Pfizer slashes R&D by billions, ditching less profitable diseases

The world’s largest pharmaceutical company unveiled plans to slash its research and development spending by billions of dollars – shutting down plants and cutting thousands of jobs.

According to Pfizer’s new CEO Ian Read, the reductions are part of a plan to overhaul the company’s research operation to focus on the most-profitable programs.

The company forecasts $66 billion-$68 billion for 2011, compared with $67.8 billion in 2010.

For 2012, they’re predicting $63 billion to $65.5 billion. This decline is predicated on competition from cheaper generics and lack of new-drug revenue the company had been expecting before prospects failed clinical trials [FiercePharma].

The industry spent years bracing itself for the 'patent cliff,' when sales are expected to plummet as a bundle of blockbuster drugs loses protection against generic competitors [Nature]. Pfizer's $10 billion-a-year cholesterol-reducing Lipitor, the world's best-selling drug last year, loses patent protection in November.

With key patents expiring, Pfizer will carve a huge amount from its R&D spending. Expenditure for 2012 R&D will be cut to between $6.5 billion and $7.0 billion, down $1.5 billion from its previous target. Compare that to $9.4 billion in 2010.

Chief casualties include:

• Its research facility in Sandwich, UK, where Viagra was developed, will close in 18–24 months. There are 2,400 employees at this site.
• Its R&D headquarters in Groton, Connecticut, will be shedding roughly 1,100 jobs.
• The company plans to cut research into areas like allergy, respiratory diseases, urology, internal medicine, and tissue repair.

They plan to focus on the more profitable areas of neuroscience, oncology, vaccines, and cardiovascular and inflammation treatments, Read says. “At some point your shareholders and stakeholders demand you have a return on investment in research.”

As Bloomberg notes, Pfizer is continuing a cost-reduction plan that includes firing 19,000 employees, closing 8 plants, and shutting 6 research centers. Even before that plan was enacted, Pfizer had fired about 40,000 employees during the 6 years ended in 2009.

Rival companies also face sales losses running into the billions. Nature reports:

The latest parade of annual results shows that although profits are buoyant for now, companies are increasingly reluctant to sink money into R&D pipelines, which have been slow to yield new drugs. Instead, share buy-backs – which boost share prices and please investors – and outsourcing R&D are in vogue.

GlaxoSmithKline plans to focus its work on getting the most promising drugs to market and will cut costs and risk "through externalizing parts of early-stage discovery; dismantling infrastructure; and terminating development in areas with low financial and scientific return”.

Image: Pfizer

This post was originally published on Smartplanet.com