Business
Pfizer cuts jobs for 800 scientists as it trims focus
01:00 AM EST on Wednesday, January 14, 2009
AP / Mark Lennihan
TRENTON, N.J. — Pfizer Inc., the world’s biggest drug company, announced yesterday it is firing up to 800 scientists this year in its latest effort to refocus disappointing research efforts and cut its massive overhead ahead of an anticipated crash in revenue.
The company was to begin notifying the workers yesterday, Kristen Neese, a spokeswoman for the New York-based drugmaker, said. She wouldn’t specify which research fields or what laboratories around the world will be affected, but the company’s main U.S. research and development headquarters are in Connecticut, in New London and Groton.
New York-based Pfizer plans to reduce its global research staff of about 10,000 people by 5 percent to 8 percent this year, Neese said. “This is in line with our refocused research areas.”
The move comes after the company announced in September it was narrowing its research focus to six disease areas — Alzheimer’s, cancer, schizophrenia, pain, inflammation and diabetes — and abandoning new research in other areas. Where possible, researchers were shifted from other areas into the six new core areas, Neese said.
The company also wants to sell to other drugmakers 100 experimental medicines for conditions ranging from obesity to high cholesterol as it cleans out its chemical compound closet
The new research cuts add to firings of 1,200 scientists last year with the closing of Pfizer’s Ann Arbor, Mich., laboratory.
“The imperative for radical change is higher than ever, and we believe that pressure is mounting on management to do something big and soon,” Jami Rubin, an analyst at Goldman Sachs Group Inc. in New York, said in a research report.
Chief executive officer Jeffrey Kindler has fired more than 14,000 workers since he took the job in 2006. Kindler also has reshaped the drugmaker’s research arm, which includes 10,000 people in a work force of 83,000 and a budget of $7.5 billion a year, said Neese.
Surprisingly, one of the areas abandoned was cardiovascular disease, where Pfizer had been a dominant player with its $13-billion-a-year cholesterol fighter Lipitor, the world’s top-selling drug. But Lipitor — which brings in just over one-fourth of Pfizer’s roughly $50 billion in annual revenue — is expected to face generic competition in late 2011. Efforts to come up with a successor drug failed, including the flameout of once-promising torcetrapib after it was linked to heart problems in late-stage human testing.
Already, Lipitor sales have dipped slightly, apparently partly due to consumers trying a much-cheaper generic form of a similar drug, Zocor.
Firing scientists “is exactly the wrong thing to do,” said analyst Steve Brozak of WBB Securities. “With this step that they’ve taken, either they acquire, are acquired or fail.
“They are basically sacrificing their young for the benefit of the old pharmaceutical model, which does not work,” he added, referring to the industry’s once-successful strategy of producing blockbuster drugs and marketing them aggressively.
Martin Mackay, Pfizer’s head of global research, said yesterday at a J.P. Morgan health-care conference in San Francisco that since he arrived just over a year ago, one of his priorities has been to ensure the company had its research in the most promising areas.
“We’ve had extensive reviews of our portfolio, both internal and with external experts, to make sure we had the best portfolio that we could,” he said.
That review resulted in the six-disease focus, where he said research is growing despite flat spending.
“Barely a week goes by at Pfizer without one of our compounds going into [a new stage of testing], such is the depth of our portfolio,” he added.
Mackay also said the company expects to have 24 to 28 late-stage human studies by the end of this year. About half are on new compounds, the rest on existing drugs being tested for new uses.
“We’re still interested in doing deals for platform technologies that will help us increase our productivity,” as well as deals for other technology or specific compounds, Mackay told J.P. Morgan clients.
Brozak, who attended Mackay’s presentation, said Pfizer needs to invest far more in research, either in-house or through licensing deals and other collaborations with biotech companies or other outside researchers.
Another analyst said more cuts are likely.
“This is probably not the end,” said biopharmaceuticals analyst Erik Gordon, a professor at University of Michigan Business School.
He said Pfizer probably has identified 500 to 800 scientists not in the new core areas in its first round of review, but more could be cut later.
Gordon said the cuts are not due to the recession but to the long-term problems plaguing the entire drug industry. Those include stiffer generic competition and a general lack of research productivity.
Also last fall, Pfizer said it was reorganizing its business units, including replacing its current geographic divisions with new ones centered on primary care, specialty care and operations in emerging markets.
“We have removed several levels of management within the research organization and are now operating in smaller, more nimble and efficient units. With these changes, we are realigning our staff to reflect our research priorities,” Pfizer said in a statement.
Research areas that Pfizer is exiting include anemia, bone health, gastrointestinal disorders, obesity, liver disease, osteoarthritis and peripheral artery disease.
Pfizer shares rose 23 cents, or 1.5 percent, to $17.59 in trading Tuesday.
With Bloomberg News reports
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