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Derek Lowe The 2002 Model

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Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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December 10, 2007

More Belts Tighten

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Posted by Derek

OK, let's get the layoff news out of the way for the week. Late last week, Bristol-Myers Squibb announced some long-expected cutbacks. And I know some people in research over there have been rather jumpy, but it looks like this round isn't going to hit the labs. From the sound of it, manufacturing is going to take the brunt of this one.

And that's not good, but it's arguably a better indicator for the company's future than laying off research staff would be. Generally that's one of the last areas to cut for a large company, at least for a large company that plans to discover any drugs. (Which makes you wonder what Johnson & Johnson has been up to, doesn't it?) BMS seems to have decided that its future is in its current strong therapeutic areas, and is narrowing down to make sure that these have enough resources. Good luck to them; I hope it works.

Of course, they're also talking about freeing up some money for partnerships and acquisitions, which is a bit more problematic. Companies this size can do very well bringing in particular drugs that a smaller partner might not have the resources to market, but I hope the company's management isn't picturing some grander strategy. (They don't seem to be planning on getting bought, which is a start). Great Big Visionary Moves in this industry don't have a good history. The time lag of drug development makes them difficult to assess, and difficult to correct when they go wrong. Here's hoping that BMS sticks to what they're good at for now, and that they're correct in identifying just what that is. . .

Comments (7) + TrackBacks (0) | Category: Business and Markets


1. CMC guy on December 10, 2007 3:32 PM writes...

Reductions or eliminations in manufacturing in favor of research may not be a good indicator for companies future prospects either depending on how deep they go. It may be short-term benefit to purge duplication, reduce excess capacity or close older less efficient plants. However for many years the strength of Big Pharma is ability to translate from discovery to the market and manufacturing is vital to that part of the drug development. A process chemist or engineer who knows and sees what it is like in a commercial setting will likely generate a better process (although in main still done less well than in other chemical plants that have greater cost concerns). Formulation folks also need to be in touch with real world so as the product with be makeable. Analytical development people who understand plant QC may take different approach to make a test as routine as possible. In terms of Quality the development and manufacturing environments are very different so again the awareness is critical. In too many cases these non-discovery people have been seen as second class or less important thus expendable.

Manufacturing is typically part of money generator side rather than a funding absorption center so unless trimming the excess it can be more expense long-term. Outsourcing all manufacturing to CMOs is not necessarily that much cheaper except for possible wages and direct capital costs. You still need people with expertise above in order to manage contracting and release. Global Quality systems are improving but certainty the high standards in US (EU and JP) are not inherent yet in many places so higher risk of getting drug cheaper is that unexpected can happen.

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2. Researcher on December 10, 2007 7:21 PM writes...

Very little ever comes out of big pharma internal R+D programs! Anyone who has worked in both startups, and big pharma, will be able to tell you why.....

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3. vindall on December 10, 2007 8:03 PM writes...

Are Pharmas fat? According to an article "Big Pharma's tough medicine" in Fortune the record 2007 layoffs are needed due to years of excess capacity.

Are there an excess of R&D people? Are they sitting around eating wine and cheese all day? The article can be found under the BMY ticker in yahoo.
I'd link it but this might not be posted.

Someone comment.

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4. weirdo on December 10, 2007 11:37 PM writes...

Fat Pharma?

"D" in many places is certainly fat, as is sales. "R" is generally fairly trim these days, particularly after the slaughter of middle-managers at a high-profile pfarma recently.

The bottom line for me is that upper management at most companies is gun shy on pulling the trigger on internal molecules, but is quite willing to burn million dollar bills on POS that come out of biotechs. Look at the beautiful molecule for which GSK just paid $80M upfront to Synta. That molecule is going to die a spectacular fiery death, but there will be no one in Research at GSK to blame for that disaster, so I'm sure it will be repeated. In fact, you can bet money BD people got big bonuses and promotions for doing the deal. They'll have moved on the next in-license "opportunity" when that flames.

You CANNOT tell me there was nothing coming out of the GSK labs that could have been a better bet for that $80M. Not to mention the continuing costs associated with further development.

I think we'd all be better off if management let us alone for about five years to look at new ways of doing things, while continuing to in-license various pieces of crap hoping a chunk will stick to the wall. Then, if we really cannot find anything useful in that timeframe, fire the lot of us. Seems like a fair bargain.

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5. burt on December 11, 2007 8:44 AM writes...

"Look at the beautiful molecule for which GSK just paid $80M upfront to Synta. That molecule is going to die a spectacular fiery death"

Very likely.

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6. J&J researcher on December 11, 2007 9:01 AM writes...

"Which makes you wonder what Johnson & Johnson has been up to, doesn't it?"

Yes, it does. Even those folks who are making the decisions at J&J don't know what J&J is up to.

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7. NFAM on December 12, 2007 3:44 AM writes...

>>"Look at the beautiful molecule for which GSK just paid $80M upfront to Synta. That molecule is going to die a spectacular fiery death"

>>Very likely.

Based on the structure, mechanism of action, and lack of knowledge about the target, I wouldn't disagree with the above statements. But the clinical data seems to be OK, and I would suspect that that was the primary driver of the deal. A randomized double blind phase II showing increased progression free survival is pretty unusual from a small biotech.

Aside from the relatively small effects (2 mo increase in PFS), and relatively small sample size (n=81), I'm curious if anyone sees anything obviously wrong with the phase II study. Looking at the molecule and (lack of) target, I am sure such a program would have never survived internally this long at GSK, and appropriately so. But if it works, it works, and everything else becomes secondary.

I'm not betting that the phase III will come out positive, but if it doesn't, that means there was something wrong with the phase II data. So tell me, is there something wrong with it?

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