Big Pharma in 2008: R&D Retooled

Last year was another year of upheaval for R&D operations at the top pharmaceutical companies. Big pharma continued to undergo extensive changes as firms sought to increase the odds of successful drug discovery and development, while reducing R&D costs, in order to maintain profitability as drug patents expire. In addition, new CEOs at Eli Lilly and GSK implemented their visions. In particular, Eli Lilly, GlaxoSmithKline (GSK), Merck and Pfizer announced dramatic changes in R&D operations in 2008. Downsizing, outsourcing and reorganization were among the tools employed.

Narrower Research Focus

In 2008, GSK, Pfizer and Wyeth each reduced their pharmaceutical R&D portfolios. GSK trimmed its drug R&D focus to eight therapeutic areas: immuno-inflammation, neuroscience, metabolic pathways, oncology, respiratory, infectious diseases, opthaolmology and biopharmaceuticals. Pfizer narrowed its R&D for new drugs, excluding phase III drugs, to six therapeutic areas: oncology, pain, inflammation/immunology, diabetes, Alzheimer’s disease and schizophrenia. The company ended early-stage research in anemia, atherosclerosis/hyperlipidemia, bone health/frailty, gastroenterology, heart failure, liver fibrosis, muscle, obesity, osteoarthritis and peripheral arterial disease. In March 2008, Pfizer announced the termination of 24 preclinical and clinical drug development programs.

In the fall, Wyeth also announced a revised pipeline. The company cut research in eight areas, excluding drugs in late-stage development, to focus on oncology, inflammation, neuroscience, vaccines, metabolic diseases and muscular-skeletal disorders. The development of drugs for 55 diseases was reduced to 27 diseases.


Further organizational changes occurred in 2008, following numerous restructuring efforts among big pharma in recent years (see IBO 2/15/07). In March 2008, Pfizer announced the formation an Oncology Business Unit within its Worldwide Pharmaceutical Group, designed to combine development, medical affairs, commercial development, and sales and marketing. The company also announced the creation of dedicated business units for primary care, specialty care and emerging markets, which were scheduled to begin operation in January. The units incorporate drug development, starting at proof-of-concept, as well as sales and marketing. A Regenerative Medicine Research Unit, an independent research unit with approximately 70 researchers that engage in external collaborations, was launched in November.

In July 2008, GSK announced that it had formed 35 Drug Performance Units (DPUs) within its Centers of Excellence for Drug Discovery (see IBO 2/15/07). Each DPU has 5–80 scientists and focuses on a specific biological pathway. GSK also created the Drug Discovery Investment Board that allocates $2.0 billion annually to DPUs based in a competitive process that evaluates research performance and value. At year end, the company reported that its narrower therapeutic focus and the Investment Board’s decisions resulted in the termination of 35% of discovery projects. As with Pfizer, GSK also formed a research unit for oncology, consisting of existing DPUs and a new, dedicated development group.

R&D Outsourcing

The world’s 10 largest pharmaceutical companies stepped up their R&D outsourcing and partnership efforts last year. Contract research organizations (CROs), universities and biotech firms were the primary beneficiaries. Among the major R&D outsourcing announcements was Eli Lilly’s 10-year $1.6 billion contract with CRO Covance for non-GLP toxicology, in vivo pharmacology, quality laboratory and imaging services, as well as certain clinical pharmacology, central lab, GLP toxicology studies and clinical phase II–IV services. Covance also purchased Lilly’s R&D site in Greenfield, Indiana. The deal is part of Lilly’s FIPNET (fully integrated pharmaceutical network) plan to increase R&D productivity. By 2010, Lilly aims to reduce the cost of bringing a new molecular entity to market by $400 million to $800 million.

FIPNET also includes Chorus, an autonomous group of experts that advances early-phase drug development using an outsourcing model. According to PharmaFocusAsia, Chorus includes more than 200 third-party providers. Formed two and a half years ago, Chorus has advanced compounds from selection to clinical proof of concept in 18–24 months at a cost of $6 million on average. In 2008, under the Chorus model, Lilly introduced Vanthys, a 50–50 joint venture with Jubilant Organosys to advance molecules to phase II. In January, Merck announced a strategic collaboration with CRO PPD, which includes PPD’s purchase of the company’s vaccine testing lab in Wayne, Pennsylvania. PPD will also provide Merck with central lab and sample storage services for clinical development over a five-year period.

Academia became a greater focus of partnership activities in 2008. GSK introduced an academic incubator program focused on early-stage clinical development and employing a shared risk and reward model. The company announced its first such partnership with the University of Cambridge for neuroscience and metabolic disorders. Similarly, GSK signed several university R&D agreements last year, including a five-year, $254 million alliance with the Harvard Stem Cell Institute for research related to neuroscience, heart diseases, cancer, diabetes, muscoloskeletal diseases and diabetes. ”In the future, we believe that up to 50% of GSK’s drug discovery could be sourced from outside the company,” stated CEO Andrew Witty in July 2008. Other major academic partnerships announced last year were the University of California San Francisco’s three-year $9.5 million collaboration with Pfizer’s new Biotherapeutics and Bionnovation Center, and Johnson & Johnson’s three-year $10 million collaboration with Vanderbilt University for the development and optimization of new schizophrenia drugs.


The January announcement of the $68 billion merger agreement between Pfizer and Wyeth will lead to a restructuring of R&D operations as the firms consolidate operations. Later this year, Sanofi-Aventis plans to announce R&D changes. The Wall Street Journal reported this month that new CEO Chris Viehbacher aims to increase the percentage of Sanofi-Aventis’s drugs that come from outside the firm from 10% to 50%. Forecasting 2009 R&D spending, AstraZeneca predicts flat R&D spending, Eli Lilly expects R&D expenses to grow in the low double digits. As a percentage of sales, GSK predicts R&D to be the same this year, while Johnson & Johnson forecasts a decline.

Company: AstraZeneca

Announced: Jan. 2009

Employees Affected: 7,400

Comments: Reductions will be made by 2013 and will result in annual savings of $2.5 billion

R&D Employees Affected: 700

Company: GlaxoSmithKline

Announced: June 2008

Employees Affected: 350

Comments: Approximately 2% of the company’s R&D workforce was cut at US sites in North Carolina and Pennsylvania, as well as Harlow, England and Verona, Italy.

R&D Employees Affected: 350

Company: GlaxoSmithKline

Announced: Sept. 2008

Employees Affected: 850

Comments: Job cuts were made in the US and Britain, mostly in preclinical development.

R&D Employees Affected: 850

Company: Merck

Announced: Oct. 2008

Employees Affected: 7,200

Comments: The reductions are expected to result in pretax savings of $3.8–$4.2 billion in 2008–2013. Three research labs to close by the end of 2009.

R&D Employees Affected: Not available

Company: Pfizer

Announced: Jan. 2009

Employees Affected: 8,190

Comments: The cuts are expected to reduce annual R&D spending by $7.5 billion.

R&D Employees Affected: Up to 800

Company: Pfizer/Wyeth

Announced: Jan. 2009

Employees Affected: 11,235

Comments: The merger is expected to save the combined companies $4 billion. Fifteen percert of employees from the combined companies will be cut by 2013.

R&D Employees Affected: Not available

Top 10 Pharmaceutical Companies’ Results, FY08 ($US)

Rev. ($B) Chg. R&D ($B) Chg. R&D as % of Sales

Johnson&Johnson $63,747 4.3% $7,577 -1.3% 11.9%

Pfizer $48,296 -0.3% $7,945 -1.8% 16.5%

GlaxoSmithKline $44,276 -2.5% $6,693 0.6% 15.1%

Novartis $41,459 8.9% $7,217 12.2% 17.4%

Sanofi-Aventis $40,541 5.5% $6,728 8.3% 16.6%

Roche (Pharma) $35,286 9.0% $7,319 15.6% 20.7%

AstraZeneca $31,601 6.9% $5,179 0.3% 16.4%

Merck & Co. $23,850 -1.4% $4,805 -1.6% 20.1%

Wyeth $22,834 1.9% $3,373 3.6% 14.8%

Eli Lilly $20,378 9.4% $3,841 10.2% 18.8%

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