The Sandwich Shoppe is Closed

There has been a lot of commentary this week on Pfizer’s announcement that their highly respected research center in Sandwich, UK, will be closed. The original press release suggested that the decision was based on  Pfizer’s decision to exit therapeutic areas such as allergy, respiratory, and urology, which are based in Sandwich.

Wall Street analysts loved the news. Coupled with share buybacks, reductions in R&D spending were viewed as a net positive for their new CEO:

“Just what the doctor ordered,” wrote Jefferies, the investment bank, in a research note, as the company’s shares jumped 5 per cent on the day.

Barclays Capital said: “We view the reduction of R&D spend as well as the share repurchase programmes as positives”.

As the citizens of Ann Arbor, Michigan will tell you, this is not a new tactic. In fact, Pfizer is also shifting some R&D from Groton, CT to Cambridge, MA. Nor is it necessarily unique to Pfizer. Many companies are viewing R&D as a fungible, variable activity that can be moved, almost at will, driven by financial decision makers. Witness, for example, Daiichi’s decision to move some of their programs to India:

“Daiichi Sankyo has transferred five or six early discovery programmes from Japan. These are transition targets. We will explore our own research targets here,” said Pradip K Bhatnagar, head, RCI. RCI’s mandate is to identify potential drug candidates for clinical trials and transfer those molecules to Japan.

The other three global R&D hubs are Daiichi Sankyo RD Associe (Japan), Asubio Pharma (US) and U3 Pharma (Germany).

These activities raise several questions:

1. How comfortable are you, as a Daiichi researcher, working in the US or Germany or Japan? Are you about to lose your job?
2. Will decreased R&D spending result in more funds made available for in-licensing and acquisitions? After all, the pipeline has to come from somewhere?
3. But Pfizer is buying back shares. Are they essentially giving up on R&D over time?
4. Many emerging pharma and biotech companies are struggling to raise rounds in the $1-5 MM range. Will Big Pharma get increasingly involved in early stage VC investing while simultaneously reducing R&D spending?
5. Is buying a pipeline every few years a viable business model?

For an excellent discussion, we recommend this excellent essay by William Cullerne Bown. We also recommend the latest posts by Derek Lowe on his reliably excellent blog, In the Pipeline.

Update: A LinkedIn Group called Pfizer Sandwich Site Closure has opened up. It is described as:

A networking group designed for anyone affected by the Pfizer site closure in Sandwich. This group will enable you to keep up-to-date with new roles available in the UK and help you network with current colleagues and recruiters alike.