Merck Seeks Boost For $4B-a-Year Diabetes Drug
For decades, Merck (MRK) and Pfizer (PFE) were bitter rivals. The enmity dates back to differing strategies and cultures that characterized each drugmaker. For many years, Merck was mostly a go-it alone outfit that prided itself on churning out big sellers from its own labs. Pfizer was something of a scrappy also-ran, but eventually dwarfed Merck by often licensing drugs that became big sellers and, later, made huge acquisitions - Warner-Lambert, Pharmacia, Wyeth - to bolster its porffolio. And they regularly competed in many of the largest therapeutic categories, notably statins and painkillers. Think Vioxx versus Celebrex or Lipitor versus Zocor.
Now, though, these big gorillas are embracing an increasing trend in the pharmaceutical industry - they have areeed to collaborate. This morning, the drugmakers struck a deal to combine a Type 2 diabetes drug that Pfizer has readied for Phase III development with Merck's Januvia, a so-called DPP-4 inhibitor that is a widely used diabetes treatment and generated about $4 billion in sales last year. The Pfizer drug is called ertugliflozin and is an SGLT-2 inhibitor. As part of the deal, Merck paid Pfizer $60 million and will make additional payments based on clinical, regulatory and commercial milestones. Merck and Pfizer will split revenue and certain costs on a 60-40 percent basis.
Major drug makers, of course, have had a hard time of late generating revenue growth, as patents expire on existing blockbuster drugs and company labs fail to produce enough new medicines. So, they’ve become more flexible in their business models, and collaboration is part of that.
Collaborations among the largest drugmakers is not a new concept, of course. Pfizer and GlaxoSmithkline (GSK) formed a joint venture called ViiV Healthcare four years ago, for instance, to take HIV and AIDS drugs to market. Another notable example involves Bristol-Myers Squibb (BMY) and AstraZeneca (AZN), which have similarly teamed to develop diabetes drugs. In fact, AstraZeneca helped Birstol-Myers with the cost of its $7 billion acqusition last of Amylin Pharmaceuticals (covered in earlier Pharma news). And other drugmakers have combined resources to help develop treatments that afflict poor nations, in particular, such as malaria, or have joined efforts to build databases of compounds.
In fact, Merck and Pfizer, along with Eli Lilly (LLY), three years ago formed the Asian Cancer Research Group, which was envisioned to create an extensive pharmacogenomics cancer database to be made available to researchers around the world. But the diabetes agreement marks the first time that these drugmakers have agreed to joinly develop a drug. "This is like the Yankees and Red Sox combining their scouting departments. Surprising!" says John LaMattina, who headed Pfizer global R&D before retiring in 2007 and is now wirth PureTech Ventures, in a Tweet after hearing about the deal.
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Ed Silverman, a contributing editor of YCharts, is the founder and editor of Pharmalot. He previously reported on the pharmaceutical industry and other business topics for the Star-Ledger of New Jersey, New York Newsday and Investor’s Business Daily. He can be reached at email@example.com.