Pfizer carving $1.5B from R&D budget, dropping diseases
Pfizer's release on earnings today included plans for a big restructuring of its R&D operations. In broad strokes, the pharma giant announced that it will carve about $1.5 billion out of drug research as it funds a $5 billion stock repurchase program in pursuit of its projected earnings-per-share goal.
Pfizer, which started to slice back on R&D after merging with Wyeth in 2009, says it will shutter its R&D facility in Sandwich, UK, and lay off 2,400 researchers and support staff. Some of those workers--who specialize in allergy and respiratory treatments--may be transferred. And Pfizer added that a "partner organization" could continue to do work at the site.
Pfizer CEO Ian Read told analysts this morning that urology and internal medicine projects are being phased out. But neuroscience, oncology, inflammation, immunology and vaccines will be maintained or beefed up in the realignment. In addition, Pfizer says that it will shift R&D resources from Groton, CT to Cambridge, MA.
The news could spell major changes for Pfizer in Cambridge, MA. In an interview with FierceBiotech today, Pfizer's worldwide R&D chief, Mikael Dolsten (photo), noted that the company is looking to consolidate its operations into one facility that can accommodate expanded efforts.
"We have two facilities in the north and south we are going to move into a new facility, very central in Cambridge. We are exploring various options," says Dolsten. And the R&D chief emphasized that Pfizer is intent on developing a new R&D model that has a much more flexible approach to drug discovery; an approach that moves much of the routine clinical efforts that Pfizer had earlier handled in-house over to clinical research organizations which can do the work under contract. Dolsten hit on several familiar themes reshaping R&D today: A move to partnering with academic groups and biotech companies to explore new ideas, with a reduced emphasis on internal efforts that create high fixed costs.
"You will see us explore a variety of partnerships to maximize our strength," added Dolsten. That entails more work with biotech companies that could use Pfizer's core skills as well as pharma partners working on big efforts. It is, he said, a "more manageable way to manage research."
Pfizer's release spelled out just how big this new restructuring will be.
"R&D expenses are now expected to be between $6.5 and $7.0 billion, compared with the previous target of between $8.0 and $8.5 billion," the company said in a release. "Driving this decline is the planned reduction in the number of disease areas the company will focus on based upon where the greatest medical and commercial impact can be achieved as well as a realigned R&D footprint, including a planned exit from the Sandwich, U.K. site, subject to customary requirements, shift of selected resources from Groton, CT to Cambridge, MA and outsourcing of certain functions. Additionally, the company is planning to enhance its presence in Cambridge, MA to complement research teams in other hubs like San Francisco, New York, La Jolla and Cambridge, U.K."
Pfizer has been dogged by a series of late-stage snafus. Just in the last few months Thelin was withdrawn on toxicity concerns, Sutent failed two studies and a Phase III for the the blood thinner apixaban had to be halted. Bosutinib failed a head-to-head study with Gleevec shortly after CEO Jeff Kindler suddenly departed in December. But Pfizer's failures haven't stopped the company from doing new deals. The company set up a new unit for rare diseases last summer, bought FoldRx and plans for more deals.
Dolsten added that the company has also seen some successes in its R&D work. And he's planning on more.
"There have been some setbacks," he said. "But I think we have learned a lot from them. Keep an eye on us and I think you will see more positive news."