Issue Date: September 1, 2008
Rewiring Research At Pfizer
IN MARCH, Pfizer Chief Executive Officer Jeffrey B. Kindler hosted a meeting with stock analysts in New York City at which he outlined his plan to "change the DNA" of the world's largest pharmaceutical company. Having completed a conventional downsizing of Pfizer's manufacturing, research, and sales operations in his first year on the job, Kindler hoped to convince critics in the audience that his vision for a redesigned Pfizer will generate the revenue growth needed to compensate for the pending loss of patent protection on its top-selling drug, Lipitor.
Many in the New York audience had pressured Kindler to do something big and fast to offset the loss of billions of dollars in sales for the statin blockbuster. But Kindler asserted that a major acquisition, on the scale of the company's purchases of Warner-Lambert and Pharmacia, would be too disruptive. Instead, he laid out a markedly less conventional approach to growth and business development at a large drug firm—an approach characterized by entrepreneurial management and the launch of a biotherapeutics research organization comprising a network of acquired technology specialists and small biotech drug discovery firms.
Kindler used the meeting as an opportunity to introduce Pfizer's newly appointed R&D management regime, headed by Martin Mackay, president of Pfizer Global Research & Development (PGRD). Mackay, who most recently held the post of vice president of PGRD and head of worldwide development, told analysts his primary focus is on accelerating overall productivity. Mackay told the gathering that Pfizer is commited to beginning 15–20 Phase III trials by the end of 2009 in therapeutic areas such as oncology, pain, and diabetes. Pfizer expects a similar number of regulatory submissions between 2010 and 2012, he said, pointing out that the company also aims to become a top-tier biopharmaceutical firm.
C&EN recently met with Mackay and Corey Goodman, head of Pfizer's new Biotherapeutics & Bioinnovation Center (BBC), at Pfizer's headquarters in New York City. Goodman, a former Stanford University professor and founder of biotech drug discovery firms Exelixis and Renovis, recently joined the company to launch the San Francisco-based BBC. The two outlined plans to significantly accelerate productivity and climb onto the biotech top 10 list, which already includes several of Pfizer's big pharma competitors. IMS Health, which compiles one such top-tier biotech list, puts Pfizer at 14. Their hope, Mackay and Goodman say, is to maintain the benefits of scale while achieving the agile efficiency of a much smaller company.
NO SMALL TASK, Mackay admits. "Pfizer got big very quickly over a relatively short period mainly through the acquisitions of Warner-Lambert and Pharmacia," he says. "That had many good points in terms of scale in discovery and development. But it had some downsides, distractions being one of them. In research and development, distractions can be costly."
Costly and painful. Kindler's downsizing eliminated 10,000 jobs in sales and research and closed one site in Kalamazoo, Mich., and two in Ann Arbor, Mich. Questions remain as to whether current operations are down to fighting weight, with speculation mounting that the company plans to launch another round of job cuts at its main research facility in Groton, Conn. Pfizer has officially stated only that further job reductions will be dictated by revenues and future product generation.
Mackay, a 12-year Pfizer veteran who received a Ph.D. in molecular genetics at the University of Edinburgh, in Scotland, in 1983, admits the need for productivity improvement at the company. One of his first moves in his new position—a move he calls unprecedented at Pfizer and a hallmark of the entrepreneurial management style fostered by Kindler—was a unilateral decision to stop work on 24 drug development projects in order to align resources with the most promising programs in key therapeutic areas.
The company currently has 16 candidates in Phase III trials—five in oncology; three each in cardiovascular/metabolic disease, infectious disease, and neuroscience; and two in pain. Nearly 40 candidates are in Phase II trials.
Pfizer, which spent $8 billion on R&D in 2007, had already consolidated its research operations, setting up single research hubs for each of 10 therapeutic areas in a program launched by Mackay's predecessor, John LaMattina. LaMattina left Pfizer at the end of 2007, shortly after work on torcetripib, a cholesterol agent being groomed as the most likely successor to Lipitor, was dropped in response to discouraging safety results. Pfizer also consolidated research technologies, combining seven sites for high-throughput screening, for example, into one large group at a single site.
With these organizational changes completed, Mackay is implementing a five-point plan that he drew up shortly after LaMattina's departure. Points one and two cover accelerating the pipeline and focusing resources on the most promising compounds. Four addresses productivity improvements, and five pushes the value of accessing outside science through industrial and academic collaborations. (Pfizer has launched collaborative partnerships with Scripps Research Institute and the University of California, San Francisco). Point three addresses biotherapeutics, with a stated commitment to becoming a top-tier company in an effort coordinated by a separate biotherapeutics research center under the direction of a biotech veteran who reports directly to Kindler.
Goodman says Kindler and Mackay managed to sell him on creating in BBC what he says is a fundamentally new research model for a large pharmaceutical company, one that will provide Pfizer with the necessary foundation to be an industry leader in the evolving world of drug discovery. "One of our missions is to bring Pfizer to the forefront and make sure it is always at the forefront in all technologies that have to do with therapeutics—antibodies, peptides, proteins, RNAi, regenerative medicine," Goodman says. "Wherever the biology revolution is going, we want to make sure we are there and a major player, which means not just going in later on and spending a gazillion dollars to acquire something, but saying that our scientists will help to develop the technologies."
Other major drug companies are also moving to grow biotech. AstraZeneca, for example, is pushing toward a top 10 position, having acquired two midsized biotech firms, MedImmune and Cambridge Antibody Technology. On the day of C&EN's meeting with Mackay and Goodman, Roche announced a plan to purchase the rest of Genentech, which would put the Swiss drugmaker in the number two position in biotech with over 20% of the market.
PFIZER, HOWEVER, doesn't see conventional acquisition as the way to go. Instead, Goodman says, the company intends to gain ground by cultivating a federation of small companies that will operate intact in their areas of expertise, feeding PGRD's pipeline. Pfizer's 2006 acquisition of Rinat, a biotech firm concentrating on monoclonal antibodies, is a prototype of the deals Pfizer is pursuing, Goodman says. Rinat, which became part of PGRD, had two lead drugs, an Alzheimer's disease therapy and a nerve growth factor for osteoarthritic pain. Both compounds are very interesting, he says, but Pfizer's main incentive for buying Rinat was its antibody technology expertise.
As Pfizer's antibody technology hub, Rinat is already working with CovX, a peptide technology specialist in San Diego that Pfizer acquired at about the time that Goodman came on board and launched BBC. According to Rodney Lappe, chief science officer of CovX, the two companies and Five Prime Therapeutics, a protein and antibody drug discovery firm, are collaborating on a genetics and systems modeling project that is coordinated through Pfizer's Research Technology Center in Cambridge, Mass.
CovX is a better example of a member of Pfizer's planned federation in that it will operate as a small drug discovery firm with its own pipeline rather than a technology asset. According to Lappe, CovX, which is about five years old, is operating as independently as it did prior to being acquired by Pfizer, only now it has a richer therapeutic expertise to draw from.
What Pfizer gets in the relationship is a unique scaffold technology, originally developed at Scripps Research Institute, that extends the half-life of peptides by creating hybrid peptide/antibody molecules, Goodman says. "And the guys at CovX have shown how they can combine two therapies into a single molecular entity," he adds. "What we learned in HIV and AIDS research will be true in oncology—hitting disease with two things at once is more than just additive. It's very powerful and will be the future of oncology."
A KEY CHALLENGE, Goodman concedes, is maintaining the morale of small-company biopharma researchers when their companies are purchased by the largest drug firm in the world—a firm that has historically stripped its acquisitions for parts. Goodman says that the staff of CovX witnessed this happen to Idun Pharmaceuticals, which was located directly across the street from CovX, three years ago. That company dissolved into Pfizer.
Lappe himself might be expected to have his own concerns. His previous job, running a cardiovascular and metabolics research group for Pharmacia in St. Louis, came to an end with the Pfizer acquisition. Despite his experience and recent occurrences at Idun, however, Lappe says he and others at CovX took a wait-and-see attitude when Pfizer purchased the company last year.
Lappe says that whatever anxiety befell the staff with the arrival of Pfizer was largely alleviated when Goodman, a star in the world of West Coast biopharmaceutical science and business start-ups, came on the scene with plans for BBC. "But there hadn't really been a great deal of anxiety to start with. Mostly uncertainty," Lappe says. "San Diego has a wealth of opportunities for people coming out of a successful company."
Lappe says CovX will not have much of an impact on Pfizer's profitability before 2011, "but our goal is to put cutting-edge molecules into the clinic, lower the attrition rate of those molecules, and make sure we address critical procedures that, over time, will rebuild Pfizer."
Meanwhile, PGRD's drug development wing managed by Briggs Morrison, the newly appointed chief of clinical development, is working toward big productivity improvements by 2011. Morrison, formerly senior vice president of research at Merck, says he is shifting the organization from cost-cutting mode into a mind-set of process and productivity improvement, "which, in fairness, has not been much of a focus of the Pfizer system previously."
Part of what's entailed is basic business process redesign—the kind of reengineering and quality-control measures that target basic process efficiencies, Morrison says. The other part, he adds, is more focused on improving the science deployed in vetting candidates and getting to proof of concept faster.
Morrison says that although the loss of patent protection for Lipitor has ratcheted up the pressure to bring new drugs to market, the pressure is not to produce another single blockbuster. "One thing that Lipitor highlights is that there are good things and bad things about having a blockbuster," he says.
Most industry analysts applaud the new R&D scheme, but they still see a long road ahead for Pfizer. "First of all, you have an organization whose operations have been disrupted not once, but twice" due to mergers and acquisitions, says C. Anthony Butler, an analyst at Lehman Brothers. This would indicate that another big acquisition is not in their interest, he says. On the other hand, the new organization will take years to prove itself.
Butler notes, however, that patience here could pay off. "BBC is a new approach, and it is something that we have argued" is in Pfizer's best interest, he says.
But the real challenge is Mackay's, Butler says. "Pfizer, in order to generate excitement, really just needs one drug. One!" Butler says. "And it may not be a replacement for Lipitor. I'm talking about an internally groomed product, not something that is licensed."
Butler says Mackay's pipeline triage was a good move. "You eliminate 24 programs and put your best foot forward," he says. Prior to Mackay's entry, he adds, Pfizer had not been one to cut any projects. The company may also have to further reduce headcount in research, Butler says.
Butler says Lipitor, with 2007 sales of $12.7 billion, may be weighing too heavily on investors' minds. "A lot of my clients have stopped doing analysis—they feel that Lipitor will be gone and that is a fait accompli," Butler notes. But more than of half of Pfizer's business today, including 43% of Lipitor sales, is outside the U.S.
OTHER ANALYSTS agree. In a July statement on Pfizer's second-quarter results, Barbara Ryan and George Drivas at Deutsche Bank wrote: "The culture change under way at Pfizer is huge, and underappreciated, in our view. The market remains unimpressed as there is no 'shock and awe.' However, we believe that the right significant and necessary steps are being taken to improve the company's long-term growth prospects."
Mackay says that meeting targets for Phase III trials and regulatory submissions announced in March is a key focus. "That was a commitment we made very publicly, and we are on track," he says. Kindler, he adds, has been very supportive of his five-point strategy.
"He is a quick study," Mackay says of Kindler, who came to Pfizer from McDonald's after holding various executive positions. "He wants the good news and the bad news in equal parts. I have given him my commitment to telling him when things are not going well quicker than I tell him things are going well. That's the Scotsman in me, always dwelling on the glass half empty. It actually works pretty well."
But what needs to be filled, all agree, is the late-stage pipeline. Its steward, Morrison, says things are in place to ramp up. "But no matter how good we get at the speed part, people understand that it takes time to prove a medicine is safe and effective," he says. "I think the company understands this and has committed the resources it needs to R&D. I may be delusional, but I feel like there is a lot of positive energy in the organization right now."
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