With Pfizer's animal-health unit now being spun out after a major retooling that has included deep cuts on the R&D side of the business, the big question now is whether Pfizer ($PFE) has a sensible research strategy in place as it concentrates its full attention on drug development. In an interview with Bloomberg, CEO Ian Read made a game effort to insist that the company was well fixed on that front--but his answers fell far short of illuminating a coherent position on how the pharma giant will balance buyouts, licensing, and internal R&D work.
Read's position on the company's multibillion-dollar R&D effort is that it's still early days. And any deals it may do in the future, after a lengthy spell with few significant acquisitions, will depend on its commercial potential--which isn't much to go on.
"On the research side, we're before the middle innings, because it takes a longer timeline," than cutting expenses, Read told Bloomberg. "We need to make it easier for people to make an impact and get things done inside a company that has 100,000 colleagues."
"We invest internally in projects that we believe have a return above our cost of capital," Read added later in the interview piece. "External opportunities are subject to the same analysis. We are not going to do projects that do not return our cost of capital because of issues internally or non-issues internally. Our willingness to do deals externally is driven by the value of the deals."
In recent years, Pfizer earned a reputation for paying big figures to license failed drugs. A setback on bapineuzumab, another high-stakes, high-risk effort on Alzheimer's after blowing hundreds of millions of dollars on Dimebon, would prove a serious setback. Eliquis, though, offers a solid shot at a blockbuster approval, but analysts haven't been happy to see back-to-back delays at the FDA. And tofacitinib for rheumatoid arthritis--check out the story below--has a decent chance at making its way to the market, but faces questions about its ability to generate revenue.
Read, a CPA with a chemical engineering degree, certainly seems more comfortable working with numbers and paying dividends after executing big cuts. And there are more cuts ahead, with the CFO outlining the possibility of shuttering 10 more facilities. At some point though, as Pfizer finishes shedding businesses and narrowing its focus, the R&D game plan will be the main issue. And Pfizer's fate on that score is far from certain.
- here's the article from Bloomberg
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