A day on from AstraZeneca’s announcement of 7,300 job cuts, the company was still keeping the UK in suspense with regard to a breakdown of the numbers. UK staff assembled for a meeting at 10 am on Thursday, but as of lunchtime there was still no confirmation of the  numbers , with the BBC’s Business Editor Robert Peston tweeting that it was “odd” that the drugmaker was giving “no public guidance” on the UK element of the job cuts. The expected UK losses are “not huge” — the general union GMB speculates 250 to 300, all from the R&D site in Alderley Park, Macclesfield — but other sources inform me that it could be considerably more than that. Either way, added to the company’s mooted worldwide R&D cull (2200 jobs), it very much reflects the endemic crisis plaguing pharma innovation in general.

And, globally, this is a major downsizing exercise, the third restructuring effort in five years (AZ is lighter by 21,600 global staff than it was in 2007). It also exacerbates the blow to UK R&D dealt by Pfizer’s announced closure of its Sandwich facility, just over a year ago to the day. And, coming just a day after disgraced former Royal Bank of Scotland boss Sir Fred Goodwin was belatedly stripped of his knighthood for leading RBS into financial collapse, some UK pharma bosses may be feeling a twinge of panic in light of the Royal Society of Chemistry’s Professor David Phillips’ reaction to the news: “There has to be some element of state intervention at this stage.” A few Twitter commentators wondered aloud about the former AZ head Sir Tom McKillop losing his knighthood too. Their tongues were firmly in their cheeks, but there is no getting away from the fact that this was a dark day for UK pharma.

But what they do need is a greater emphasis on post-integration planning during the deal-making phase and some fundamental (non-scientific) principles, writes Brian McGilligan.

Ex-Pfizer R&D boss John L. LaMattina recently proclaimed that Big Pharma mergers are crippling science. Whether or not you agree, mergers are a core part of business and the chances of safe-guarding future R&D investment in merged companies will best be achieved by ensuring mergers are delivered in a way that doesn’t negatively affect share-holder value and, therefore, cash-flow.

The last time we witnessed merger-mania in the sector was just over two years ago when, during a heady six weeks in the first quarter of 2009, Pfizer agreed to buy Wyeth, Merck & Co and Schering Plough followed suit. Then just a couple of days later, Roche won its long-running battle for full control of Genentech.

While the announcement of such deals tend to herald opportunities to grow market share and, in many cases, reduce costs, if a detailed post-mortem was carried out you would not only find that the benefits outlined prior to the deal hadn’t been realized, but value may have been eroded rather than created.

Clearly, some deals in the sector have already been identified as failures by sector analysts. For instance, the Wall Street Journal has reported, in the case of Daiichi Sankyo, the Tokyo-based pharmaceutical company that acquired Gurgaon-based Ranbaxy for $4.6billion in June 2008, more went wrong than right. Analysis suggests that this deal failed largely because of a lack of due diligence. This isn’t uncommon but, by far, the greatest reason for mergers failing is poorly planned and executed integration activity.

Unfortunately, for many companies the executive team often see this as peripheral, treating it as a secondary element while they work with any number of nominated advisors, incentivised only on doing the deal, not on its downstream success.

So while deals may not need science to increase their success rate, they do need a greater emphasis on post-integration planning during the deal making phase and some fundamental (non-scientific) principles should be followed.

Firstly, it may sound simple, but it is important to have a clear and well-architected direction/end state design. This factor is so often the root cause of so many integration failures, resulting in a tortuous technical process to knit together disparate systems and data structures.

Secondly, integration must be the priority. This is not the time for fixing every operational issue en route or pandering to internal pressures to add additional functionality to the business operating model. It’s a time to look at ways to take complexity (and change) out of the plan not add unnecessary change to it.

The next thing to consider is that no plan will be perfect and striving for it will lead to delays rather than a perfect plan. There will always be unpredictable events that will shape decision making during the integration. Single accountability and a dedicated focus on delivering the integration is also hugely important as managing the delivery of a successful integration is not a part time activity … nor is it for the uninitiated.

Finally, the logic of the acquisition and the integration plan – and the progress made against it – must be communicated to the external market and employees. As a result of past acquisitions within the sector, huge global networks (e.g. Novartis in 140 countries), are in even greater need of regular communication!

Whilst Mr LaMattina may highlight that R&D is suffering as a result of some mergers, surely if the integration is delivered on time and to budget, then this could allow more money for those very same cash strapped R&D departments?

Brian McGillian is Partner, Pharmaceutical Practice, PIPC.

About PIPC
PIPC is a project and programme management consultancy responsible for some of the largest business transformations and post-acquisition integrations in corporate history. Founded in 1992, the firm operates globally from 16 international offices across over 25 countries.

The data, which tallies contributions made to political campaigns over ten years (2000-2010), shows that Sen. Max Baucus (D-MT) received more pharma dollars – approximately $340,000 – than any other Super Committee member. Baucus, also chairman of the Senate Finance Committee, took in just slightly more pharma cheddar than Reps. Dave Camp (R-MI) and James Clyburn (D-SC), who got $327,000 and $305,000, respectively. Rep. Jeb Hensarling (R-TX) received the smallest pharma contribution over 10 years, at roughly $15,000; over half of that came from Pfizer.

Pfizer gave more money to Super Committee candidates than any other Big Pharma company, at $183,000, a tear in the ocean for a company with revenues topping $67 billion last year. Lilly came in second at $155,000, and Abbott was the third largest contributor, at $146,000. All told, the pharma sector contributed around $2 million across the 12 Committee members – over ten years – and the rest of the healthcare industry, which includes insurers, professional practice groups and other service providers, gave an additional $7 million.

While these dollar amounts would be enough to constitute a conflict of interest for a physician attempting to sit on an FDA advisory panel, they’re relatively small, and it’s an open question as to whether they’ll provide much in the way of protection against additional cuts beyond the health reform givebacks negotiated by former PhRMA president Billy Tauzin two years ago. President Obama, for his part, received over $2 million in campaign contributions from pharma since 1989, according to the data, but an election season combined with a teetering economy and incessant deficit talks may remove any political safeguards the industry previously enjoyed.

After all, Super Committee members have been handed an assignment to trim $1.5 trillion worth of budget brisket, and if they exempt pharma, then bigger constituencies with more reach in their own districts will have to pay the difference. The fact is, pharma’s clout is concentrated in a few states, and it’s hard to make the case for job creation when it tops the league charts in cutting 300,000 highly-skilled U.S. jobs in the past 10 years. Nevertheless, PhRMA can point to tactical alliances with some unlikely counterparts. For example, Super Committee co-chair Sen. Patty Murray (D-WA) was a key opponent of efforts to open the gates to drug importation and roll back data exclusivity for biologics. This may prove more valuable in contesting the ideological debate around preserving market-oriented solutions in healthcare.

The path to commercializing a breakthrough discovery is rarely a linear process. The orderly rationale of the scientific method is often overtaken by the random artistry of passion, personality, business culture, and sheer luck. Each plays a significant role in handicapping success or failure in that wending transition from bench to bedside. The story behind drug development is thus as interesting as a dime-store novel, except what is fiction in the second case is truth in the first—and always the developer’s own dime is at stake.

Pfizer’s crizotinib—a new targeted therapy that blocks progression of a genetic alteration in a subset of patients with non-small-cell lung cancer (NSCLC), extending survival well beyond the current standard of treatment—is revealing on two counts. The compound’s extraordinarily fast development timeline shows that improvements in basic science around molecular biology are bringing more order to the process of moving from POC to confirmatory trials that conform to regulatory requirements for an accelerated NDA. At the same time, the path for crizotinib was littered with unforeseen risks, best exemplified by a chancy decision on clinical testing that, instead of yielding a medical breakthrough, could have shut the door on an entire field of investigation and potentially harmed Pfizer’s reputation.

With reference to the speed of the science, several institutional drivers helped pull crizotinib out of the filing cabinet and into active development. First was a seemingly unrelated commitment by Pfizer to expand its research capabilities in Asia to accommodate the region’s demand for data relevant to local clinical conditions. Governments like Korea were committing significant funds to facilitate home-grown research, particularly in oncology where the disease profile bore distinctive variations compared to the US. As a result, Pfizer began looking at how various tumor suppressing therapies based on the ALK and MET gene alterations could be leveraged against additional tumor types, including those prevalent in Asia.

“During the dose escalation part of the Phase I study of crizotinib in the US and Korea, we observed early responses in patients with advanced NSCLC,” Darrel Cohen, senior director in the Pfizer Oncology Business Unit, tells Pharm Exec. “Given our strong local networks, we were able to connect the dots and apply this knowledge quickly to expand the Phase I clinical trial and initiate a Phase II study of crizotinib in ALK-positive NSCLC. And despite the limited test population evidence, we were able to take the risk of expanding the trial to focus on establishing how crizotinib suppresses tumor growth among those patients with advanced NSCLC harboring ALK rearrangements, a group that represents approximately 3 percent to 5 percent of the entire NSCLC patient population.”

Pfizer contends that crizotinib is not only a potential therapeutic leader, but a benchmark in new ways to facilitate development partnerships across regions and markets. The success of this approach is exemplified by its joint simultaneous filing submissions on crizotinib to the FDA and the Japanese Ministry of Health Labor and Welfare in March of this year.

But there was also real risk in going global. The expanded trial proved more complicated than expected, involving extensive outreach to academic partners and regulatory authorities in Japan and Korea. In both groups there was concern about the generally precarious state of health among the candidate clinical trial population, most of whom were in the late stages of the disease. This was compounded by the cultural and medical practice gaps between the two countries that proved to be a potent challenge in defining and communicating the clinical trial protocol.

In one instance, Pfizer had to make a wrenching choice, says Oncology Business Unit Regional President for Asia, Jorge Puente. “We had a strong test candidate associated with one of our key academic research partners in Japan. The patient was at that point near death but our assessment was that getting him to the trial center in Korea might possibly prolong his survival and enhance the clinical relevance of the data. So we decided to pull out all the stops in registering the patient, including getting the Korean regulatory officials to accept his entry to the country, obtaining approval of the institutional trial review board, ensuring the patient’s informed consent with the government oversight required under Japanese law, and arranging logistics and transport for a subject who by that time was on a respirator.”

Puente notes that there was an acute awareness within Pfizer of the risks involved, but, he says, “by limiting the population to the US and Europe, we decidedly could not have achieved the rich response rate that allowed us to file globally with this early data.” From a societal point of view, the availability of this type of therapy to patients could have been set back years.

As it happened, the 27-year-old patient survived the trip, was administered the drug, and within two days was off the respirator and walking unaided.

In a world where individual accountability has grown opaque, it is still true in science that reputations and livelihoods can be put on the line, often around statistically assumptive outcomes whose interpretation in the clinical setting can deliver life—or death—to thousands of patients.

William Looney, Editor-in-Chief

The three-year low demonstrates the receding trends of drug success, the amount of drugs entering Phase I and II trials and the number of new molecular entities (NMEs) launched in the global market.

Pfizer is a prime example. The firm’s R&D expenditure for 2012 is between $6.5 billion and $7 billion’ last year’s budget was between $8 and $8.5 billion budget. The areas in which Pfizer plans to cut R&D include allergy and respiratory diseases. Instead the key focus will be on vaccines, neuroscience, oncology, cardiovascular and inflammation treatments.

Another pharma giant slashing its R&D expenditure is GlaxoSmithKline. The company has downsized its Harlow R&D site and has claimed it will be wary of unnecessary R&D expenditure in areas such as depression, neuroscience and depression. Both Johnson & Johnson and Bristol Myers Squibb have reduced R&D expenditure by 2%.

The Factbook highlights that 21 NMEs were launched globally in 2010, compared to the 26 NMEs last year. Drugs entering Phase I and Phase II trials dropped 47% and 53%, respectively.

Phil Miller of Thomson Reuters, said: “High failure rates continue to be of great concern to the industry and this is compounded by the decrease in NMEs. The strategy of big pharma to in-license more drugs for development does not appear to be paying off at present. An earlier focus on clearing out weak drug candidates will be instrumental to successfully progressing drugs to market.”

On a positive note, clinical trials for anti-cancer drugs are experiencing growth and some industry experts believe that R&D productivity is, generally, quietly improving. Hans Poulsen, Head of Life Sciences Consulting at Thomson Reuters, said: “For the first time, drug companies are reducing costs in their R&D organizations and I believe we will see that trend continue. We could see an improvement but it may take four to six years before we can really say the trend has been reversed.”

Beth Kennedy

Once again, its the biggest Big Pharma of all that sets the pace. Pfizer’s latest financial report to shareholders provides a rich example of the high price of scaling down. To help digest the Wyeth acquisition alone, the company has swallowed more than $5.6 billion in employee termination charges over the past three years. Another $1.1 billion is due to be paid this year and next to account for layoffs associated with the closure of Pfizer’s Sandwich UK  research facility and the planned 25 reduction in overall spending on R&D.

All told, Pfizer’s “let’s get lean” diet has led to the departure of more than 36,000 employees since a formal program of rolling staff cuts called Adapting to Scale was launched in 2005 — with another 13,000 still to go in order to meet the Wyeth integration target of a 15 per cent reduction in the combined company workforce.  The total payout bill estimated by the forensic functionaries who fill all those holes in the Albert Hall? At least $9 billion, and with associated charges as much as $12 billion.

That’s no small change even for a company as large as Pfizer, which explains why the terms of separation have become progressively less generous as the number of affected employees increase.  But give some credit where its due: our own informal review of company exit packages reveals that Pfizer still sets the industry standard in terms of generosity.

Pfizer and King Pharmaceuticals announced on Tuesday they have entered into a definitive friendly merger agreement. Under the terms, Pfizer will acquire King, a diversified specialty pharmaceutical company based in Tennessee, for $3.6 billion in cash, or $14.25 per share. The company emphasized the deal is not dilutive of earnings and will not affect its forecast estimates on market performance for the full year.

King, a mid-sized player in the industry, has been a suspected acquisition target for Big Pharma for some time, given its concentrated franchise in the lucrative therapeutics for pain market.

• The deal indicates Pfizer will remain a key player in primary care, with a new emphasis beyond the statin franchise that drove the business over the past decade. King’s inventory of small molecule drugs will prove useful in keeping Pfizer active in high volume businesses linked to prevalent chronic diseases. It will thus augment the company’s recent entry through Wyeth into high-cost specialty biologics.

• King will also cement Pfizer’s effort to become the therapy lead in pain management, building on the existing Celebrex and Lyrica franchises. The expectation is that patients will continue to pay a premium for pain relief, particularly for the explosion in arthritis predicted as the baby boom population ages.

• King’s expertise in new delivery technologies will also help other Pfizer products find new markets and seed introduction of process improvements “beyond the pill.”

On the down side, more staff restructurings—and a $200 million anticipated cost savings—will follow the acquisition and likely trigger additional efforts to review the status of under-performing segments of the overall business, such as oncology. Diversification is clearly the Pfizer strategy—but even for a behemoth like Pfizer it could be too much of a good thing. Look for some winnowing down of asset categories in the early part of next year.

This week, Pfizer announced that it has ended a Phase III trial of cancer drug Sutent. The drug, which was being tested as a treatment for patients with prostate cancer, has already been approved as a treatment for kidney cancer and for tumors of the stomach, esophagus, and bowels in patients that do not respond to other treatment, according to Forbes.

The Sutent prostate cancer study—which focused on patients who had advanced prostate cancer that had progressed despite treatments with chemotherapy drug docetaxel—was comparing a regimen of prednisone to a regimen of prednisone and Sutent together.

An independent Data Monitoring Committee said that patients on the Sutent/prednisone regimen weren’t living significantly longer than those in the other group, prompting Pfizer to end the study.

“There is a great need for better therapies for prostate cancer and we are committed to working with basic scientists and clinical researchers to identify more effective treatments for this disease,” said Dr. Mace Rothenberg, senior vice president of Clinical Development and Medical Affairs, Pfizer Oncology Business Unit in a press statement from Pfizer.

The announcement marks another blow to Pfizer’s efforts to position Sutent as a next generation Avastin—the kind of versatile therapy with multiple indications that provide the building block for a strong oncology franchise.

The decision also indicates the importance now attached to trial results that can document progress against current standard of care; without such evidence, cancer drugs have a harder path to registration, let alone reimbursement.

Much of Pfizer’s future in oncology now depends on the outcome of a large trial for crizotinib, which has shown early promise in reducing tumor growth for non-small cell lung cancer patients with a specific genetic marker for the disease. Overall, in-house prospects for new drugs at Pfizer are trending negative.

Pfizer currently has 118 drug programs in clinical development, down from 133 in January.

This new research partnership names Pfizer Animal Health the sole biopharmaceutical partner of CHF, and begins with Pfizer committing to provide an initial $50,000 over a two-year period.

According to Market Watch, the collaboration will focus on basic and applied research initiatives and on sharing leadership and scientific expertise.

As part of Pfizer Animal Health’s commitment to veterinarians, the research will focus on future discoveries in canine nutrition, genetics, and disease, “and how this supports veterinarians, the animals they care for and their owners,” according to the press release from Pfizer.

“We have the opportunity to gain enormous insights and be a part of pursuing scientific discoveries that not only impact animals, but also may involve translational medicine that impacts humans,” said David Haworth, DVM, PhD, director of Global Alliances for Pfizer Animal Health in a statement.

Pfizer spokeswoman Gwen Fischer told Pharm Exec that the deal came together in a matter of weeks, and that FoldRx will be fully incorporated into Pfizer’s research division. All of FoldRx’s employees are expected to become Pfizer employees when the deal is completed.

FoldRx made its name—literally—by discovering compounds that treat diseases related to protein misfolding, using a proprietary yeast-based target discovery platform. Its pipeline leader is tafamidis meglumine, a treatment for TTR amyloid polyneuropathy, which is a genetic neurodegenerative disease.

“Over the past five years the FoldRx team has successfully developed tafamidis from the bench stage to MAA submission,” stated Richard Labaudiniere, president and CEO of FoldRx, in a release. “Pfizer’s strong clinical and regulatory resources, global marketing reach, and commitment to the treatment of rare diseases will significantly enhance the ability to pursue the goal of efficiently bringing tafamidis to all patients affected by this devastating neurodegenerative disease.”

According to Pfizer, the deal is a reflection of the company’s new business unit structure. The original intent of the business unit was to target specialized expertise in specific research areas.

“This particular transaction will add another important component to the specialty care business unit and investigation medicines for rare and orphan diseases,” Fischer said. “The company also compliments our neurosciences disease area, which is currently a part of Pfizer’s specialty care.”

Earlier this year, Pfizer created an orphan and genetic disease research unit charged with discovering diseases affecting fewer than 200,000 patients in the United States and fewer than 10,000 patients in the European Union.

Pfizer has been upfront with the general public in stating that one of the key ways it will drive growth in the next few years will be through strategic business development, focusing on small to mid-size business deals such as the acquisition of FoldRX.