative
drugs and technology,=94 Corey S. Goodman, the president of Pfizer=92s
Biotherapeutics and Bioinnovation Center in South San Francisco, Calif.,
said Monday.

But others say the debt that Pfizer took on to buy Wyeth might preclude
it in the short run from buying any but the smallest of biotech
companies. And when two big companies merge, talks for deals with
smaller companies tend to get put on the back burner, as management=92s
attention is diverted and the newly combined company assesses its
research pipeline.

=93It will just drag people=92s attention away, and they will want to do
only the critical things,=94 said Jonathan MacQuitty, a partner at venture
capital firm Abingworth. With small, unprofitable private biotech
companies unable to go public, venture capitalists=92 hope for a payout
are typically based on selling the companies they start to
pharmaceutical companies.

Matt Geller of Geller Biopharm, a boutique investment bank, says that
because Wyeth is so science-oriented, it has been seen as a good
potential partner for smaller and middle-size biotechnology companies.
=93Unfortunately,=94 he said, =93it does take a potential buyer of smaller
biotech companies off the market.=94

Pfizer, on the other hand, had a reputation for paying top dollar for
products or for smaller companies. It raised many eyebrows last
September, for instance, when it agreed to pay $225 million initially,
and possibly hundreds of millions of dollars later, for the rights to an
Alzheimer=92s disease drug being developed by Medivation, a San Francisco
company.

Pfizer is behind many of the other large pharmaceutical companies in
moving into biologic drugs, which are made in living cells and are more
immune to generic competition. But it is trying to make strides.

In late 2007 it hired Mr. Goodman, an academic neuroscientist and
biotechnology entrepreneur, to lead its move in that direction, in part
by arranging alliances with smaller companies and with universities. To
keep the operation nimble, Mr. Goodman reports directly to Mr. Kindler,
the chief executive, and has a fair degree of autonomy.

Some experts say Pfizer=92s purchase of Wyeth might actually spur other
pharmaceutical companies to buy biotechnology companies. One reason
Pfizer was interested in Wyeth was the latter=92s expertise in
manufacturing biotech drugs and vaccines.

=93I think it=92s just further evidence of how valuable these assets are,=
=94
said Kris Jenner, portfolio manager of the T. Rowe Price Health Sciences
Fund. =93There are plenty of buyers outside of Pfizer who are interested
in biotech assets.=94

Moreover, Pfizer=92s ability to arrange $22.5 billion in debt financing
from five banks for the Wyeth acquisition raises the chances that Roche
will be able to raise the money it needs to acquire the 44 percent of
Genentech that it does not already own.

Roche, a Swiss pharmaceutical giant, first proposed to pay $43.7 billion
for those shares in July, an offer Genentech rebuffed as too low.
Analysts expect Roche to raise its bid, but its difficulty in arranging
financing has slowed negotiations.

Big pharmaceutical companies are not the only ones who can buy companies
or drugs. In some cases, mid-size biotech companies like Cephalon and
Myriad Genetics are outracing larger companies to snap up some drugs.

That is why Mr. Nodelman, at the Biotechnology Value Fund, said he did
not expect the Pfizer-Wyeth deal to have much of a braking effect on
acquisitions of small companies or their drugs. =93All it means is there
is one less company that might do a deal with them,=94 he said.

--
Sarah Rimmington
Attorney
Essential Action, Access to Medicines Project
Washington, DC
Tel: (202) 387-8030
Cell: (202) 422-2687
www.essentialaction.org/access/