Pfizer anticipates that one-third of the six new products the company expects to launch annually beginning in 2011 will derive from enhanced external sourcing efforts.

During a Nov. 30 analyst meeting in Groton, Conn. outlining Pfizer's pipeline, Vice Chairman David Shedlarz presented the firm's "new approach and enhanced capability in external sourcing."

Pfizer's goal is that the new strategy will yield two additional approved products per year starting in 2010, on top of the firm's own in-house candidates.

Pfizer Global Research & Development President John LaMattina said that the new deal-making strategy shows that "we are working very hard to get beyond our walls."

"Our message to scientists working in university labs, independent research institutes and biotech start-ups should be loud and clear, 'we want to collaborate with you; we are willing to embrace your ideas and suggestions and we want your advice.'"

"Our intention is to have the best in-house scientific capability that exists in the industry and to supplement that by tapping into the best scientific capability that exists anywhere," he added.

Shedlarz cited four main components to the new approach: greater flexibility in deal structure, increased flexibility in integrating acquired entities, a different organizational structure for external sourcing activities and a focus by therapeutic area.

First, Pfizer will be more open to "creative" deal structures, such as equity stakes, staged mergers & acquisitions and options/debt structures, as well as more traditional structures, such as licenses, co-promotion/co-developments and acquisitions.

"The increased focus on creative deal structures will help us ensure that we are not overpaying on the deals up front, while ensuring our partners are paid a fair value for the intellectual property they created," he explained.

The decision to provide greater flexibility in deal structure may also reflect increased competition in the licensing and acquisition market (¹ Also see "Big Pharma Seeking Simple Deals In Complex Biotech Licensing Environment" - Pink Sheet, 15 May, 2006., p. 6).

Second, Pfizer will take a more flexible approach to integrating acquisitions, adopting a "hub-and-spoke" model. The new approach will allow for some acquired entities to remain operationally distinct from Pfizer, the exec said.

Shedlarz acknowledged that "too often in the past we have purchased companies and moved their compounds and their programs into our existing facilities and our existing teams...a cookie cutter approach, one size fits all."

Under the hub-and-spoke model, Pfizer will provide acquired firms with the "resources and expertise that they require and also encourage an entrepreneurial culture," he said. Pfizer has highlighted its willingness to allow acquired firms to operate with greater independence in recent months, citing its purchase of Rinat as one example (² Also see "Big Pharma More Comfortable Giving Acquired Firms Independence" - Pink Sheet, 21 August, 2006., p. 12).

Shedlarz noted that giving acquired firms greater independence will also likely make it easier for Pfizer to attract and retain scientists. The potential for significant staff departures, as were seen after Pfizer's merger with Pharmacia, is often seen as one drawback to major M&A (³ Also see "Schering Licensing Decisions To Focus On Boosting Sales Efficiency – Hassan" - Pink Sheet, 24 April, 2006., p. 6).

Third, Shedlarz said the consolidation of Pfizer's licensing, M&A, venture capital and business development arms into a single division will lead to more focused and coordinated deal-making efforts.

Under an August restructuring, Pfizer's external sourcing operations were brought under the leadership of Senior VP-Worldwide Business Development & Licensing Ed Harrigan, who reports to Shedlarz (⁴ Also see "“One Pfizer” Restructuring Initiative Divides R&D And Sales Operations" - Pink Sheet, 21 August, 2006., p. 3).

The new structure renders Pfizer "better able to leverage our scale and focus our business development approach," Shedlarz said.

Fourth, under the new external sourcing strategy, Pfizer will use its therapeutic area management teams to identify potential partners and acquisition candidates.

The company has been aligning its R&D operations by therapeutic area over the last year. During the meeting, the firm identified 11 therapeutic areas in which it is involved: allergy and respiratory; cardiovascular, metabolic and endocrine; dermatology; gastrointestinal/liver disease; genitourinary; infectious diseases; inflammation; neurosciences; oncology; ophthalmology; and pain.

Of those 11 therapeutic areas, diabetes, neurology, infectious disease and oncology have been identified as near-term priorities for external sourcing.

Pfizer's external sourcing efforts will fall under three main headings, Shedlarz said. Deals will complement the firm's current portfolio, be synergistic with the firm's existing products and services or provide the company with an entrée into "adjacent" healthcare products and business.

Deals designed to complement Pfizer's existing research and product lines will address gaps in the firm's existing portfolio, he said. The firm will also "seize opportunisistic investments" as they become available, he added.

Synergistic deals could include "everything from drug delivery systems, such as the Exubera inhaler, to evidence-based medicine tools to diagnostics," the exec said.

Shedlarz cited Pfizer's move into the vaccine industry via its recent acquisition of PowderMed as one example of an acquisition intended to move Pfizer into an adjacent healthcare market.

To underscore the move towards enhanced external sourcing, Pfizer announced two external research programs during the Nov. 30 meeting.

The first program is a five-year research collaboration with the Scripps Research Institute. Under the deal, Pfizer researchers will work with Scripps scientists to develop "new tests to rapidly validate approaches as possible novel treatment options for patients."

The company also announced the establishment of a biotechnology "incubator" at its La Jolla, Calif. research facility. The incubator will house three to seven unique biotech "start-ups," which will be funded by Pfizer and have access to the firm's research infrastructure.

Shedlarz said that Pfizer's strong cash position will enable the firm to reach its goal of two externally sourced products per year.

"One of the many pieces that makes us well-positioned to meet this challenge is Pfizer's tremendous financial strength and flexibility that allows us to move aggressively into new areas and take advantage of many new opportunities," Shedlarz said.

"Pfizer has the capacity to make investments in products across many therapeutic areas, in both large and small molecules, in vaccines and biologics, while also returning cash to our shareholders," he added.

In addition to two externally sourced compounds, Pfizer expects four internally developed compounds to enter the market each year beginning in 2011 - which is the timeframe in which the company is expected to lose exclusivity on its blockbuster Lipitor .

CEO Jeffrey Kindler said Pfizer's internal R&D efforts will be characterized by the key traits of diversity and consistency.

With regard to diversity, Kindler said the firm "will be a significant player in a growing cross section of therapeutic and specialty areas with strong growth potential. Name a modality across a therapeutic area, low molecular weight, antibody, vaccines, and we have the capability - this really distinguishes us from many other biopharmaceutical research organizations - to be a player in that area."

"This is an across-the-board trend and because of that, the sum of Pfizer is much greater than its parts," he maintained.

The firm's goal of bringing to market four products from internal research activities each year starting in 2011 reflects the expansion of the firm's mid-stage pipeline in recent years, Kindler noted.

"The depth of our mid-stage pipeline gives us confidence that our own labs can generate a steady stream of new products beginning in 2011, products that can address significant unmet medical need," he explained.

Pfizer expects the depth of its mid-stage new molecular entity portfolio - the firm expects 51 NMEs to reach Phase II in 2007 - to lead to a tripling of the size of its Phase III portfolio by 2009.

- Andrew Kasper

Pfizer R&D Emphasizes M&A; Deal Structure, Integration To Be More Flexible

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