Hard Times Hit Biotech

The more I think about all the research layoffs that have been going on for the last year or two around the industry, the more I think that we really are seeing a change in the way drug discovery is being done.

Most of the jobs have been lost from the large companies. There have, of course, been shutdowns at the smaller ones, but I don’t think that those have been running at any different rate than usual. Startups and other smaller shops are always rearranging as their skills, finances, and luck dictate – that seems to be going on at the usual pace. But what’s different is the wave after wave of job cuts at the Pfizers (PFE), GSKs (GSK), AstraZenecas (AZN), J&Js (JNJ) – the big hitters (and big employers) of the industry. Even the companies that haven’t had major layoffs (Novartis (NVS) comes to mind) aren’t exactly hiring heavily.

So what’s going on? My take is still that this is a shift – as far as the US end is concerned – from larger research outfits to smaller ones. After all, the drugs are going to have to come from somewhere, and the deal-making for small companies that have something promising has been intense. It just seems that the larger companies don’t think that they can do as much of this discovery work themselves – not, at least, at the prices that make sense.

Now, it’s true that a lot of chemistry has been outsourced to contractors in India and China, and that several firms have opened research divisions of their own overseas. That’s a cost-cutting move, too, certainly – but look at what this says about research here in the US. Everyone knows – including the people in Shanghai and Hyderabad – that the difficult, high-level research is still not being done there. That’ll change, as the human and physical infrastructure improves, but the bulk of the outsourced chemistry is methyl-ethyl-butyl-futile stuff. It’s “Hey, make me a library based on this scaffold structure” or “Hey, make me fifty grams of this intermediate.”

This kind of thing is definitely cheaper to do outside the country. It’s not always as timely as it should be, or as well-done – so it’s not as cheap as it always looks. But overall, on the average, you can bang out compounds for less money by outsourcing. That’s not going to change, either. The countries that furnish the services may change, as time goes on. But until the whole world is a high-wage environment (or, more horribly, until the only countries that aren’t are so benighted that no such work can be done there), ordinary chemistry is going to be done where it can be done for the least money.

So what’s left for us here in the US? The hard stuff. The risky stuff. The science that needs well-paid experienced people hovering over it the whole time. The cheaper, easier research is leaving – a lot of it has left already. We get to take on the stuff that can’t be outsourced.

And that’s why I think that there’s a shift to smaller firms. They’re traditionally the risk-takers in this business, and I think that’s going to be more true than ever. The larger companies, to me, seem to be trying to play it safer than ever. They have huge costs to meet, and don’t seem to think that they can devote as much of their resources to taking chances. We can argue about whether that’s wise (after all, you might think that larger companies with more cash might be the ones who could afford more risk). But that’s not how it’s been working – not for quite a while, when you think about it.

Here’s the hard part: the world does not owe any of us a high-paying research job. Neither the world, nor the US government nor the US pharma industry owes us jobs of any kind. I wish that that weren’t true, but it most certainly is. Those of us trying to make a living through science and drug discovery are going to have to scramble for it. We’re going to have to prove our worth to those who are in a position to pay for us, and we’re going to have to try to make as many of our own opportunities as we can.

There are some things that can help us out in this period (see below), and there are some others that will do none of us any good at all. I know from some of the comments here that not all of you will agree with this, but as far as I’m concerned, here are some of the no-good-whatsoever moves:

1. Complaining about the Evil Suits Who Are Ruining the Industry. Look, I’ve been unemployed in this business, too. A merger pitched several hundred of us out into the market when our entire site was shut down. But I didn’t think that it was being done because upper management was enjoying it. They were, as far as I can tell, trying to keep the company going while having it make as much money as possible – the same behavior that had been paying my salary, actually. The constant drive to do those things is what’s paid all our salaries. Now, that doesn’t mean that upper management is always right. I didn’t say that they couldn’t be stupid (hey, I’ve sat through some of those presentations, too). I’m just saying that they’re not evil. Ranting about it is a pointless distraction from the business of keeping your job or getting another one. And besides, if they really are making a stupid mistake, that creates opportunities later on (see below).

2. Complaining about All Those Foreigners. I have even less time for this one. As far as outsourcing goes, I don’t see how I can tell chemists in China not to do the same work as American chemists for less money. (We should be making sure that we’re not doing the same work – see below). This is how economies grow, and how the world improves. I’m living in one of the greatest places in the world, and have been making a better living than most of the world’s population: I have no room to tell someone that they can’t try to reach for the same standard of living.

And as for foreign scientists working here, well, I think that one of the reasons I’ve been living in one of the greatest places in the world is that it’s been a haven for all sorts of bright, hard-working people. We’re not going to turn this into an immigration blog – there’s lots of room to argue about our current policies, particularly regarding unskilled laborers. But that’s not what we’re dealing with in the sciences. As far as I can see, we can use all the intelligent, creative, entrepreneurial people we can take, and we need to make sure that our country is the kind of place that people like that aspire to live in.

So if those don’t do any good, what does? Well, look at the situation. This is, as I’ve said before, a terrible time to be an ordinary chemist in this industry. That goes for the ordinary biologists, too. We’ve all got to demonstrate why we’re worth what we want to earn, and doing something that can be done for half the price somewhere else isn’t going to cut it.

So improve your skills. Learn new techniques, especially the ones that are just coming out and haven’t percolated down to the crank-it-out shops in the low-wage countries. Stay on top of the latest stuff, take on tough assignments. Keeping your head down in times like these will move you into the crowd that looks like it can be safely let go.

That’s one thing. Another one is the traditional advice given in all industries: keep in touch with everyone you know around the business. Use networking sites, keep current phone numbers, drop people an e-mail now and then. Getting laid off may well have had nothing to do with what you did – but finding a new job will have everything to do with it. If you don’t have any contacts around the business, large outfits and small, you’re going to have a harder time of it for sure.

And finally, here’s a more macro-scale suggestion. We medicinal chemists need to think more about being the source of startup companies ourselves. That’s harder to do if you’re part of a service group, or if you have that mentality. If your job is to crank out molecules, then you need to find a place that needs someone to do that. But if you’ve got a larger skill set, it may be large enough to get together with some other creative people and try to get some funding for ideas that no one else is doing. People still need medicines, and as long as we can still discover them here, it sure beats waiting for the phone to ring. If the bigger companies are in fact making a mistake by cutting research, what better revenge than to make them wish they hadn’t?

Comments

[jasonjim:]

As`long as America have smart and realistic guys like you Derek, America will somehow come out on the top, and you and others like you along with it. What I can't understand is why a company like Pfizer for instance never got into the generic drug business right from the outset. With their money they could have undercut any emerging generic company, and it would have provided Pfizer with a cash cow to carry them over while they worked away at the very expensive development of new drugs----they would have had the best of both worlds. They missed the boat because their management are too rich and stuck in their ways to adjust to new realities in the drug business.

2008 Oct 01 10:37 PM

[Tom B:]

Countries that are willing to taint baby formula and ignore intellectual property law don't pass MY "sniff test", but I'm not an ex-"fast food" executive Big Pharma CEO.

2008 Oct 02 09:31 AM