By Nancy Volkers

Special To BioWorld Financial Watch

Public capital markets still are tight for biotech. And many biotech companies still are forced to seek private capital, strategic partnerships or, in some cases, a merger or acquisition to stay afloat.

Despite the lagging equity markets, however, biotech indices are rising steadily. The AMEX Biotech Index and the Nasdaq Biotech Index have doubled since September. But big pharma stocks have taken a beating. September lows gave way to spring peaks, but since then Merck & Co. stock is off more than 15 percent, and Eli Lilly and Co. nearly 25 percent. After a valley of $86 in October and a peak of $150 in April, Pfizer Inc.'s stock dropped nearly a third, close to $100, before its 3-to-1 split June 30.

But Pfizer seems to be flourishing otherwise, a full 150 years after it was founded. Charles Pfizer started the company in Brooklyn, producing chemicals for food flavorings. Pfizer got into the drug business by supplying penicillin during World War II. Today, the New-York-based company has more than 46,000 employees, more than 50 drugs in trials and more than 180 products in development. Pfizer has launched 11 major products in the past 10 years, six of them in the past three years.

Pfizer is a true "big pharma" over the past decade, the company's focus has sharpened on pharmaceuticals. In 1990, half its revenue came from pharmaceuticals; by 1998, pharmaceuticals accounted for 87 percent of revenue.

The interest to biotech companies is that Pfizer is in high gear on the alliance front. The company said it entered 11 major alliances in the past year. In the past six months alone, Pfizer entered or expanded on more than a dozen deals, with companies including Neurogen Corp., OSI Pharmaceuticals Inc., Aurora Biosciences Corp., Affymetrix Inc., Vical Inc., Allelix Biopharmaceuticals Inc. and Rigel Inc.

In a three-year, $27-million deal, Neurogen licensed its Accelerated Intelligent Drug Discovery (AIDD) technology to Pfizer for in-house drug discovery activities. Neurogen has collaborated with Pfizer already using the AIDD program, for indications including anxiety, depression, insomnia, Alzheimer's disease and obesity in humans, and dementia and anxiety in companion animals.

Pfizer has signed more than $150 million worth of deals with Neurogen, beginning in 1992, when the companies agreed to a $50 million deal to develop and commercialize drugs for anxiety. In 1994, they entered a $20 million agreement on drugs for sleep disorders. In 1996, those two deals were combined and expanded. A 1995 collaboration, worth up to $60 million to Neurogen, was signed to develop obesity therapies.

OSI and Pfizer have an ongoing collaboration in cancer research. In May, OSI, of Uniondale, N.Y., licensed certain compounds from Pfizer for treating mild to moderate psoriasis. The compounds were synthesized during the cancer collaboration. Both are inhibitors of epidermal growth factor receptor and vascular endothelial growth factor receptor. Also in May, the two companies began Phase II trials of CP-358,774, an inhibitor of epidermal growth factor receptor tyrosine kinase. At least three other compounds are in development.

In another May development, OSI will receive up to $50 million over the next six years in research and development funds from Anaderm Research Corp., through financing from Pfizer, for the discovery and preclinical development of compounds for "cosmeceutical" indications. OSI, Pfizer and some New York University (NYU) faculty members founded Anaderm in 1996. Pfizer owns 82 percent of Anaderm, OSI owns 14 percent and the NYU faculty members own 4 percent. In 1997, Pfizer put $12 million into the venture. The collaboration will focus on quality-of-life indications such as wrinkle control and hair growth.

Aurora Biosciences' agreement with Pfizer gives Pfizer automated systems for compound storage, high-throughput screening and multiple ion channel lead-discovery platforms. The contract provides $50 million to Aurora, plus additional funding if Pfizer decides to enlarge the research team or buy more instruments. Milestone payments and/or profit sharing also are possibilities. That is Aurora's largest agreement with a pharmaceutical company.

In March, Pfizer entered into an EasyAccess Silver agreement with Affymetrix Inc., of Santa Clara, Calif. It gives Pfizer preferential access to Affymetrix's GeneChip arrays, instrumentation and software.

Pfizer's agreement with San Diego-based Vical has a potential value of $40 million, and is centered on the delivery of therapeutic proteins via naked DNA technology for animal applications. The technology could result in sustained release of protein levels from a single intramuscular injection. In another animal-health deal, Pfizer and Allelix Biopharmaceuticals Inc., of Toronto, established a program in February to test the potential of Allelix technology for such applications.

Pfizer has a strong presence in animal health. Its Animal Health Group had revenues of $1.3 billion in 1998. The company's products include Anipryl for canine Cushing's disease and cognitive dysfunction syndrome, Rimadyl for canine osteoarthritis, and Revolution (selamectin), a topical heartworm preventative approved last week for dogs and cats. More than 40 animal health products are in clinical development.

Rigel, of South San Francisco, is working with Pfizer to discover human and veterinary drugs for asthma and allergy based on IgE regulation in B cells.

Revenues from Pfizer's various alliances will total about $1 billion this year, and the company expects to spend $2.8 billion on research and development. But Pfizer's deals aren't just for R&D. With a sales force more than 14,000 strong, the company has angled for several major marketing agreements. Last year Pfizer co-launched Lipitor, a cholesterol-lowering pill, with Warner-Lambert Co. The drug broke the pharmaceutical industry's record for first-year sales and topped Merck's Zocor to lead the anticholesterol sector in the United States.

Also last year, Pfizer co-launched Aricept with Tokyo's Eisai Co. Ltd. Aricept, for symptoms of Alzheimer's disease, quickly became the leading medicine for that indication. Pfizer also is co-marketing G.D. Searle and Co.'s Celebrex, and analysts predict Pfizer's share of revenues from the three deals will exceed sales of Viagra.

Yes, Viagra the drug that put Pfizer's name prominently in the public eye since its approval. Projected sales for 1999 close in on $1.5 billion, nearly 10 percent of the company's projected overall sales figures of $15.2 billion.

Pfizer has other best-sellers that aren't quite so, well, sexy. In 1998, sales of three drugs topped $1 billion: Norvasc, for hypertension; Zoloft, an antidepressant; and Zithromax, and antibiotic. There's also Trovan, another antibiotic that's been approved for 14 infection indications, the most ever for a new drug.

Far along in Pfizer's pipeline are Tikosyn, for atrial fibrillation; Zeldox, for schizophrenia; and Relpax, for migraines. *