There are a couple of excellent exchanges taking place in blogland discussing Big Pharma's R&D purge, possible causes for this, and perhaps most importantly what possible consequences will eventuate. Check out discussions on Derek Lowe's In the Pipeline and Eric Milgram's PharmaConduct blog - both kicked off from Morgan Stanley comments on AZ's R&D restructuring.
The Milgram blog asks a provocative question about whether MBA style management of the R&D function has led to these severe cuts with eyes on short term profits and with perhaps long term negative consequences.
I think MBA's are great guys, at least in my house and from my alma mater - UNC Chapel Hill.
However that doesn't detract from the discussion of whether the R&D function can really withstand being run with a short term profit motive and a very decreased appetite for risk. I can see the argument for shifting more of the total pharma R&D effort toward increased outsourcing, but I also find it hard to believe that a model that took this as the sole route to new products or even the primary route is sustainable in the long term. The Morgan Stanley report claims outsourcing is 3 times more likely to result in success than internal development as it is being done now - which is certainly sobering if true.
I don't care. I think you still need capacity for internal innovation to maintain health in this industry. Without that, I also subscribe to the belief that R&D power will shift from the traditonal companies in US and West -- and the next swooshing sound you hear will be a talent suck moving to the India, China and the rest of the AP.
Interestingly, while this whole concept is much more important to the pharma industry, and certainly the cuts happening now are very much more severe in this industry, we have some of the same issues as an industry supplier. Increasingly, we're looking at ways of delivering new innovative products in a much shorter timeline (in our case 1 year vs. 3).
Certainly, the motivation is to decrease investment and increase ROI. But is that possible? Is true innovation really compatible with a shortened time line? Aren't you by default really talking about marginal improvements and line extensions at that point and not "innovative products"? I don't see this working unless we're willing to invest somewhere. In our case, that is investing in acquisition of technology that can then be utlized by our R&D groups to make innovative products in those shorter time lines. But there is no free lunch, the investment still must occur whether it is internal or external.
One recent example where we're pursuing this avenue is our recent acquisition of zinc finger nuclease (ZFN) technology that enables cell engineering for commercial drug manufacturing. This will allow us to create novel ZFNs, cell lines and a cell line platform in shortened time lines - because the technology is truly enabling. But, it also required significant investment and certainly has its level of risk.
I'm eager to see how this plays out. It should be fun.
Posted by Bruce Lehr Feb 14, 2010
