Monday, December 22, 2003

Pfizer to buy Esperion We've discussed the difficulty that many large companies have in generating new products, even when the component parts were at one time major innovators. That's particularly true in the pharmaceutical industry, where continued profits are dependent on breakthrough drugs, especially those that treat chronic illnesses. Inspiration in these matters is not something you can easily incubate, cajole, or predict, and many of the big pharma companies have struggled with this problem. In fact, Merck recently took a big hit on the stock market when it announced a paucity of new drugs for the upcoming years to replace its products that will soon lose their patents. Worst of all, few of these new drugs are targeted at long-term, and therefore frequently medicated conditions, the type that guarantee long-term profits. You can't force innovation, but you can buy it. That's a course Pfizer is taking with its acquisition of a small biotechnology company called Esperion Therapeutics. The $1.3 billion deal will give Pfizer the fruits of Esperion's innovative research in the crucial (and profitable) area of treating heart disease and cholesterol manipulation. Esperion's drug raises the level of HDL or good cholesterol in the blood, and has shown an ability to reverse heart disease. This new product complements one of Pfizer's biggest moneymaker, the LDL (bad) cholesterol reduction drug Lipitor. The hope for Pfizer is a combination of the two would be even more successful. For Esperion, it will add a major marketing effort and research efforts that are experienced at developing new discoveries into products. This is yet another case of a small company innovating, and a large company making an offer the owners of the start-up simply cannot refuse. In any case, Esperion would have had to sell its product through one of the big pharmaceutical companies. Now it is a subsidiary of one of those companies and the founders and early investors are quite well off. 6:18:58 PM

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