On Wednesday, Pfizer Inc. (NYSE:PFE) received approval from the FTC for its $68 billion acquisition of Wyeth. Friday is Day One for the combined companies. The mood at the two giant organizations no doubt varies by function and location. But a juxtaposition of two facts in a Bloomberg
report suggests the swirl of emotions researchers at the two companies may be feeling.
On the one hand, there's the excitement felt by scientists on the two sides who can now, finally, compare notes on various efforts. "As soon as the close happens, the phones will be red hot," a U.K. researcher told Bloomberg, noting that there's nothing like new data to energize a scientist.
On the other hand, the backdrop to this sharing consists of looming R&D cost cuts that could total $3 billion, according to Barbara Ryan, a Deutsche Bank AG (NYSE:DB) analyst cited by Bloomberg. The new R&D organization may spend 30% less than the two separate operations spent previously, which means layoffs and combined and discontinued projects.
No doubt many folks have a sense of where they stand. Pfizer has already moved in recent years to concentrate research in key therapeutic areas. Plans to organize R&D at Pfizer-Wyeth into two decentralized operations -- with Pfizer's Martin Mackay running the traditional pharma part and Wyeth's Mikael Dolsten running biotech -- have been public for months. As Pfizer details in a
press release, the two sides have done plenty of integration planning.
Even so, explaining your work in progress to new colleagues -- let alone a new boss -- in an environment where there are jobs on the line seems likely to be a little nerve-wracking.
For individuals, the overall employment climate for pharma research scientists doesn't offer much reassurance. After a long period of low research productivity big pharmas are rethinking their R&D setups, cutting back and laying off scientists. Johnson & Johnson (NYSE:JNJ), AstraZeneca plc (NYSE:AZN) and GlaxoSmithKline plc (NYSE:GSK) have all scaled back recently.
The tight job market and reduced risk of talent loss may make the job of integration leaders easier, of course. But the risk of a further falloff in productivity while everything gets sorted out -- an acknowledged problem in previous Pfizer deals -- remains real.
Not that productivity alone will even carry the day any more. As the In Vivo blog pointed out in a recent post, plain old innovation doesn't quite cut it these days. What companies need now is
reimbursable innovation -- research that yields drugs that are enough of an improvement that insurers and government programs will pay for their use.
Just one more example of the forces transforming this industry and generating deals like Pfizer-Wyeth. -
Kenneth Klee
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