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pharmafile | September 1, 2008 | News story | Research and Development | Pfizer
Pfizer: changes in R&D structure expected to increase number of late stage products
Pharmaceutical giant Pfizer has announced that it intends to make further changes to its R&D model after splitting its R&D division into small therapy area units. This is a much-needed step for the company, which desperately needs to increase its product pipeline. However, a further overhaul of R&D processes may be necessary as patent expirations and intense generic competition come ever closer.
As Pfizer is preparing for the so-called ‘patent cliff’ of 2011, and the colossal generic competition that will follow, it is clear that the company needs a change in strategy. The world’s best-selling drug, the cholesterol pill Lipitor, generated $12.7 billion in sales through 2007 alone. However, due to the absence of a follow-on product to capitalize on its market and additional new blockbusters to offset the losses, Pfizer is left in a challenging position. The current chief executive, Jeffery Kindler, has already cut 14,000 jobs and closed manufacturing plants.
In an interview with Bloomberg Television, Mr Kindler stated that steering Pfizer, at a time when it has been trading at an 11-year low, requires leadership and management skills. When he inherited Pfizer from previous chief executive Hank McKinnell, he claims the firm was hindered by "slow decision making"; good projects were stalled by layers of management, while bad projects were not dropped fast enough.
In an effort to increase efficiencies in R&D, in 2007 Pfizer decided to rearrange its huge R&D structure into smaller disease-based research units for existing products, in addition to a separate biotechnology center and an independent cancer unit. As a result, Mr Kindler highlighted the fact that the company will have 28 late stage drugs by the end of 2009. The immediate need for new products will force Pfizer to make further changes to its R&D division, in an effort to dismantle its "monolithic" structure and to increase efficiencies across its R&D units.
Other pharmaceutical giants have already adopted similar strategies. Novartis set up a biotechnology unit in Boston, which operates as a separate company. Roche changed its R&D model into specialized units for each of its five therapeutic areas. GlaxoSmithKline was actually the first to initiate this restructuring; in 2001 the company set up small groups for seven disease areas, known as Centers of Excellence in Drug Discovery (CEDDs).
These CEDDs function as independent units to mimic the biotech model. Recently, GSK underwent another round of reorganization and has made its CEDDs into even smaller units of around 80 scientists, even more closely based on biotech units, which have to compete for funding, therefore incentivizing research even further. Whether this measure will generate more valuable products remains to be seen. If Pfizer is to take such radical steps, it must first of all ensure that the decision-making process is streamlined.
As the patent cliff approaches, pharmaceutical giants’ hunger to refill their thinning pipelines escalates. The tried-and-tested mega-mergers of the past may not offer long-term benefits, and may actually decrease productivity, thus worsening the scenario. The best option is to address the root of the problem and focus on in-house productivity and ways to develop novel innovative medicines. Pfizer has certainly taken a step in the right direction, but only time will tell if this change will be fruitful.
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