So, after reading what Pfizer (NYSE:PFE) has to say about Sirtris (SIRT) (and by extension, about GlaxoSmithKline's (NYSE:GSK) heavy investment in them), let's go over the possibilities. What happened, and what's going on?
We'll start out with the first branch point: either Pfizer (and Amgen (NASDAQ:AMGN)) are right that there's trouble with the Sirtris assays and compounds (Reality A, I'll call it), or they're wrong (Reality B). For the rest of this piece, I'm going to assume that they're right, because I think that this is almost certainly the case. At least two separate groups of competent investigators have reported trouble, and that's good enough for me. (We'll discuss the implications of that in a bit).
Now we come to the second branch point: Either Glaxo did enough due diligence to be aware of the problems (scenario A1) or they didn't realize them at the time of the deal (scenario A2). If A1 is the case, then we'd have to assume that the most likely consequence (A1a) is that Sirtris had other non-public assets that did check out, and that GSK's management felt that these justified the purchase. (A1b would be the scenario where GSK was well aware of the Sirtris problems, knew also that they didn't have anything else to offer, and bought them anyway, which doesn't make sense). These assets could have been other compounds, and/or a leg up on the complicated biology of this field. The difficulty with that line of thinking is that having found the fundamental assay problems with the Sirtris work, the GSK people would surely have been much more cautious about drawing sweeping conclusions about the rest of the company's intellectual property.
If A2 is the case, then we're looking at sheer fecklessness on the part of GSK's upper management. I'd like to be able to rule this out, but there have been other deals in the history of this industry that make that hard to do. I have witnessed at least one such personally. One problem is that these deals tend to be initiated near the highest levels of a company, and these people are not always the most technically savvy (or up-to-date) members of an organization. Even with a science background, the CEO of a large company does not have the time to be a scientist. (I'm reminded of Peter O'Toole's character in My Favorite Year: "I'm not an actor - I'm a movie star!"
Overall, though, I find it hard to believe that no one would have noticed the reported problems at all, which leads me to favor what I'll call scenario A3: The problems with the Sirtris assays may well have been known/realized at the lower scientific levels of GSK's organization, but these concerns may not have made it to the top in a sufficiently timely or vigorous manner. The deal would have gone through under its own momentum, then, in a flurry of last-minute misgivings which would have been hard to distinguish from the usual butterflies that accompany any large transaction or the preliminary stirrings of buyer's remorse. The sorts of reasons advanced in the A1 paragraph above would have been used to justify pushing ahead. With that in mind, this scenario could be broken down further into A3a, where Sirtris also had some other assets that the rest of us haven't seen, and A3b, where they didn't. I think that A3a is more likely, since that would have provided some of the momentum to get the deal done regardless. A3b is basically A2 with different timing and slightly less cluelessness.
So where do things go from here? That obviously depends on which of those three realities obtains. If A1 (specifically A1a) is the case, then GSK plows ahead with their secret Sirtris assets and compounds, and good luck to all concerned. It's worth keeping in mind that sirtuins are quite interesting and important, and that it's an area worth investigating on its own merits. (Pfizer and Amgen, among others, must think so too; that's the only reason that they would have been trying to replicate the Sirtris work).
If A2 is the real story, well, I'm very sorry to hear it. A lot of people seem ready to believe this one, partly because of anger over the layoffs the company has been going through. The most likely consequence of A2 is that $720 million dollars disappears, never to yield anything that's of use to anyone, so I hope that this isn't what happened.
And if, as I think, A3 is what actually happened, then that sort of depends on whether we're looking at A3a or A3b. If the former, then Glaxo overpaid, but has a fighting chance to redeem itself. If the latter, then Glaxo not only overpaid, but (as with A2) is in danger of losing its whole investment as well. We'll all find out.
But we may not find out very quickly. GSK has (like many other companies) a tendency to be rather close-mouthed about the progress of some of its research. When I worked in the nuclear receptor field, we all were very interested in the fate of a particular Glaxo compound, the first selective PPAR-delta ligand to go into the clinic. The company had talked about some animal and preclinical data, but we knew that they were taking it into humans (after all, it was listed that way in their pipeline updates). But it stayed listed like that. . .and stayed. . .and stayed. . .until, as the months and years passed, it became obvious to even the most optimistic observer that the compound's development was (at the very least) extremely complicated, and (more likely) had actually quietly ceased a good while before, albeit with no change in its public status.
In this case, now that these doubts have come up, GSK has a real interest in pointing out any success it may have. If its sirtuin compounds go into the clinic and just sort of hang there, that will probably be an even worse sign than usual. And if no sirtuin compounds even go into the clinic at all, well, the question has answered itself. I hope that's not what happens.