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DBL%20Hendrix%20small.png College chemistry, 1983

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: derekb.lowe@gmail.com 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


COMMENTS

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 spend less?"

The vast majority of high level management and MBAs cannot see the unholy alliance of factors that led to a lost decade- combi chem, all the low-hanging fruit being picked, and increased scrutiny (paranoia?) at the FDA. This insane game of silly buggers they are now playing will not, and cannot, address these fundamental issues, but it might just get them to a fat bonus check!

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20. GACE on December 11, 2008 5:58 PM writes...

As Milkshake mentioned, the intellectual snobs who actually think about how to make better ligands deserve to go. Now is the time to bring Iosif Vissarionovich's dream to fruition.

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21. MTK on December 11, 2008 6:09 PM writes...

Hap,

I think we're basically on the same page. I said it would be painful.

And unlike yourself, there are those that believe if we just kept on investing more things would be better despite what the 90's showed us.

The problem with outsourcing R&D is that its death by a thousand cuts. Basically, management is admitting they can't run a R&D outfit, so they outsource what they can to contain costs. As you say though Hap, that doesn't address the problem which is they can't run a R&D outfit.

Does that not suggest that Big Pharma should get out of discovery altogether and concentrate on what they do best, which is managing the complicated and multi-faceted process of getting a drug approved and selling those approved drugs?

How about this: Big Pharma should spin out all of R and most of D. If nothing else, it will get the beancounters who get in our way and have proven they can't run an R&D organization out of the way. Without internal R&D, they're going to have to in-license everything, and since it's pretty much acknowledged that India, China, Slovenia, and everyone else stinks at this moment than we'll do fine. That also addresses your concern about giving away the knowledge and expertise.

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22. MTK on December 11, 2008 6:21 PM writes...

So what's your solution, Jose?

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23. Anonymous BMS Researcher on December 11, 2008 7:12 PM writes...

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

> 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?

At the Constellation Roll Out Meeting we all got umbrellas with the BMS logo on them (because this was supposed to be an "umbrella initiative"). The UMBRELLAS were very high quality, in fact mine kept the rain off my head as I left the BMS site where I work this evening! This umbrella has outlasted Constellation by rather a big margin.

Of course at the moment we are all waiting to learn who gets laid off in our current round of cuts.

As for the outfit in Groton, I know people who have cool t-shirts with an oval PFIRED logo.

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24. Beatrice on December 11, 2008 8:01 PM writes...

Milkshake said-

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

Now that's more like it! What you need promptly is unionization. For those of you who don't know, the only reason the US has a middle class, it because the libertarian oppressors :), were fought tooth and nail with bottles guns and blood.

According to Libertarian theory each individual is intended to negotiate for his salary and status on a level playing field. But of course we know life isn't fair, and a company which can recruit abroad can circumvent such a process. Hence the libertarian philosophy is bankrupt in the modern world.

The whole point of this outsourcing/re-structuring process is do devalue knowledge based
Skills for the sole purpose of enriching the EXECUTIVE ELITE. You know, the guys
Who get bonuses no matter what!

UNIONIZE NOW!
http://en.wikipedia.org/wiki/Image:1912_Lawrence_Textile_Strike_1.jpg

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25. ALi G on December 11, 2008 8:33 PM writes...

I always hear upper management complain about the >10% annual increase in R&D spending, but not the >10% annual increase in sales. R&D spending at most pharma companies was tagged to a certain percentage of sales (10-15%) throughout the 80s and 90s. R&D was productive throughout that period. It is just in the last five years that sales have started to decline (or be projected to decline in the next few years).

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26. JWB on December 11, 2008 9:33 PM writes...

Just so you'd know...
Yahoo Finance data for PFE:
EPS past 5 yrs +2.4%/yr
EPS next 5 yrs est +1.2%/yr
sales '08 +0.7% est
sales '09 +0.5% est

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27. Jose on December 11, 2008 11:06 PM writes...

MTK- I do not pretend to have any answers to the current quagmire, but I am quite positive that eviscerating the intellectual engine will not be a productive tack. Anyone who supports decoupling the brains from a research dependent organization is serving donuts on Pluto.

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28. Industry Guy on December 12, 2008 8:16 AM writes...

I hear the axe falls at BMS on Tuesday next week. Good luck to all who feel the cut....its a pretty tough market out there.

As far as outsourcing goes, I think the management at my large private pharma have it right (for once), outsource the office jobs and for research, only use externals for routine library prep and intermediate prep. That way they dont learn any SAR and it lets us use our time on the more interesting stuff while they do the monkey work.

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29. MTK on December 12, 2008 8:38 AM writes...

Jose,

Here's where I have a problem. Everyone here is bitching and moaning, but no one has any ideas. None. Zip. Zilch. So despite the fact that we consider ourselves the smartest people in the room, we've got nothing in terms of ideas to increase R&D productivity.

As for your statement about cutting a research dependent organization, that's somewhat my point. Big Pharma, in the last decade and a half, has shown itself to be crummy at R&D and good at selling. Why should they continue R&D? Consider drugs the final commercial product and targets, hits, leads, and drug candidates the supply chain that leads to the products. You don't need to own and run your supply chain. And you don't do it, if you're lousy at it or someone else does it better.

If we as researchers are as good as we think compared to the rest of the world, then we'd be better off being separated also. Let us find the drugs, let someone else market and sell them.

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30. fred on December 12, 2008 9:20 AM writes...

A perfect storm:

1)Incompetent fast-food CEO's
2)patent expirations
Money sucked out of R&D to subsidize TV ads (direct to consumer ads should be illegal, IMHO)
3) overreliance on blockbusters
4) overconfidence that kinases were the cure to all ills
5) overreliance on biologicals. Enbrel's a great drug, but where's an anti-TNF SMALL MOLECULE? There's plenty of suitable, ORAL clinical candidates that have been deemphasized because biologicals shorten the Discovery phase of drug approval.
6) Last, but perhaps most important: a "CYA", croney-filled FDA that wouldn't approve even Lipitor or Zyrtec if it were put under their "watchful eyes" today.

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31. cookingwithsolvents on December 12, 2008 9:56 AM writes...

I was wondering if someone might be able to comment about specific individuals impact (or lack therof due to a "leaky drug discovery PI pipeline" due to outsourcing or other factors) to the drug industry. That is, for whatever reason, are current times lacking "that person" which shows the way and contributes not only new ideas but also their their scientific progeny? I know very little about the history of industrial research groups.

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32. Ty on December 12, 2008 10:00 AM writes...

Why don't they spin off more instead layoff? With the cost of all the sev package, I would rather provide (ex)employees with some funding and resources to help set up their own shop. License them a couple of early or dormant or discarded projects, too. It saves cost, gives the ex-employees a great upside shot (even though they will have to work their butt off for less money for now), and could possibly come back as a surprise present, gift-wrapped and everything.

A great example is aliskiren (Tekturna). The once-internal project was spinned off from Novartis as Speedel (although it was not in lieu of layoff). They succeeded in making the first bioavailable renin inhibitor, Novartis helped its development, it reached the market, and now Novartis bought the company back.

I think it's something more scientists should try to bargain for before they are let go.

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33. Anonymous on December 12, 2008 10:04 AM writes...

"UNIONIZE NOW!"

-sorry, but I like being ionized.

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34. Hap on December 12, 2008 11:05 AM writes...

If companies can't discover enough drugs, then maybe outsourcing discovery might help. (They may be able to do some discovery better because of their size and ability to afford large infrastructure, though an example would have been Merck's push to HTS, and well...) I would be more likely to think (since I don't know what's wrong, and don't have any experience in drug companies) that the problem is development, particularly eliminating ill-behaved compounds as chosen drugs before trials. Some of the factors in D (FDA) are beyond their control, but if development is the problem, outsourcing probably won't help too much. In addition, the outsourcing of drug trials may have had bad consequences - if the sets of people willing to try drugs for money don't have the same problems as the target population, and are appropriate as test subjects, then the trials are expensive because they don't work and incur legal and goodwill costs subsequently.

DTC and other things may have expanded the market for some drugs beyond what the side effect-benefit profile justifies, which dimishes their goodwill as well. The p