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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: Twitter: Dereklowe

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March 16, 2011

Pfizer Moves Antibacterials to Shanghai

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Posted by Derek

So Pfizer has announced that their antibacterial research is moving to the Shanghai site. Is this the first example of a large/traditional therapeutic area moving to China? And if it is, should we care? After all, there are Swiss, German, British, and Japanese companies, among others, with multinational research sites. Some programs run at one facility, and some at another. When you add China to that list, though, something happens for a lot of people.

That's because the Chinese sites got their start as the inexpensive way to offshore work, for one thing. But Shanghai's not as cheap as it used to be - it's still less expensive than doing the work in the US or western Europe, but the cost advantage is eroding. Another factor is that you don't see companies expanding into new therapeutic areas these days, so much as moving the existing ones around. In that zero-sum game, expanding one site means contracting another.

Here's something to think about, though: does Pfizer's choice here represent a calculation about some future opportunity in China, should they be able to develop any drugs? Would the "discovered and developed in Shanghai" factor help with the regulatory authorities there?

Comments (37) + TrackBacks (0) | Category: Business and Markets | Infectious Diseases


1. noname on March 16, 2011 12:20 PM writes...

"Would the "discovered and developed in Shanghai" factor help with the regulatory authorities there?"

Probably not as much as "gave the construction contract to the local party boss' nephew" would.

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2. Anonymous on March 16, 2011 12:28 PM writes...

"Is this the first example of a large/traditional therapeutic area moving to China?"

Actually, GSK moved neurodegenerative research (Alzheimer's, MS and Parkinsons)to Shanghai years ago based on their "exceptional expertise" in those areas.

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3. anchor on March 16, 2011 12:29 PM writes...

Derek: The fact of the matter is "no one cares"! I mean we have been talking about if outsourcing makes sense, in light of all the problems we have seen (quality, alacrity, death as a result of heparin etc.)in the past postings not only at this site but elsewhere as well. But, few determined dickheads way at the top are committed to killing the pharmaceutical research here in the US. As we all ruminate, they are rubbing it in.

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4. TJM on March 16, 2011 12:35 PM writes...

This echoes issues I have been mulling over since I understood just how many Life Science doctorates will be graduating in China this decade...

Besides that and the obvious cost issues, I wondered if research would blossom in regions that had a less constraining regulatory framework. I do NOT mean to argue for less constraint here or elsewhere. But investments tend to flow to areas that are less encumbered so long as business risks are equal. Constraints are not just costly and distracting - they also slow R&D process and decisions. Time is still money in this industry, especially if you can get a faster track to market...

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5. MoMo on March 16, 2011 12:36 PM writes...

It doesn't matter. Pfizer abandoned all of its AI work long ago, then merged with Wyeth and systematically dismantled their AI groups.

Just shows how they lost sight of what is truly important. Antibiotics of the early 50's built these companies and gave them them the jump-start into other therapeutic areas with the cash infusion they generated. Now antibiotics are abandoned or left to the Shanghai factor. Kicked to the corner like a red-headed stepchild.

Pfizer might as well have given it to them, the Chinese, they weren't doing anything of importance.

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6. processchemist on March 16, 2011 12:44 PM writes...

I totally agree with noname #1. Politics in many nations historically perceived herself as a stakeholder in every big industrial effort, but this is the new flavour. Building a new R&D site can be seen as a ticket for entering the market with more ease. I honestly don't think anymore that top execs are really believing in true significant outputs from these chinese operations. But any outlook I read says that China will be the biggest market of the world, so you've got to be there. Physically. Who cares about the rest, with their pressure on prices, regulatory pressures and so on. And have a look at the Sciclone case and you'll see which is the key to success in the chinese market.

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7. Hap on March 16, 2011 1:08 PM writes...

Someone a long time ago commented that India had policies regarding clinical trials that they couldn't be performed or approved unless the drugs were made locally, but I don't know if that's true. If it were, then developing drugs in China might lower the barrier to getting them approved there. The "improved success rate by rewarding the party boss's family" theory is pretty plausible, too.

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8. Ricardo Ros on March 16, 2011 1:21 PM writes...

Doubt very much that anything but early development will be done in China/India, at least for the next 5-10 years.

Just heard about Novartis in the UK, really sorry to hear guys, another good bunch of scientists made redundant.

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9. Mad on March 16, 2011 1:36 PM writes...

When have chemists ever cared about something beyond their so-called amazing critical thinking skill? Hey guys, time to take the blindfolds off and look at what is happening above the badboy executives.

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10. Anonymous on March 16, 2011 1:57 PM writes...

#10 Mad

You must not read this blog very often.

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11. Anonymous on March 16, 2011 2:37 PM writes...

Been saying this for awhile. It's not about developing the drugs as much as it is about selling them. Rule #1 follow the money.

Pre-clinical drug discovery is cheap and effective, the amount of small biotech's is evidence of that.

I can see clinical trials being run in developing nations. It will be much cheaper to test on the prison population there (joke). But seriously if the trial is successful, pharma runs less of a risk for follow up trials in the US.

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12. pete on March 16, 2011 3:38 PM writes...

If they ship over vaccines too, perhaps there will be greater alacrity in catching the next mega-nasty flu strain that will arise from the land where pigs, ducks and man co-habit in close quarters.

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13. dearieme on March 16, 2011 6:49 PM writes...

It'll be fun protecting IPR in Chinese courts.

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14. nick on March 16, 2011 8:22 PM writes...

If I remember correctly, Bayer is shifting a significant bit of its oncology research to its Beijing research center. They recently announced that they will soon have 300+ researchers there, but I don't know how they are allocated to different therapeutic areas.

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15. featherson on March 16, 2011 8:33 PM writes...

Totally agree with #3 anchor-no one cares anymore. No one wants talented experienced people anymore. Look at the latest bullshit trend where the US pharma industry is pumping millions of trend$'s into US universities to do pharma research instead of letting highly qualified-now laid off-industrial researchers who know how to do it, do it. At my previous place of employment where we engaged the services of the arguably #1 medical institution in the US, it was incredible to watch the blatant naivete and incompetence they brought to the table compared to the employees at such unsaid company. Prepare for an unmitigated disaster in the US in the future as drugs manufactured in India and China enter the US market place.

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16. Pfizered again on March 16, 2011 9:03 PM writes...

I was a former employee of that behemoth I lament what is being done to our research base by idiotic corporate executives who take their cue from equally idiotic MBAs. GSK invested heavily in China. So have others. What has the reward been? Anyone? Propaganda!

I am sad to hear my former colleagues lose their jobs in infectious disease research because of this insane drive to relocate basic R&D to China. I have heard that GSK is also "downsizing" their antibacterial effort. I also heard that they have been experimenting with importing Chinese post-docs as industrial interns ( no doubt at cheap prices) all the while laying off experienced scientists. If this is true it is disgraceful! When will we learn!

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17. triphosgene on March 17, 2011 12:43 AM writes...

Hi MoMo, why you said "Pfizer might as well have given it to them, the Chinese, they weren't doing anything of importance"? i'm shamed of your existence in this blog.

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18. China Bonding on March 17, 2011 12:53 AM writes...

Lilly is putting a diabetes site in Shanghai as well. There are small chinese companies starting in Beijing and Shanghai too. At least someone is opening a lab somewhere.

US reseach is not going to disappear, hopefully after the patent cliff problems global big pharma research will start expanding again. One $10bn blockbuster will lift the whole industry...hope it comes soon.

Take any fear of rising China with a grain of salt...anyone remember Japan of the 1980's? The parallels are striking.

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19. Analyst on March 17, 2011 4:14 AM writes...

@ #12 Pete: Wow great, insightful comment guy. Jealous I presume?

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20. Tony on March 17, 2011 4:49 AM writes...

The Chinese 'fixing' of their exchange rate makes China look a lot cheaper than it really ought to. I wonder how long they can carry on with that policy. When it stops, suddenly it is going to look a whole lot more expensive there. Will a lot of pharma execs be left with egg on their faces? Or will they have retired on a handsome pension by then?

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21. MoMo on March 17, 2011 9:45 AM writes...


Save your shame for the present generations of business decisions and those responsible when antibiotics run out of efficacy in future years.

Let's hope the Chinese do better in the area than the present state of Big Pharma.

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22. David Formerly Known as a Chemist on March 17, 2011 10:39 AM writes...

When stories like this are discussed on this blog, the responses are utterly predictable. Outrage at the "idiotic MBAs running the companies" and the "dismal plight of chemists".

I sympathize, really I do. Look at my name. But if this really is a zero-sum game like Derek stated, then every chemist's job that's made redundant in the US or Europe equates to a new chemist job being created in China or India. It is sad to see so many of my colleague's careers thrown into shambles by the global shift that's occurring, but who's to say the careers of Chinese (or Indian) chemists are of any less importance than those of western chemists? If opportunities were flowing in the opposite direction, I doubt anyone would be complaining (except the Chinese and Indian chemists). I'm glad to see the standard of living finally rising in these countries, isn't it about time?

Meanwhile, we in the west need to shift and adapt. These are forces way beyond the control of any individual executive or company.

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23. Anonymous on March 17, 2011 12:10 PM writes...

# 22 David while I completely agree with you here on most of your points especially adapting and that what is working here is beyond teh control of any "individual" executive or company.... I do think that many americans/corporations (same thing in this country it seems) are using rules that they create to only there advantage. This flies in the face of the whole globalization of the middle class.

I too am a "formerly known as a biologist" who adapted and can make a living.............but the deck is stacked by the corporations running our country and that I definitely don't like.

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24. Anonymous on March 17, 2011 12:11 PM writes...

# 22 David - while I completely agree with you here on most of your points especially adapting and that what is working here is beyond teh control of any "individual" executive or company.... I do think that many americans/corporations (same thing in this country it seems) are using rules that they create to only their advantage. This flies in the face of the whole globalization of the middle class.

I too am a "formerly known as a biologist" who adapted and can make a living.............but the deck is stacked by the corporations running our country and that I definitely don't like.

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25. johnnyboy on March 17, 2011 12:33 PM writes...

to @22: a nice sentiment, surely. It is unfortunate that nice sentiments can't be exchanged for food or mortgage payments.

It is certainly the prerogative of indians and chinese to do whatever they can to improve their lot, no one can begrudge them that. However it is much less easy to accept that the western corporate structure is basically handing over to indians and chinese the knowledge and capital that was built up in the west through decades of investment, just for the sake of improving short term profits. This is indeed a zero-sum game, in that there is a finite amount of capital to be spent globally on R&D. More jobs in these countries mean less jobs in the west. You can be all lovey-dovey about it and say "well, it's their turn, i'm sure they deserve it"; you could also hand them the keys to your house, I suppose - which is what we're basically in the process of doing.
When you say we need to "shift and adapt" - how is that supposed to happen exactly ? For 2 or 3 decades, western countries have been shifting away, painfully, from a manufacturing-based towards a more knowledge-based economy. The hundreds of thousands of blue collar workers losing their jobs as a result were told that they needed to "shift and adapt", improve their education, etc etc. And now we are in the process of handing over the know-how of this knowledge-based economy to people working for a tenth of the income. How the hell are we supposed to "shift and adapt" when this is completed, 10-20 years from now ? Become personal assistants for chinese billionaires ?
I'm sorry if I sound reactionary or xenophobic to PC-attuned ears, but this burns me up. The conciliatory attitudes of westerners holding that it's just great for us to help china and india compete against the west in knowledge-based industries completely fail to realize that china and india do not give a rat's ass about your job, your family and your enlightened state of being. They're in it for themselves, as they should be, and if only we remembered that we also are in it for ourselves, maybe we'd be able to keep these jobs here.

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26. Nick K on March 17, 2011 1:07 PM writes...

@25: Great post, completely agree. It's difficult to imagine Rolls-Royce handing over all their IP in advanced gas turbine design and manufacture to the Chinese or Indians merely to boost short term earnings. Instead, RR are exceptionally careful to keep their expertise in Derby under lock and key. They also have very good relations with their workforce. Why do AZ, Pfizer, GSK et al behave so differently?

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27. Ricardo Ros on March 17, 2011 1:15 PM writes...

You know 25, the funny thing is that, 15 seconds after making that post you would be complaining about how government regulation is to blame, how toxic capitalism doesn't exist ... you know, that thing about having cake and eating it.

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28. johnnyboy on March 17, 2011 1:42 PM writes...

Funny Ricardo, I'm not aware that we've met, or that I've shared with you anything about my opinions on governement regulation, capitalism, or cake.
For the record, I really like cake.

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29. Anonymous on March 17, 2011 1:46 PM writes...

#22. who's to say the careers of Chinese (or Indian) chemists are of any less importance than those of western chemists?

Then why are we not seeing the same situation occurring at the executive levels? Why do I not see Indian or Chinese presidents, VPs, etc?...

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30. MoMo on March 17, 2011 2:04 PM writes...

Good Posts Johnnyboy!

Don't worry about the Chinese becoming super-innovators. Years of oppression and conformity by Communism keeps their creative juices from flowing and the really successful inventions from emerging as of present.

But why did Pfizer give them antibiotics? They should have given them something else less germane to the future of the health of our nation, such as erectile dysfunction research.

Antibiotics are crucial to the national security of our country, and once outsourced we are vulnerable to the innovations of those less equipped to generate them.

But this could be a sign of the Apocalypse.

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31. Ricardo Ros on March 17, 2011 2:50 PM writes...

And the fault resides with China / India, and not with a system which advocates that profit is king, without consideration for consequences? So it is China forcing Pfizer to take business there?

It does look to me like some corporations have decided that there is nothing for them in the West. If you thought that certain companies have a sense of loyalty, nationality or ethics, think again.

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32. johnnyboy on March 17, 2011 3:20 PM writes...

Ricardo, if you re-read my post carefully you will see that we are making precisely the same point.

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33. Ricardo Ros on March 17, 2011 4:24 PM writes...

Johnny, sorry, it is a bit of the form in your post that hurts my PC eyes ;-) But re-reading it, I see through, but this is what we all have voted for, sadly. Do we need a revolution, of course, how to make it? I honestly do not know.

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34. anonymous on March 17, 2011 8:30 PM writes...


Great post Johnyboy. Your right, manufacturing is continuing to decline. I was in the store last night and could not find anything made in the USA. What will be left for us to do, except shuffle around borrowed money. Our R&D is going the way of the steel industry and textile industry.

Capitalism is not the problem. It is globalization. My dad supported a family of 7 with a high school diploma before we sent all of our jobs overseas. With my PhD in chemistry, I would be lucky to get a phone interview.

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35. Triphosgene on March 18, 2011 2:37 AM writes...

China has its own problems to have strong harmaceutical industry. It has chinese traditianal herbal drugs, although most of them won't work for the disease, well, they are cheaper. and most importanly, the chinese people have a strong feeling to that. it's a cultrue more than a drug. it's a tragedy for this country. we have many intellectual people, we waste bns money to build plant to make herbal drugs, the people eat them just because they like them and they believe them and ...

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36. AnotherAnonymous on March 20, 2011 11:31 AM writes...

Reading this story is painful enough...must we endure the torture of rampant spelling errors in the posted comments? Anyway, I'm surprised that this thread hasn't decayed into a mire of Sino/Indophobia.

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37. Jonah on March 22, 2011 4:38 PM writes...

"@36 said- "Anyway, I'm surprised that this thread hasn't decayed into a mire of Sino/Indophobia."

Yes it would be good if we not only halted the issuance of all visas to Chinese and Indians, but also terminated all existing visas.

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