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Big Pharma, Pfizer, GSK Refocus, Big Pharma prunes R&D as times get tough
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"The current R&D model is not delivering. Ten years ago that would have been a staggering suggestion to make; today it is one generally accepted by companies and investors alike."...."tweaking of research strategy is standard in the pharmaceutical industry - and needed periodically as new competition and other factors affect revenue."....."They're basically looking at the largest-margin, largest-market indications,"..... "it's very difficult to demonstrate a big improvement above and beyond what exists, and that's really what the FDA and payers demand"
Drug companies such as GSK have been buffeted by generic competition, greater scrutiny by regulators and limited success in developing new medicines.
Morningstar's Conover said Glaxo appears poised to do more partnering with their research, including more outsourcing.
"Because they're going to do more of that they're not going to need their internal research organization as much," Conover said.
"This is largely being spurred by the fact that the productivity of these large pharmaceutical companies just hasn't been that good. And if they can outsource some of their development efforts to increase their productivity, they're going to do it."
"There is a feeling that bigger is not better and you have to concentrate your innovation. Trying to do everything doesn't seem to have worked," said Ben Yeoh, an industry analyst at Dresdner Kleinwort. "A lot of companies are thinking along these lines."
The pharmaceutical industry is exploring ways to improve productivity because many companies have brought few successful medicines to market, despite spending billions of dollars a year on research and development.
Derek Lowe, a drug industry chemist who blogs over at In the Pipeline, smelled the layoffs coming. On a post earlier today that noted Pfizer?s research retreat and Glaxo?s cuts, he wondered where the bottom might lie for drug scientists:
"There?s no longer any doubt, in case anyone was wondering, that this is the worst stretch for research employment at the big pharmaceutical companies in at least twenty years (to my certain knowledge) and very likely much longer than that, from what longer-serving colleagues tell me. Frankly, I?m not sure we?ve ever seen anything quite like this - which makes further prediction impossible.
. . "
Many large drugmakers have announced big job reductions in the past two years, although the main focus for rationalising operations so far has been within marketing and manufacturing.
That is now starting to change, with R&D also in the frame for restructuring.
"What the industry now is focused on is reallocation of scarce resources in R&D," said Deutsche Bank AG analyst Barbara Ryan. "They have to behave like portfolio managers and identify the best opportunities for a finite pool of capital."
Some companies have already made strategic decisions.
AstraZeneca Plc spun off much of its research on medicines for gastrointestinal diseases into a new company called Albireo, backed by private equity, in February.
Others moved even earlier. Sanofi-Aventis SA, for example, spun off bone health research into what is now ProStrakan Group Plc , while Roche Holding SA's move out of antibiotics led to the creation of Basilea Pharmaceutica AG (BSLN.S: Quote, Profile, Research, Stock Buzz).
In 2005, Merck & Co Inc announced it would focus research and development efforts on nine therapeutic areas.
Other companies are increasingly farming out research and development. Eli Lilly and Co unveiled a 10-year, $1.6 billion lab services deal in August with testing company Covance Inc.
The shake-up at Pfizer, however, may make bigger waves -- partly because it is the world's biggest drugmaker, but also due to its decision to exit heart medicine, a traditional mainstay of the industry.
Pfizer, in particular, is heavily reliant on sales of Lipitor, the world's top-selling $12 billion-a-year drug for lowering cholesterol. But Lipitor revenues are set to fall off dramatically in 2011 when generic versions hit the market.
And following the high-profile failure of torcetrapib, another cholesterol treatment, Pfizer has been unable to come up with a replacement.
Ryan said cardiovascular research is increasingly expensive and it may be difficult to improve on the effective heart drugs already on the market.
Cardiovascular products also have faced a tougher regulatory road in recent years, said Morningstar analyst Damien Conover.
"R&D is no longer the sacred cow it was in the past," Goldman Sachs analyst John Murphy wrote in a research note earlier this month.
"The current R&D model is not delivering. Ten years ago that would have been a staggering suggestion to make; today it is one generally accepted by companies and investors alike."
GSK?s longer-term strategy to ensure that we can invest in key areas of future growth and evolve our business to compete effectively in what is a rapidly changing and challenging environment for pharmaceutical companies."
Earlier on Tuesday, Glaxo's arch-rival Pfizer Inc -- the world's number one drugmaker -- announced it had decided to drop efforts to develop medicines for heart disease, obesity and bone health in a move to better focus its research portfolio.
Glaxo said the cutbacks were necessary "to take advantage of new scientific opportunities and further improve GSK's productivity"
The move reflects a tough stance on costs by new Chief Executive Andrew Witty. He has pledged to make GSK a lower-cost company as part of his strategy to improve returns to investors.
The plans announced today are part of a continuing effort, announced last October, to save $1.4 billion a year over the next three years.
Last year the then Glaxo chief executive Jean-Pierre Garnier outlined plans for a programme designed to produce savings of 700m by 2010. Earlier this summer his successor, Andrew Witty, underlined the need for the company to review its strategic priorities in the face of changing conditions. He told investors the industry faced a series of challenges as an increasing number of products lost patent protection, funders sought more cost-effective health care and patients demanded new and better medicines. He warned then that companies had to work harder to demonstrate greater returns from R&D investment.
"These new strategic priorities will evolve GSK into a company that has a balanced group of healthcare businesses and lower overall capital risk. They also point to a more disciplined allocation of capital across all our different business areas."
Pfizer shifts focus to cancer and biotech drugs
(AP) By LINDA A. JOHNSON 09.30.08, 5:37 PM ET
TRENTON, N.J. -
Pfizer Inc. is shifting its research focus to diseases that have high potential for big profits and for treatment improvements, such as cancer and Alzheimer's disease.
The world's biggest drugmaker also is ending new research on conditions from obesity to heart disease, but research on drugs already in late-stage human testing will continue, spokeswoman Liz Power said Tuesday.
Experts said such tweaking of research strategy is standard in the pharmaceutical industry - and needed periodically as new competition and other factors affect revenue.
Pfizer expects to spend up to $7.5 billion on research and development this year, a huge budget for the industry.
"Even though it is very large, it is finite," Power said.
Like most of its competitors, Pfizer has been reorganizing and cutting costs to deal with looming generic competition and a lack of blockbusters in its pipeline.
Power said Pfizer needs to focus research, particularly costly late-stage human testing, on areas where patient needs aren't met by existing treatments, where there's a sizable commercial market and where the company has expertise and a good chance for scientific success.
The New York-based company has identified six high-priority areas for future research: cancer, pain, inflammation, diabetes, Alzheimer's disease and schizophrenia.
"They're basically looking at the largest-margin, largest-market indications," said analyst Steve Brozak of WBB Securities.
Pfizer has increasingly been investing in cancer research and probably now will move into treatments for pain and inflammation that work through different mechanisms than its blockbuster Celebrex, he said. The focus on diabetes likely will be on the type linked to the Western obesity epidemic, and Alzheimer's also will be a huge market, given the aging population. And there are "no satisfactory cures whatsoever" for schizophrenia, Brozak added.
Areas where the company is ending research, much of it still in early stages, include anemia, bone health, gastrointestinal disorders, muscle diseases, obesity and some approaches to osteoarthritis. The company also is dropping early research in four areas of cardiac disease: hardening of the arteries, high cholesterol, heart failure and peripheral arterial disease.
Deutsche Bank (nyse: DB - news - people ) pharmaceuticals analyst Barbara Ryan noted Pfizer has been among the top few drug companies that develop heart drugsa huge market given the aging population in developed countries.
Pfizer markets the world's top-selling drug, cholesterol fighter Lipitor, which generates about $12 billion a year in revenue. However, it will lose its U.S. patent late in 2011, and there's already a generic version of a cholesterol drug from the same class, Zocor.
Many heart drugs in other categories also have significant generic competition that is eroding sales of brand-name medicines.
"We have a large number of highly effective (cardiovascular) drugs, and it's very difficult to demonstrate a big improvement above and beyond what exists, and that's really what the FDA and payers demand," said Ryan.
Meanwhile, Pfizer on Tuesday gave its semiannual update for investors on its research pipeline. It now has 114 human studies of drugs in process and said that since its last update in February, the number in final human testing has grown from 16 to 25 - 19 of them in its high-priority areas. Testing of 13 drugs, including four for rheumatoid arthritis, has been stopped since February.
Biotechnology drugs, which generally are extremely profitable and so far have been insulated from generic competition by their complexity, will be a big part of that pipeline, particularly in cancer research.
Pfizer shares rose 79 cents, or 4.5 percent, to close at $18.44, near their 52-week low and at about the same level where they traded in the summer of 1997.
"We are making significant operational improvements and driving our strategies to accelerate development, refocus investments and further improve execution, including trial design and cycle times," said Martin Mackay, President of Pfizer Global Research & Development. "We are investing in the most promising disease areas, where there is strong unmet medical need, favorable markets and an opportunity to advance medical science."
Pfizer's pipeline acceleration is ahead of projections given to investors in March 2008. At that time, the company announced the goal to grow its Phase 3 pipeline to at least 24 -- and as many as 28 new molecular entities or new indications -- by December 2009. The company is targeting 15-20 regulatory submissions in the period 2010-2012.
The company is vigorously driving its biotechnology investments and has 16 biotherapeutics in development, including CP-751871, a fully humanized monoclonal antibody which works against the Insulin-like Growth Factor 1 (IGF1-R). CP-751871 recently began Phase 3 testing against non-small-cell lung cancer, the leading cause of cancer death in the U.S.
The company has seven other cancer programs in Phase 3, including two potential new indications for Sutent in hepatocellular and prostate cancer. Sutent is taken orally and is a highly selective, multi-targeted tyrosine kinase inhibitor that starves tumors of blood and nutrients needed for growth and simultaneously kills cancer cells that make up tumors. It is also being tested in Phase 3 against breast, lung, and colorectal cancers.
Also advancing to Phase 3 is a potential new renal cell carcinoma indication for axitinib. This is an oral, selective inhibitor of VEGFR (vascular endothelial growth factor receptors 1, 2 and 3), which has been shown to induce tumor regression.
Pfizer's updated pipeline is posted at www.pfizer.com and shows each compound name with the relevant disease area. The mechanism of action is also shown for late-stage programs.
GlaxoSmithKline to cut 850 jobs
http://www.newsobserver.com
By David Ranii, Staff Writer
The latest round of job cuts at British pharmaceutical giant GlaxoSmithKline calls for the elimination of 850 research and development positions company-wide, including an undisclosed number in Research Triangle Park.
The plans announced today are part of a continuing effort, announced last October, to save $1.4 billion a year over the next three years.
An undetermined number of the positions the company expects to cut currently are unfilled, the company said. GSK has more than 15,000 research-and-development staffers worldwide, including 2,500 in RTP, the site of one of the company?s two U.S. headquarters.
GSK declined to provide a breakdown of how many people or positions are affected in RTP.
"We usually don?t make that information public," said spokeswoman Melinda Stubbee.
RTP workers affected by the cutbacks were notified today, but some of them could remain with the company for weeks or even months, Stubbee said.
The majority of the job cuts involve scientists, but administrative staff also will be affected.
The cutbacks are focused on preclinical and and early-stage drug development and are part of a "reshaping" of the company?s research-and-development effort, Stubbee said.
Prior to today?s cutbacks, the company had a total of about 5,500 workers in RTP and at its plant in Zebulon.
GSK previously had laid off more than 200 workers in the Triangle and more than 1,500 in the U.S. and Puerto Rico.
Drug companies such as GSK have been buffeted by generic competition, greater scrutiny by regulators and limited success in developing new medicines.
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