Former Pfizer R&D Chief John LaMattina says pharma mega-mergers may have made some sense in terms of short-term business rationale but were/are devastating to the R&D function. He points to several factors that have negatively impacted industry R&D productivity:
- Merged companies slash R&D spending and close entire R&D sites (to help pay for merger)
- The number of companies has been reduced from 42 to only 11 (from 1988 to 2011) resulting in less diversity in the pipeline
- Many companies used to pursue the same targets which increased chances of someone being successful - pipelines are now less broad
- He says there is a correlation between the number of companies and the number of new drugs
- Unlike the past, mergers now result in R&D cuts in personnel, spending and programs
- Historically, companies prided themselves on spending 20% of sales on R&D - now that figure is approaching 10 to 11% at companies like Pfizer
- Mergers tend to freeze pipeline advancement -- especially in earlier stages than phase III as merged companies sort out pipeline and "rationalize"
- Enduring large and potentially multiple mergers, with associated stops and starts, has big negative impact on employee morale and motivation
He finishes his discussion by noting Lilly's Lechleiter has eschewed mega-mergers as a growth strategy, and Merck's Frazier has opposed R&D cuts to satisfy short-term return desires from Wall Street. He hopes other industry leaders will take note.
His final thought is that industry consolidation has resulted in less competition and less investment in R&D. At a time when there is a major need for new treatments for conditions such as Alzheimer's disease, drug-resistant infections and diabetes, such a trend is alarming. See Nature Reviews Drug Discovery.
Posted by Bruce Lehr Aug 2nd 2011.
Bernard Munos argues in Fierce Biotech article (via Forbes' Matt Herper) that big pharma R&D needs to be radically revamped to regain productivity of past
http://www.fiercebiotech.com/story/drug-development-revolutionary-advocates-radical-change-rd/2011-08-03?utm_medium=rss&utm_source=rss
Posted by: bigredbruce | 08/03/2011 at 05:59 PM
More commentary on the LaMattina piece from Derek Lowe's In the Pipeline blog
http://pipeline.corante.com/archives/2011/08/03/a_former_pfizer_executive_finally_trashes_pfizers_strategy.php
Posted by: bigredbruce | 08/03/2011 at 05:58 PM
This meta-analysis I did earlier this year can be a good complement to John Lamattina's discussion. No clear answers, but maybe some visual signals as to the effects of mergers. http://www.randdreturns.com/in-progress-nmes-vs-mergers/
The effects of mergers has been topical for a looong time. Twenty years ago, the financial professors at Wharton were explaining that many became distractions from the core business (R&D?) and were often "smokescreens to fool stockholders" around a slumping business. I have lived and seen the distractions and effects on Pharma R&D first hand in at least six firms, both as a scientist and as an advisor. Key learning is to keep FOCUSED on what creates and sustains value to the business - and not just short-term.
Posted by: Terry McCormick | 08/03/2011 at 10:39 AM