14 January 2009

Credit crunch hits Pfizer

The worldwide financial crisis is now affecting drugs research and development as Pfizer Inc., the world’s biggest drug company, lays off up to 800 scientists.

The worldwide financial crisis is now affecting drugs research and development as Pfizer Inc., the world’s biggest drug company, lays off up to 800 scientists.

This, they say, is to refocus disappointing research efforts and cut its massive overhead ahead of an anticipated crash in revenue. New York-based Pfizer plans to reduce its global research staff of about 10 000 people by 5% to 8% this year, company spokeswoman Kristen Neese said.

"This is in line with our refocused research areas," Neese said. The move comes after the company announced in September it was narrowing its research focus to six disease areas – Alzheimer’s, cancer, schizophrenia, pain, inflammation and diabetes – and abandoning new research in other areas. Where possible, researchers were shifted from other areas into the six new core areas, Neese said.

Surprisingly, one of the areas abandoned was cardiovascular disease, where Pfizer had been a dominant player with its $13 billion-a-year cholesterol fighter Lipitor, the world’s top-selling drug. But Lipitor -which brings in just over one-fourth of Pfizer’s roughly $50 billion in annual revenue – is expected to face generic competition in late 2011. Efforts to come up with a successor drug failed, including the flameout of once-promising torcetrapib after it was linked to heart problems in late-stage human testing.

Move sparks controversy
Already, Lipitor sales have dipped slightly, apparently partly due to consumers trying a much-cheaper generic form of a similar drug, Zocor.

Firing scientists "is exactly the wrong thing to do," said analyst Steve Brozak of WBB Securities. "With this step that they’ve taken, either they acquire, are acquired or fail. They are basically sacrificing their young for the benefit of the old pharmaceutical model, which does not work," Brozak added, referring to the industry’s once-successful strategy of producing blockbuster drugs and marketing them aggressively.

Martin Mackay, Pfizer’s head of global research, said Tuesday at a J.P. Morgan health care conference in San Francisco that since he arrived just over a year ago, one of his priorities has been to ensure the company had its research in the most promising areas.

"We’ve had extensive reviews of our portfolio, both internal and with external experts, to make sure we had the best portfolio that we could," he said.

That review resulted in the six-disease focus, where he said research is growing despite flat spending. "Barely a week goes by at Pfizer without one of our compounds going into (a new stage of testing), such is the depth of our portfolio," he added.

More cuts likely, say some
Mackay also said the company expects to have 24 to 28 late-stage human studies by the end of this year. About half are on new compounds, the rest on existing drugs being tested for new uses. "We’re still interested in doing deals for platform technologies that will help us increase our productivity," as well as deals for other technology or specific compounds, Mackay told J.P. Morgan clients.

Brozak, who attended Mackay’s presentation, said Pfizer needs to invest far more in research, either in-house or through licensing deals and other collaborations with biotech companies or other outside researchers. Another analyst said more cuts are likely.

"This is probably not the end," said biopharmaceuticals analyst Erik Gordon, a professor at University of Michigan Business School. He said Pfizer likely has identified 500 to 800 scientists not in the new core areas in its first round of review, but more could be cut later.

Gordon said the cuts are not due to the recession, but rather to the long-term problems plaguing the entire drug industry. Those include stiffer generic competition and a general lack of research productivity.

Over 14 000 jobs lost since 2007
Also last fall, Pfizer said it was reorganising its business units, including replacing its current geographic divisions with new ones centred on primary care, specialty care and operations in emerging markets. "We have removed several levels of management within the research organisation and are now operating in smaller, more nimble and efficient units. With these changes, we are realigning our staff to reflect our research priorities," Pfizer said in a statement.

Under a major restructuring begun in January 2007, Pfizer has eliminated roughly 14 600 jobs, leaving about 83 400 workers, and closed eight plants or other sites.

Neese said the scientists now losing their jobs were being notified individually on Tuesday. Research areas that Pfizer is exiting include anaemia, bone health, gastrointestinal disorders, obesity, liver disease, osteoarthritis and peripheral artery disease. – (Sapa, January 2009)

Read more:
Financial crisis hits aid agencies
Money blues to take mental toll


Read Health24’s Comments Policy

Comment on this story
Comments have been closed for this article.