Pfizer's former head of R&D criticized his former company's R&d cuts to meet short-term profit objectives. John LaMattina opined that the cuts to 10 to 11% of sales were far below historic numbers of 15 to 20% and could have a long-term negative impact on Pfizer's ability to create new products, adding "that if you don't have new products, you don't have a business anymore."
LaMattina says that mega-mergers, popular in the industry the past decade, not only resulted in cuts of the R&D budget but were very disruptive to pharma R&D organizations and their productivity. He is more in the camp with Lilly's John Lechleiter and Merck's Kenneth Frazier on advocating staying the course with R&D spending to develop many (not all) key products in-house -- in other words take the lng-term view.
The conundrum is that recent R&D investment has NOT paid off well and those opting for the long view will not see an immediate payoff plus will have to weather a short-term storm of reduced revenues and profits caused by drugs falling out of the pipeline due to patent expiration with no ready replacements. So, while I tend to be more of an advocate of R&D spending and the long view, it is still hard to argue the facts that this approach hasn't worked so well in the past decade -- particularly for Pfizer and Lilly. See Fierce Biotech and Pharmalot.
Posted by Bruce Lehr July 6th 2011.
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