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Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

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 11, 2008

Pfizer's Restructuring Grinds Along

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Posted by Derek

So, Pfizer: it seems as if they’ve been going on about cutting their research staff for months now. Well, its has been months, and the whole thing is turning into a rather bitter joke for people in Groton, from what I can tell. This current wave of restructuring has been rumbling along since back in the summer, and they told people about the layoffs in the fall. How long is all this going to take?

The latest announcement from the higher layers is that the company will announce its plans “sometime in January”. Lee Howard, a reporter at the New London paper The Day, has a copy of a letter from Pfizer’s Rod MacKenzie (head of discovery research worldwide) to employees, saying that because the changes in research are so complex, he won’t be able to communicate them by the end of the year. I’m not sure if the letter includes his greetings for a Merry Christmas and a Happy New Year; maybe that one will arrive in time for Valentine’s Day. Here's the article, the comments to which erupt in a lot of vituperative town-vs-gown New London crossfire.

From what I’m hearing, the coming changes are going to be quite profound in chemistry. Pfizer seems to be dividing its chemists up into people who think up molecules, and people who make them, with no real overlap. You’re probably thinking sure, that’s how the Germans and the Swiss tend to do it, the PhDs in the offices and the BS/MS folks out at the hood. But apparently there are PhDs on the “make the molecules” side in Pfizer’s new scheme, although I think the “design the molecules” side will have no one who isn’t. At any rate, the traditional medicinal chemist, someone who has an idea for a new molecule and then goes out to the lab and makes it, will seemingly have no place at Pfizer. You do one, or you do the other.

And I’ve heard from several sources that major outsourcing will be a big part of the new system as well. The “drug designers” will also be resource managers, spending their time figuring out what compounds and series to ship over to China, and what to have the local groups work on. As readers here well know, I think that outsourcing definitely has its place, but Pfizer seems to be going even further down that road than the rest of the industry – how well that’s going to work is an open question. A lot of the outsourcing work I’ve seen over the years has been. . .OK. Used judiciously, that’s fine, but I don’t know if I’d want to base whole programs on it if I didn’t have to.

I think it’s safe to say that morale and productivity in the labs in Groton must be drooping a bit these days. How could it not be, with everyone waiting for months to see who’s going to be let go, and in this economic climate? I understand that it’s a big organization, and that figuring out what to do is a complicated job. I certainly wouldn’t want it. But the way this is being done has not reflected well on the company’s management and how it treats its employees. But we’ll just have to add this one to the existing lists in both categories. . .

Comments (57) + TrackBacks (0) | Category: Business and Markets | Current Events


1. leftjustintime! on December 11, 2008 9:10 AM writes...

You forgot to mention that this has actually been going on for the last 7 years! DAYONE/ATS/INTEGRATION/TRANSFORMATION/WHATERVER THEY ARE CALLING IT NOW...

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2. d_orbital on December 11, 2008 10:58 AM writes...

I interviewed w/ Pfizer last year and this model was described to me pretty much as you have it. The PhD positions they were massively hiring last year were for "Synthetic Leads" where the PhD gets molecules from the Medicinal Chemists and then simply makes them. At their disposal are MS and BS chemists as well as the power to outsource. The plan, then as described to me, was for these "Synthetic Leads" to follow the molecule(s) eventually to process where they would have significant input/interaction with the Process chemists.

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3. Sigh on December 11, 2008 11:11 AM writes...

"Leftjustintime" has it right. I think it is rather hilarious that a company with an average employee education level of a master's seems to think that things will work better with programs with names like "Our Path Forward" and "The Five Point Plan". (passing out little plastic cards with the 5 pt. plan is really funny.)

In this day of irony, you just can't do that and expect to be taken seriously.

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4. Sigh on December 11, 2008 11:13 AM writes...

One more thing: I find it fortunate that they did not name the program "The Great Leap Forward".

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5. Hap on December 11, 2008 11:22 AM writes...

The job titles seem less limiting than I might have expected, but the cynic in me (which keeps growing, lately) might see this as being a way to narrow job descriptions for easier outsourcing later - considering the inability of companies to optimize drug development, I think they figure you can't outsource too much, and people with narrower responsibilities should be easier to outsource.

I assume they don't plan on recruiting management from within their ranks either - this system seems destined to give the people who work in it less knowledge of other areas and perhaps a more difficult transition to managing.

Maybe they could just call it "The Five-Year Plan" and leave it at that.

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6. Ty on December 11, 2008 11:40 AM writes...

So, it's a synthetic service, no question asked. Hmm... I wonder where those chemists will end up in 5 years, with the limited (or 'highly specialized') experience and skill sets.

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7. Nick K on December 11, 2008 12:24 PM writes...

it's difficult to see how these changes will solve Pfizer's fundamental problem, namely a lack of creativity and originality in Drug Discovery, resulting in an empty pipeline. Maybe Rod MacKenzie could enlighten us....

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8. milkshake on December 11, 2008 12:41 PM writes...

Screw the chemists - they are nothing more than over-confident peasants. Serfdom is the working model you are searching for

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9. Hap on December 11, 2008 12:46 PM writes...

I don't think anyone knows how to make drug discovery more productive, only how to make it cheaper (well, if you can still something drug discovery if it doesn't actually discover any drugs). If all you have is a hammer, everything looks like a nail. Layoffs, cuts, and outsourcing are the hammers of choice.

It also helps if your upper management won't be around when the consequences come around, particularly if their salaries, retirement, and bonuses are assured. Jumping from a crashing plane with a reliable parachute is much easier on the body than riding the plane to the ground.

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10. milkshake on December 11, 2008 1:17 PM writes...

You have to understand when you have large research sites with very limited output over the last decade, a situation that threatens the company existence, the leadership has to take a long and hard look at all productivity factors affecting their in-house research. And of course they will determine that the root of the problem is with the unreliable intelligentsia in the labs, rather than with the party officials or even the politburo itself.

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11. R&D Chemist on December 11, 2008 1:19 PM writes...

Hey, I got here from the link from FierceBiotech. Congrats! Derek, you're famous [not that I don't know that ;)]

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12. Indy on December 11, 2008 1:19 PM writes...

Outsourcing is helping CROs in countries like China and India to develop their skills, learn and implement what is needed to become eventually biotech/drug discovery entities.

And when this happens (because it is bound to happen) these CROs will stop doing the work for other companies.

At the end, big pharma is helping these CROs to become their competitors in a not distance future.

And to make things worse, when this happens big pharma is not going to have the necessary infrastructure to do drug discovery anymore, and all the know-how that they will need to get their outsourced projects moving again will not be available because, yes... you guessed right, the CROs kept all that knowledge and expertise.

Moreover, the extreme outsourcing is becoming less cost effective day by day as the current prices keep going up and up with CROs.

It is getting to a point that the savings (if any) are not as substantial, significant, or at all.

So... Could anybody remember what was the point of outsourcing after all?

When it comes to outsourcing, big pharma should listen to what the doctor says: Do all in moderation.

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13. Hap on December 11, 2008 1:44 PM writes...

1) To do the same work cheaper so they could either do different (and more) work for the same cost or cash out more profit on the same investment.

2) To increase stock prices for people who will not be around when the consequences of their mismanagement show up.

I think the long-term point of outsourcing is to expand the labor pool - whoever is around eventually will have a larger pool of qualified people to hire from. I think of it like a game of musical chairs, or the NFL - as long as there is one more person that wants a job (or city that wants a team) than actual jobs or teams available, they can use the threat of layoffs (or departure) to depress wages (or increase team benefits from cities). Of course, the desire to invest lots of time and money in education for jobs that can be rapidly purged is sort of limited, but something will happen to magically cure that, and it'll be OK.

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14. processchemist on December 11, 2008 2:04 PM writes...

I worked since my first day in small (western) contractors in the classic areas: synthetic support to medichem, scale up and process research, manufacturing, and I can say that the more the big outsource, the more technical culture they loose. I know of a big company (part of the cut/restructure club) where after a big merge the quality of at least one development/process group dropped to almost zero.

So I totally agree with Indy.

Did you noticed a mail from ACS saying something like "Science it's moving overseas"?

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15. The Pharmacoepidemiololgist on December 11, 2008 3:34 PM writes...

Back in the day, Bristol-Myers Squibb had its "Opportunity Seeking Blockbusters." Everyone remember OSBs? The PRI was to crank out 3-4 of them every year (Lord knows who had the money to pay for them). That was in the early 2000s. Then came Constellation--remember all the fun we had "constellating" all the time? I do. That's why BMS is such a powerhouse today in cardiovascular drugs and in infectious diseases, too. Maybe Pfizer should try a variant on Constellation--let's call it "Cancer". Then the employees can talk about the cancer growing within Pfizer, and how great it will be when the cancer forms mets throughout the organization. Wonder how longer before the cancer kills the host.

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16. CMC Guy on December 11, 2008 3:56 PM writes...

Outsourcing of medchem/discovery is just a further sign that most companies have little "technical culture" remaining these days, at least at the decision making levels. Indy and processchemist are correct that when focus becomes doing certain elements externally much of the training and experience of those involved is weakened (or to a degree transferred to others) which likely will result is less efficiency and poor results down the road. Discovery in particular takes many diverse functions working together closely and so is much harder to combine if not under a single companies structure. Research done in isolation of good Development and Clinical perspectives can be misaligned. There are counter examples but most biotechs struggle along or fail because they don't have sufficiently wide view/knowledge of drug development.

While it can be argued that outsourcing some functions may save some money it does come at a cost of building foundations that could be important. Isn't it good preparation to have new chemists bang out analogs while they learn the hows and whys of what they are making so they can later extrapolate by themselves? Likewise although on paper outsourcing of all manufacturing can look rational because of infrastructure costs unless the process chemists are exposed/work with true commercial scale will they really know how to design an appropriate process?

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17. MTK on December 11, 2008 4:19 PM writes...

While we all bash outsourcing, or at least the way it's implemented, let's not forget the impetus for all this.

R&D productivity has declined. R&D budgets across pharma skyrocketed in the 90's, yet fewer drugs were produced. I don't think it's an unreasonable response to say "Why spend more for less when I can spend less?"

This may not be the solution, but something has to change. Going back to the 80's way isn't going to do it either, that's what got us here. Unfortunately, there's going to be a lot of pain and a lot of mistakes until someone finds that new path forward. Status quo is really not an option.

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18. Hap on December 11, 2008 5:03 PM writes...

Cutting research without some understanding of what the problem seems like a self-destructive solution - it saves you money in the short term but diminishes your ability to generate products later. Same with outsourcing - you lose the institutional memory that goes with having the research in-house. If your research isn't producing, neither layoffs or outsourcing are likely to make it produce - because if you could produce, then you wouldn't need to lay off, and if your outsourcing groups can, they will then displace you at some point (because once they cease needing your money, they will beat you at your business, because while sales and marketing isn't easy, it can be replicated, while drugs can't.)

The problem isn't that the status quo isn't being maintained - the problem is that cutting staff and outsourcing have been tried before and don't work, at least in anything other than the short term. They cut costs, but don't improve productivity - they don't solve the problems in their businesses, and potentially make it harder for them to solve those problems. Outsourcing sucks for us, but that isn't why it's necessarily bad in this case - it's that you are training your replacements and while you do so, the cost advantage of outsourcing disappears, so that if the money from outsourcing isn't used to improve your productivity, you are left with an unproductive (but smaller and unhappier) staff and a competitor who knows your business.

If we understood how to fix pharmaceutical research, we'd be making money ourselves. Pfizer's plan could work, though it appears to have flaws (developing managers, making single-track employees and reducing their and your adaptability). Its most anticipatable consequence, however, seems to be to facilitate outsourcing, so that even if it works, drug chemists currently at Pfizer will probably be worse off (because more than a few of them won't be there, and those who are will probably be less adaptable and thus less able to be hired elsewhere if Pfizer lays off). The likely costs seem obvious, while the benefits don't so much. That doesn't mean it won't work (see above), but it doesn't make for a good bet or a pleasant ride if you're there.

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19. Jose on December 11, 2008 5:56 PM writes...

"R&D productivity has declined. R&D budgets across pharma skyrocketed in the 90's, yet fewer drugs were produced. I don't think it's an unreasonable response to say "Why spend more for less when I can s