Wyeth Pharmaceuticals Company Term Paper

Pages: 7 (2231 words)  ·  Style: MLA  ·  Bibliography Sources: 6  ·  File: .docx  ·  Topic: Medicine

¶ … Fen-Phen Disaster to Top Pharmaceutical Company

Letter of Transmittal

Wyeth represents a "hidden gem" in the pharmaceutical business. This report seeks to show how difficult experiences since 1997 have resulted in Wyeth emerging as a financially successful firm with one of the deepest product pipelines in the business.

Wyeth's new strategies may have been the result of necessity: the diversion of cash and management attention to the Fen-Phen problems may have resulted in a realignment in Wyeth's corporate strategies. From a multi-sector healthcare company in 1997 (then known as American Home Products), the company divested itself of its non-pharmaceutical products and began finding more efficient ways to find and develop new drugs.

The Wyeth of today is a much more interesting company, both as a place to work and for investors.

Introduction

Wyeth (NYSE: WYE) is one of the leaders in global pharmaceuticals manufacturing, but achieved its ends in a different way than most of its major competitors. Long known as American Home Products, the company was known for astute financial management, diversification across a broad area of health care, but a relatively poor product pipeline in its core pharmaceutical products business.

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In addition, Wyeth underwent a difficult period with some of its products, including HRT (hormone replacement therapy) and Fen-Phen. The latter product cost AHP billions of dollars in legal expenses and a concomitant decrease in overall share value in 1998-2005. It also led to AHP changing its name back to Wyeth, which is where the company originally developed its products in the 1860's.

The subject of this paper is to evaluate the crises encountered by Wyeth and how the company responded. It will then cover Wyeth's strategies in the development and marketing of pharmaceutical products since 2001. Finally, the paper will assess Wyeth's strategies as compared to its competitors, and their chances to outperform the rest of the pharmaceutical marketplace.

Term Paper on Wyeth Pharmaceuticals Company Assignment

The Global Pharmaceutical Marketplace has been a High-Growth Marketplace

Globally, the pharmaceutical industry has doubled in size from 2000, to nearly $600 billion in sales. Wyeth can count itself in the top 10 of these manufacturers -- though at the bottom of that elite grouping. The primary reasons for growth in pharmaceuticals generally has been due to three factors:

The aging of the populations, particularly in wealthier areas, such as Japan and Europe.

The increase in scientific discoveries in past decades, which has led to the introduction of whole new classes of drugs. This has been especially true for drugs which treat chronic diseases, such as diabetes or heart disease.

The world is growing wealthier. As more people enter the $6,000-$10,000 per year per capita income level, this propels pharmaceutical spending.

The growth in pharmaceutical spending has focused on "blockbuster" drug categories, such as heart disease, depression and weight loss. That is because these diseases are fairly universal, lend themselves to common solutions, and are attractive to pharmaceutical companies because of the long-term assurance of cash flow.

In recent years, the emphasis on "blockbuster" categories has waned as fewer diseases lend themselves to one or two "cures" or maintenance drugs. Partly due to the success of pharmaceutical research, much of the worst effects of heart disease, infection (viral and bacterial), diabetes and other major diseases has already been addressed successfully through the introduction of new products.

On the other side, the cost of introducing new "blockbuster" drugs has increased substantially. At present, it takes 13 years for a drug to move from phase 1 through FDA approval (Scherer).

The Pharma industry is changing. Whereas past market valuations were based on the number of blockbusters in their R&D portfolio, the current emphasis is more on product portfolio 'sustainability.' That is because many supposed new blockbusters have reached the market only to fail, or have not borne out their promise shown during clinical trials (Feick). As a result, there may be fewer new, particularly high-volume, drugs coming out in the future (Taylor).

Wyeth's Fen-Phen Scare, and How it Changed the Company

Fen-Phen was a short-lived phenomenon. It was found that the combination of the two drugs worked in a complementary way to reduce weight faster than any other then-existing drug combination. The primary action of the product was to suppress appetite in the same way that other speed-related drugs did so.

Wyeth underperformed its key competitors, then bounced back in the past 2 years source: Marketwatch, 10/21/07)

The Mayo Clinic noted in 1997 a correlation between taking Fen-Phen and a rare form of aortic heart-valve disease. Subsequent publication in the NEJM resulted in Wyeth withdrawing the drug from the market in 1998. In 2000, a U.S. judge approved a class action lawsuit. Wyeth set aside a $14 billion fund to settle the suits, which was later raised to $21 billion in 2005. The ultimate size of the settlements made it the most expensive recall in pharmaceutical history; the final settlement nevertheless removed a cloud over the organization.

Of necessity: a push for niche drugs

In the meantime, from 1998 to 2005, Wyeth's limited access to funds meant that the company had to rely on lower-cost, "niche" drugs and partnerships with "boutique" drug firms and international pharmaceutical companies in order to insure a product pipeline. At the time when Lipitor, Zantac and Nexium, Viagra and other multi-billion dollar drugs were coming to the fore, Wyeth was left with a broad set of aging OTC (over the counter), off-patent and niche drugs.

Wyeth revamped its drug discovery and development process. Given the long time and high risks of development, the company developed a "learn and confirm" method which reduced the time and expense of early drug discovery (phases I and II). In Wyeth's recent report, they claimed

The goal of Learning is to focus on how to use a drug in representative patients to make an acceptable benefit/risk profile likely, while the goal of Confirming is to demonstrate, in a large and representative patient population, that an acceptable benefit/risk profile is achieved (Wyeth).

This strategy appears obvious to the outsider, but represents a significant departure from the usual big-pharma R&D approach. In Big Pharma, the usual approach is a "pipeline," in which drugs move from discovery through phases I, II and (the most expensive) III prior to FDA approval. As each milestone is achieved, the costs and time of achieving the next milestone moves up swiftly. In addition, there is little to indicate during the discovery process which of the drugs will fail -- early or late -- in the following phases.

The "learn and confirm" method compresses the first three segments -- discovery, phase I and II, by having some work on a smaller number of patients to indicate safety and efficacy in a safe environment. As such, Wyeth's methodologies are more similar to the medical device industry, where shorter product life cycles (and a shorter FDA approval cycle) result in new products emerging after 3-5 years rather than 13 years in the marketplace.

Wyeth's strategy is helped by its focus on niche products. Focusing on niche applications can ease the approval process, whether under HUE (humanitarian use exemption) of for highly-targeted pathologies (FDA). Working with more limited claims improves FDA approval times, as does exempting drugs from certain population groups, which improves safety.

Wyeth then pursued a policy of working with drug boutiques and middle-sforized foreign drug firms to co-develop and/or license new pharmaceuticals. Its partnerships with Elbion of Israel (for schizophrenia), Nautilus Biotech and MediVas (haemophilia) are examples of how they have leveraged their 10-year efforts to work with venture-backed or public small "research houses" to focus on limited areas of disease (Nagle).

Wyeth has bolstered this representation with other products from Elan (Ireland), Zeeland (Netherlands) and Exelexis (U.S.) in niche areas. The sum of Wyeth's partnerships is 60 drugs in the pipeline, more than any of its major pharmaceutical competitors. While few may be in the "blockbuster" category, focusing on collaborations and niche applications may result in a more durable product portfolio with fast regulatory approval.

Recent stock analysts' opinions of Wyeth have improved, now that the company has moved away from its Fen-Phen problems. A recent industry report claimed that Wyeth is in a good competitive position vis-a-vis its major pharma competitors. The strengths cited were their broad product portfolio and its promising product pipeline:

Pipeline Analysis Wyeth believes it has one the most exciting late-stage new product pipelines in the industry and plans to file at least two products from this pipeline per year. During 2005, Wyeth entered 12 new compounds into formal development for the fifth year in a row, for a total of 60 new compounds in the past 60 months (Epsicom).

Conclusion

Wyeth's problems in the past few years have made it a stronger company today. With a focus on collaboration, niche products and rapid regulatory approval, the company has put together a set of potential winners in a number of areas of healthcare. Recent setbacks in hormone replacement therapy do not represent a major drag on the company, as there… [END OF PREVIEW] . . . READ MORE

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