* No more new drugs today than 60 years ago
* Diversification push as blockbusters stumble
* 200,000 jobs could go across the industry
* Can biotech and contract research pick up the pieces?
By Ben Hirschler and Kate Kelland
LONDON, June 16 At just 28, Duncan Casey has
already been from the university science bench to the world of
Big Pharma research and back again. Now working in an Imperial
College lab tucked behind London's famous Science Museum, he has
no illusions about the prospects for researchers in the
"The unit I used to work in -- GlaxoSmithKline's place in
Harlow -- has been closed down now," says Casey, dressed in
signature protective goggles and white coat as he works on
synthetic chemistry. "It used to be a job for life. Now it's a
job until the next restructuring."
Across the western world, Big Pharma is cutting back on the
number of scientists it employs in its labs and the money it
spends on research and development. The hunt for new drugs
continues, but the men and women in white coats -- traditionally
viewed as the lifeblood of the industry -- are not as
untouchable as they once were.
It's a similar story at GlaxoSmithKline's research
laboratories in Verona, where lunchtime conversations can be
decidedly gloomy. Glaxo is axing the Italian facility, shedding
500 jobs as part of a programme of cuts designed to improve
returns on R&D. Many scientists feel stranded or wonder why they
entered the profession at all.
"It's a sad but true fact that science really doesn't pay
any more," says one young researcher who would not give her name
for fear of jeopardising her future prospects in the industry.
"The lunchtime discussion today was about what we'd go back and
study if we were 18 again and choosing university courses. There
were only a few of us who said they'd still go for a science
Across the Atlantic in Cambridge, Mass., Adrian Ivinson,
director of Harvard's NeuroDiscovery Center, is reminded of the
shifts underway in the industry every time he looks out of his
window. Over the road, the "gorgeous, state of the art labs" no
longer house Merck & Co Inc's neuroscience team. "They only
built it a few years ago and had this wonderful neuro group in
there," Ivinson says. "Now they're gone."
The magnitude of the changes is hard to ignore.
U.S. drug giants Pfizer Inc and Merck have slashed thousands
of jobs since acquiring smaller rival firms last year.
British-Swedish firm AstraZeneca has plans to close its research
labs at Charnwood in central England by the end of 2011, with
the loss of up to 1,200 jobs; its Swedish research unit in Lund
will also shut. In Japan, Astellas Pharma Inc has announced
plans to limit its research expenditure.
Sam Isaly, managing partner at OrbiMed Advisors -- with some
$5 billion under management it is one of the world's largest
healthcare investment firms -- expects employment in the 14 Big
Pharma companies across the United States, Europe and Japan to
fall around 20 percent between 2009 and 2015. That means some
200,000 jobs will disappear across the drugs business -- not
only in research but also in sales and back office functions.
"The management of these companies have to deliver to their
shareholders, so they are downsizing or making acquisitions or
diversifying," says Isaly.
NEW PRODUCTS, NEW MARKETS
One factor forcing Big Pharma to rethink its business model
is the huge number of patents that are set to expire over the
next five years. As patents run out on blockbuster prescription
tablets like Pfizer's $12 billion-a-year cholesterol medicine
Lipitor and AstraZeneca's $5 billion heartburn pill Nexium,
cut-price generics are sure to rush in and slash margins.
Between now and 2015 products with sales of more than $142
billion will face copycat competition, according to IMS Health,
the leading global supplier of prescription drug data. It is the
biggest "cliff" of patent expiries in the history of the
Add in tougher regulatory hurdles and a brutal squeeze on
healthcare budgets as cash-strapped governments push austerity
programmes and it's little wonder that drug companies are
cutting back and shifting focus.
The strategy so far has been to buy promising new drugs from
outside developers and boost investment in the relative safety
of non-prescription consumer products. Big drugmakers are also
moving into new markets -- with Asia at the top of everybody's
list. It all adds up to a redesign of the multinational
pharmaceutical company. In the 21st century, says Isaly, Big
Pharma will primarily be a distribution business.
HORLICKS HELPS CEO SLEEP AT NIGHT
A peek inside the bag of free goodies handed out to
shareholders at Glaxo's annual meeting in London gives an
idea of one direction the industry is headed. Aquafresh
toothpaste, Corsodyl mouthwash, Breathe Right nasal strips and
Lucozade energy drink are not exactly at the cutting edge of
bioscience, yet they are all products that now enjoy top billing
under Glaxo's youthful Chief Executive Andrew Witty.
Under Witty, who has been in the top job for two years,
over-the-counter remedies, oral care and health drinks have
become a key pillar of Glaxo's drive to reduce reliance on
traditional prescription pharmaceuticals. As if to emphasise
that fact, the one new hire highlighted by the CEO in his
address to the meeting was Emma Walmsley -- an executive poached
from French cosmetics group L'Oreal SA and heir apparent to run
Glaxo's reinvigorated consumer healthcare business.
Glaxo may be working on groundbreaking treatments for
cancer, but one of Witty's favourite products is Horlicks, a
malted milk powder best known in Britain as a bedtime drink for
the elderly. Horlicks is a huge seller in the key emerging
market of India. The brand clocked up 146 million pounds ($214
million) in Indian sales in 2009, bagging an enormous 48 percent
of the hot drinks market there.