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 Pfizer agreed in November to buy Botox-maker Allergan for $160
billion in a transaction meant to slash Pfizer's tax rate and
achieve other cost savings. The tax-inversion deal would shift
Pfizer's headquarters to Dublin and is slated to close in the second
half of 2016.
Industry regulators and U.S. lawmakers have criticized the deal for
its reliance on financial engineering. But more recently, company
executives have said medical benefits of bringing together their
drugs in development have been "underappreciated" and some
healthcare analysts are making the case that combining the two
research programs will yield sales and earnings ahead of Wall Street
expectations.
"There has been a lot of attention on financial aspects of the deal,
but there has been an underestimation of the Allergan pipeline,"
Pfizer research chief Mikael Dolsten told Reuters in a recent
interview.
Dolsten told Reuters that Allergan's depression treatment rapastinel,
which has shown promise of treating symptoms within hours rather
than weeks required for standard treatments, could be
"transformational" if it succeeds in late-stage trials.
Further studies of Vraylar, a treatment for schizophrenia and
bipolar disorder approved in September, could show it has "unique"
ability to treat negative symptoms of schizophrenia, such as social
withdrawal and slowed movement, Dolsten said.
Relamorelin, potentially the first new treatment in decades for
delayed emptying of food from the stomach, is another big
opportunity, he said.
Allergan has predicted peak annual sales of up to $2 billion for
rapastinel and up to $1 billion each for Vraylar, relamorelin, an
experimental treatment for uterine fibroids called Esmya and
Allergan's recently approved Viberzi treatment for irritable bowel
syndrome.
It expects potential annual sales of up to $2 billion each for
experimental treatments for migraine headaches and for a leading
cause of blindness called macular degeneration.
The forecasts have largely fallen on deaf ears, said Credit Suisse
analyst Vamil Divan.
"Right now there are almost no expectations for Allergan's
pipeline," Divan said. "Even if they get just a few billion dollars
out of these products, that would be more than people give them
credit for."
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Pfizer expects a modest lift to its earnings in 2018 from the
planned purchase of Allergan, a boost of 10 percent in 2019 and a
high-teens percentage boost in 2020. Divan said he expects
Allergan's pipeline to add a few extra percentage points of sales
and earnings growth in all three of those time periods.
"We have 70 products in mid- to late-stage trials, but I think our
pipeline is under-recognized," David Nicholson, research head for
Allergan's branded products, said in an interview. He attributed the
lack of visibility to the rapid series of acquisitions and deals
that created the present-day Allergan, folding in the portfolios of
large drugmakers such as Forest Laboratories and Actavis.
"It takes time for people to realize these are all part of one
company's pipeline," said Nicholson.
Nomura analyst Shibani Malhotra said less than 20 percent of
Allergan sales are from outside the United States, and that Botox
and other Allergan products could eventually get a surprisingly
strong boost from 70 new international markets that Pfizer will open
up, including Japan.
"The biggest advantage for Allergan would be in leveraging Pfizer's
global sales forces," Malhotra said.
Pfizer Chief Executive Ian Read is slated to lead the combined
company, with Allergan's younger Chief Executive Brent Saunders
serving as president and chief operating officer.
Nicholson, in a presentation on Tuesday with Read, Saunders and
Dolsten at the annual JP Morgan Healthcare Conference in San
Francisco, said Allergan's pipeline deserves far more credit, as
does Pfizer's array of immuno-oncology drugs.
"When we put these pipelines together, (other) companies better
watch out!"
(Reporting by Ransdell Pierson, additional reporting by Bill Berkrot;
editing by Michele Gershberg and David Gregorio)
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