The In the Pipeline blog weighs in with its commentary of the different choices made by Pfizer and Merck CEO's with regard to cuts to R&D and maintenance of EPS for the next couple of years (see previous post in the blog too).
On balance, I tend to be in agreement that I like Merck's approach better than Pfizer's -- at least based on my perceptions from the outside looking in. It looks to me that Pfizer is behaving in a more short term "get the financial numbers to look good" fashion at the expense of its future R&D success - which I think is a BAD way to go in the pharma industry. Merck to me looks more willing to stand up and take some criticism in the short term for financial short falls to protect future revenues that it expects from its R&D investment in the long term.
Obviously, we'll see which approach will work in the coming years. Clearly, it is not all about spending the R&D money. Just spending does NOT guarantee success. You do have to spend on the right programs in the right way. And, it is also true that you could supplment your internal R&D effort with acquisitions or partnerships from the outside -- in fact probably should do so in the world of today. But, it's not clear to me from Pfizer's statements that is what it is doing. It really looks more like an austerity program. I think focusing on fewer programs is good -- but one could argue that you could have diverted more of the existing budget to fewer programs rather than cut the programs and cut the budget.
Merck will of course have to actually deliver on the R&D programs it chooses to pursue. That is and has always been the case -- now we will see if they can actually boost their success rate with the programs they've chosen to pursue. It will be interesting to see which of the two companies is successful with their approach.
Hopefully, one of the path's forks is right, and we don't have another path not taken.
Posted by Bruce Lehr Feb 5th 2011.