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There is no longer any doubt that big pharma companies are beginning to reduce their emphasis on internal R&D activities. Instead the companies will increasingly rely on outsourcing, partnerships, closer collaborations with academia, public private partnerships and M&A to keep their drug development pipelines full

Therefore it was not surprising when Merck’s new CEO, Kenneth Frazier recently mentioned in a conference call to financial analysts and investors that its multi-billion spending on new drug R & D will likely decline as a percentage of overall sales in the coming years. Merck is one of the largest pharmaceutical companies in the world

According to an article on Nasdaq.com, in 2010, Merck spent $11 billion on R&D, or 24% of total sales. Adjusted to exclude certain acquisition-related and other costs, R&D spending was $8.1 billion. Merck has predicted 2011 adjusted R&D spending would be $8.1 billion to $8.5 billion for 2011.

Frazier, the first African American CEO of a major pharmaceutical company, came under pressure earlier this year after he decided to not substantially cut R&D as many of Merck’s rivals, most notably Pfizer, did. He noted that cuts in R&D spending would have jeopardized Merck’s long term product development pipeline.

While rumors persist that Merck may be seeking to jettison its non-pharmaceutical consumer health and animal health businesses, Frazier insisted that the two units are complementary to its core pharmaceutical and vaccine focus and are not for sale. That said, if I was a Merck employee in either of those divisions, I would be updating my resume just about now.

Until next time...

Good Luck and Good Job Hunting!!!!!!!!

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A post on the Pharmalot blog today reports that spending on direct-to-consumer pharmaceutical advertising came bounding back in the third quarter —rising 15 percent to $1.16 billion, according to DTC Perspectives (which cited data from TNS Media Intelligence).

The increased spending marks the first quarterly gain in nearly two years after slumping 6.4 percent earlier this year from January to June. According to the Pharmalot post, “Internet spending increased the most—more than tripling between January and September to $221 million (display ads only). And, more ads were placed in newspapers, which showed a 25 percent gain to $104 million during the same period.

During the first nine months of 2009 the leading advertisers by brand (each of which spent more than $125 million each) were:

1. Lipitor (Pfizer)
2. Abilify (Bristol-Myers Squibb/Otsuka America)
3. Cymbalta (Eli Lilly) and
4. Advair (GlaxoSmithKline)

Could this be a sign that the pharmaceutical industry thinks that the economy is improving? Alternatively, maybe pharma marketers think that people might become increasingly stressed by the economy and drugs like Abilify and Cymbalta (a variety of psychiatric indications) and Lipitor (high blood pressure, cardiovascular disease ands stroke) may be in greater demand. And finally, from a completely cynical perspective, maybe drug makers want to sell as many drugs as possible before healthcare reform and possible price controls kick in?

Hat tip to Ed!!!!

Until next time...

Good Luck and Good Job Hunting!!!!!!!!!

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It’s no secret that major pharmaceutical companies are no longer investing in internal drug discovery initiatives as much as they have in the past. However, I was unaware how drastic the decline in R&D spending was until I read an article entitled “Significant Change Predicted for Bioindustry” by Benjamin J. Conway in the July issue of Genetic Engineering & Biotechnology News. 

Mr. Conway notes that in 1989 more than 50% of the pharmaceutical industry’s budget was spent on preclinical drug discovery and development. During the 1990s, the percentage slowly declined and was approximately 44% by 1999. He asserts that beginning in 2000, “the drop became precipitous” as pharmaceutical companies spent increasing amounts of their R&D budgets on downstream activities including expanded clinical trials. By 2006, big pharma was spending about 25% of its budget on R&D. Strikingly, Mr. Conway contends that “when measured in terms of constant absolute dollars, spending on pre-clinical R&D activities actually declined 0.4% annually over the period, despite annual increases of nearly 7% in total R&D spending.” 

Not surprisingly, the almost decade-long decrease in pharmaceutical R&D spending is best reflected in the lack of new drug approvals over the past five years or so. According to Mr. Conway, throughout the 1990s more than 50% of all new drug approvals originated at big pharma companies. By 2001, these companies were responsible for approximately 60% of new drug approvals. However, since then, pharma’s new drug approvals have plunged to 25% to 30% of annual totals. Some analysts suggest that the figure has been as low as 15%. The decline in new drug approvals almost parallels the decrease in R&D spending at most major pharmaceutical companies. Many industry analysts and thought leaders contend that big pharma companies have gotten too big and unwieldy and can no longer innovate. The unprecedented drops in pharma’s new drug approval rates tend to support that assertion. Mr. Conway points out that the so-called “innovation gap” has been filled by biopharmaceutical companies that “today account for 75% or more of new therapeutics developed each year.”

These changing market dynamics suggests that big pharma must reconfigure the business model that it has clung to for the past 50 years to remain competitive. Not surprisingly, almost all of the major pharmaceutical companies have begun to do just that! For example, over the past three years more than 60,000 R&D scientists have lost their jobs with little likelihood that the vacated jobs will ever be resurrected. Further, big pharmaceutical companies have increasingly begun to outsource many R&D activities to Asia, Eastern Europe and elsewhere. Finally, most big pharma companies have publicly demonstrated—through mergers and acquisitions—that biotechnology products as well as small molecules are in their future.

While big pharma may be retrenching and evolving, don’t expect the pharmaceutical industry on internal drug discovery initiatives —or small molecules for that matter— to disappear any time soon. The industry is going through a transitional period and the companies of the future will look only slightly different than they do today. These companies will still be large and well capitalized, but likely more diversified in their product portfolios (which will surely contain biotechnology drugs). Also, they will continue to excel in new product development, marketing and distribution. However, unlike the past, much less emphasis will be placed on internal R&D programs to discover new molecular entities. This means that pharmaceutical R&D operations will remain lean and companies will increasingly rely on M &A and licensing deals (with smaller specialty pharma and biotechnology companies) to keep their pipelines full.

Until next time...

Good Luck and Good Job Hunting!!!!!!!!!!

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For the past 60 years, American science was second to none. However, the US is perilously close to losing that distinction. Put simply, American science, like its economy, is in free fall.

Federal funding, primarily through the National Institutes of Health (NIH), is the lifeblood of American life sciences research. Between 1998 and 2003, the federal government doubled NIH’s budget every year—almost 25% of all grant applications were funded and life was good! However, since 2003, budget increases have vanished and the NIH remains trapped in a five year run of flat funding. Research funding rates have fallen to 10% or less and many academic scientists are voluntarily leaving or being forced out of their jobs.

This is not the first time that funding levels have plummeted. From 1989 to about 1994 (when I was a tenure track Assistant Professor), funding rates fell from about 20% to less than 10%. However, back then, there was little global research competition and American was able to recover to retain its scientific dominance. However, the world is a very different place now and the supremacy of American science, particularly in the life sciences, is clearly at risk.

According to an article in the Trenton Times, (my local paper), science and engineering have accounted for close to half of the growth in the American economy since World War II. Analysts suggest that without adequate research funding and ready access to research grants fewer scientists will enter the profession. “Already Asian countries are graduating 10 times the number of scientists and engineers as the United States. If the current trends continue in about a decade 90% of the world’s scientists and engineers will be in Asia” According to Elias Zerhouni, current director of NIH “In 10 to 15 years we’ll have scientists older than 65 than those younger than 35. This is not a sustainable trend in biomedical research.” Unless federal funding for research is increased this ominous trend will continue. That said, it may be too little too late. As you all know, finding science jobs in the US these days is becoming increasingly difficult even for qualified applicants. With this in mind, one of the most well attended talks that I give at career development symposia is entitled “The Road Less Traveled: Alternate Career Paths for Life Scientists”. As much as I hate to admit it, traditional career pathways for most life scientists may be things of the past.

Clearly, something must be done to fix the problem in order to maintain the quality of American science. The easy fix, which has been used ad nauseam for the pasts two decades, is to increase short term federal research spending. However, history indicates that this approach fosters the boom and bust cycles that have continually plagued American academic science. Although the boom and bust approach is quintessentially American, I don’t think that it will enable American science to sustain its scientific dominance in today’s increasingly competitive world.

The number of young people interested in or entering science continues to plummet in the US. Ironically, the quality and access to American science education has never been better! So, why the disconnect? It’s simple—science jobs are scare, the pay is not great and life as an academician has become almost unsustainable. In my opinion, something has to change very soon or America will almost certainly lose its status as the preeminent purveyor of science in the world.

Until next time,

Good Luck and Good Job Hunting!!!!

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