| NEW YORK
NEW YORK Pfizer Inc's vulnerability to cheaper generics and its weak roster of experimental medicines will be on display Tuesday when the company reports quarterly earnings, reviving interest in its pursuit of AstraZeneca Plc or other deals to fortify its pipeline.
The largest U.S. drugmaker, whose laboratories have not come up with any big-selling new medicines for a decade, is expected to report significantly lower second-quarter revenue.
While many industry watchers expect Pfizer to re-engage with Britain's AstraZeneca in coming months, some say the U.S. drugmaker should consider targets more focused on biotechnology, a strategy that has paid off for Merck & Co and Bristol-Myers Squibb Co.
Although Pfizer is conducting trials of promising products - including breast cancer drug palbociclib and vaccines against meningitis and staph aureus - it needs far more drugs to generate meaningful sales growth, said Ori Hershkovitz, analyst with the Tel Aviv-based Sphera Fund, which holds Pfizer shares.
"Pfizer is in a very desperate spot, having seen most of its pipeline disappoint and facing multiple patent expirations," he said. "It needs growth; it needs to buy a pipeline."
Pfizer on May 26 officially abandoned its six-month quest for AstraZeneca after its final $118 billion offer was spurned. Investors still see a rationale for the deal, which would allow Pfizer to enjoy lower corporate tax rates as a UK-based company and a promising pipeline of new cancer treatments.
Under British takeover law, AstraZeneca could reach out to Pfizer in August and Pfizer could make renewed overtures to its smaller rival in November.
"I definitely think Pfizer will come back for Astra at a somewhat higher bid," Hershkovitz said. But he recommended Pfizer consider smaller targets whose treatments might broaden its existing research priorities, such as Belgium's UCB SA and Switzerland's Actelion Ltd.
UCB, which makes treatments for epilepsy, rheumatoid arthritis and Parkinson's disease, has annual sales of $5 billion, and a market value of $17 billion. Actelion sells lucrative drugs for orphan diseases, rare and often life-threatening conditions that command high prices. It has annual sales of $2 billion and a market capitalization of $15 billion.
Leerink Swann analyst Jason Gerberry has said it might make sense for Pfizer to buy Dublin-based generic drugmaker Actavis, which itself just bought U.S. specialty drugmaker Forest Laboratories for $25 billion.
Disappointment with Pfizer is reflected in its stock price, which has fallen 1.4 percent this year, against a 11 percent gain for the ARCA Pharmaceutical Index of large U.S. and European drugmakers. Over the past two years, its shares have risen 27 percent, versus a 44 percent jump for the drug sector.
A fresh wave of patent expirations on Pfizer's top drugs is approaching. Its Celebrex painkiller faces generics in the United States late this year, while impotence treatment Viagra goes generic in 2017. The company's biggest product, Lyrica for nerve pain, loses U.S. patent protection by 2018. The three drugs have combined annual sales of almost $9 billion, and account for almost 20 percent of Pfizer's total revenue.
Biotechs with drugs already on the market and which also have exciting technologies should be on Pfizer's wish list, said Navid Malik, analyst with London-based Cenkos Securities. He cited companies such as Celgene Inc and Vertex Pharmaceuticals Inc.
Roger Pomerantz, who headed business development at Merck from 2010 until last summer, said the potential of Merck's immuno-oncology drugs - medicines which train the immune system to recognize cancer cells - was not recognized even within the company for several years after it acquired them.
"It's who you have on the inside helping you understand the science" that counts, he said.
(Reporting by Ransdell Pierson; Editing by Michele Gershberg and Lisa Shumaker)