Is Drug R&D in Jeopardy?

Posted by: Michael Arndt on January 06, 2010

The U.S. drug industry, historically one of the most lavish spenders on research and development, ended 2009 with plans to eliminate a record 69,100 jobs. The toll is up 60% from 43,000 in 2008 and more than quadruple the 15,600 in 2004, according to outplacement outfit and layoff tracker Challenger, Gray & Christmas.

Understandably, plenty of scientists are going through the five stages of loss (or soon will be). But the cuts could help one group­—outside labs.

Following its $68 billion acquisition of Wyeth, for example, Pfizer is closing 6 of the 20 R&D centers the two companies operated. Pfizer won’t disclose how many research employees will be axed, but analysts say the layoffs could essentially wipe out the bulk of Wyeth’s 6,000-person scientific staff, leaving Pfizer with the 10,000-member lab crew it had before the takeover.

Among other U.S. drugmakers dropping thousands from their payrolls: Johnson & Johnson, Merck, Eli Lilly.

The retrenchment isn’t limited to American companies. GlaxoSmithKline and Astra­Zeneca, both headquarterd in London, reduced research staffs in 2009, as did Paris-based Sanofi-aventis.

The layoffs might not slow drug introductions, however, says Kenneth Kaitin, director of Tufts University’s Center for the Study of Drug Development. Increasingly, pharmaceutical companies are outsourcing R&D to universities and bioscience startups, which may have more expertise and work for less money. The recent job cuts will likely hasten more linkups to keep pipelines from running dry, he tells me.

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Reader Comments

biotechjunkie

January 6, 2010 12:34 PM

The deconstruction of the big pharma way of bringing products to market is underway with the Lilly/Chorus collaboration as an example. Lilly is using Chorus to identify viable candidates quicker and cheaper but more importantly identifying the greater number of nonviable entities. Also Lilly has taken candidates out of their own R&D for further testing to prevent "internal attachment" to a project or candidate. So far it looks like it's bearing fruit with the Lilly anti-BAFF compound. The initial small human study and proof-of-concept study was completed at a one-third cost and time when compared with the industry standard. Lilly then took the drug back into it's own system for mid-stage trials and will probably be able to decide if it is going Phase III later this year. The end result is Lilly can likely run more candidates with fewer resources and shorter timelines.

Hopefully the CROs,outside labs, academics and contract manufacturing organizations will take advantage of the expertise on the street right now. I expect start-ups dedicated to feeding the pipelines will start popping up based on the talent being shed from the ranks and the loosening of the VC and industry purse strings as the economy picks up.

Jamie McQuay

January 7, 2010 09:48 AM

Your title for this bolg would have made more impact this time last year.

The potential jeopardy stage is done and from what I see we're in the restructuring stage now.

As @biotechjunkie mentioned I think that collaborations are the way of the future. I'm more involved in the instrumentation end of the business and in that field collaborations are now common place.

If you are a staff scientist in a big pharma company I think that you should spend some time thinking about plan B.

Random CRA

January 7, 2010 09:22 PM

Any ideas how this will affect Clinical Research Associates? Does anyone think the market for research monitors will improve in 2010?

biotechjunkie

January 8, 2010 08:03 PM

I think the 2010 CRA market will improve

-as the restructuring of big pharma places more early clinical work onto the plates of the contractors

-as the economy improves convincing money to flow. Watch the amount of private money poured into small and start-ups companies and IPOs/secondaries. We've seen an increase in the last quarter which leads me to believe 2010 is going to be the turnaround year for the bio-pharma-device industries spending.

-with the FDA mandated Good Manufacturing Procedures being relaxed for manufacture of Phase I compounds, which should continue to encourage more small organizations to put candidates into clinical trials

Also CRO market is estimated to expand 8.5% a year to result in a $37B industry worldwide by 2015 which is a good sign for CRAs.

The only trend that might negatively impact you is a large percentage of firms conducting early trials outside the US (I assume you're US based)

Good luck.

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What comes next? The BusinessWeek Innovation and Design team of Michael Arndt and Helen Walters chronicle new tools for creativity and collaboration, innovation case studies in both the corporate and social sectors, and the new ideas that have the power to change the way things have always been done.

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