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."
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!"
By: Ransdell Pierson (Reuters New York).
Additional Reporting: Bill Berkrot.
Editing: Michele Gershberg and David Gregorio.
Review: Emerging Market Formulations & Research Unit, Flagship Records.
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