Pfizer Closure Deals Serious Blow to Europe

The seemingly irreversible trend toward big pharma consolidating its research operations appears to be gathering pace, following Pfizer's announcement last month to close its R&D facility in Sandwich, UK, by 2013. Most observers agree this move represents a significant setback for clinical research in Europe, and particularly the UK.

"It is worrying that a major life sciences company pulls its R&D facilities out of the UK when this is an area in which we excel and wish to expand," Professor Sir Richard Sykes, former Chairman of GlaxoSmithKline (GSK) and Chairman of the Royal Institution, told the Financial Times on February 1.

In a BBC news broadcast, Colin Blakemore, Professor of Neuroscience at Oxford University, called it a shocking wake-up call, noting that "we must respond to this signal that one of our most important industries no longer has confidence in the future of British science."

Pfizer's spokespeople were careful not to blame government policy or the UK environment for the closure, and have explained that this move is part of a cost-cutting overhaul of the company's global R&D operations. However, according to the Financial Times, the UK Royal Society of Chemistry estimates that nearly 6,000 jobs have been cut in the past year from UK drugs and science companies—though GSK has pledged a £500m investment that could create 1,000 jobs after the government promised a "patent box" tax break that reduces the rate of corporation tax on profits generated from UK-owned intellectual property.

The Sandwich site has been a powerful symbol of the UK's success in drug development since its origins in the mid-1950s. Viagra, the erectile dysfunction treatment, was discovered there, and its researchers played a key role in the development of Celsentri (maraviroc), the oral class of HIV therapy, anti-fungal treatments Diflucan (fluconazole) and Vfend (voriconazole), and heart disease drugs Istin (amlodipine besylate), and Cardura (doxazosin). In 1997, around 1,500 new jobs were created there, but the site has been hit by redundancies in recent years, and Pfizer closed its manufacturing operations there in 2007.

"Talking to Pfizer executives (and other big R&D spenders), it is clear the world has changed. These organizations realize that to maximize the output from their R&D spend, they need to do more work with external organizations, especially universities, and less internally," said Claude Kaplan, the London-based Managing Director of IP Consulting. "One Pfizer business unit recently informed me that it wished to outsource $200 million of its $300 million R&D spend. "'Open Innovation' is not a mere management fad—it's a reality of this brave new world."

Kaplan thinks the key question now is not navel-gazing on why Pfizer and its contemporaries are changing, but rather how universities and the research funding infrastructure are adapting to this new model and encouraging companies to spend their R&D funds in Europe rather than China.

Pharma companies' laboratories are under mounting pressure because the conventional way of discovering and developing drugs is not yielding results quickly enough to compensate for sales lost due to patents expiring on their blockbuster drugs. They are responding by outsourcing more research to the biotech sector and to universities. Sponsors are also shifting research steadily toward the United States, while building up their bases in Asia.

In this fast-changing environment, the UK seems to be especially vulnerable because its research-based industry is focused heavily on life sciences, and the country has relatively few biotech companies and more traditional medium-sized pharma companies that exist in the rest of Europe. The government's vision is for the emergence of a thriving life sciences campus populated by CROs and start-up companies, but this requires a coherent strategy and investment program, along with more extensive streamlining of clinical research regulations.

In spite of the trend toward outsourcing drug discovery to small biotech companies, more must be done to support early-stage research and to maximize the potential offered by the UK's scientists, according to Paul Cuddon, a healthcare analyst at Peel Hunt.

"At the moment, we're highly productive in the research, but nothing seems to come out the other end," he told The Daily Telegraph (February 6, 2011). "The UK remains one of the most highly cited research academic countries in the world and this is despite a much smaller amount of money spent on early-stage research. It's just (a case of) putting the infrastructure in place so that we can translate some of that world-class science into more commercial businesses."

He suggested that one option could be to fund academics to do more commercial-stage research rather than "leaving them to go off and seek venture capital, private equity, or institutional investment, which just isn't there at the moment." —Philip Ward