Pfizer Looks to Partners as It Narrows Therapeutic Focus

| About: Pfizer Inc. (PFE)
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By Michael Fitzhugh

Pfizer (NYSE:PFE), the self-proclaimed “world’s largest research-based pharmaceutical company,” will pare nearly $1.5 billion from its 2012 research and development budget as it steps up its dependence on external partnerships to supply both new innovations and cost savings.

The cuts will result in the layoff of about 2,400 researchers and support staff in Sandwich, U.K. as the company phases out urology and internal medicine projects and intensifies its focus on neuroscience, oncology, inflammation, immunology, and vaccines.

Like its peers, Pfizer faces pressure from a variety of quarters to reign in expenses ahead of sinking sales. Lipitor, Pfizer’s best-selling cholesterol pill, is already losing ground to competition from generic drugs in countries where its patent protection has expired. This year, it will lose patent protection in the United States, its largest market. In addition, sales of the company’s pain medication Celebrex and erectile dysfunction drug, Viagra are falling.

To replace that revenue, the company will need to improve innovation and overall R&D productivity, goals that its new CEO, Ian Read, laid out while announcing the budget cuts. Former Pfizer CEO Jeff Kindler originally advanced both goals as part of a sweeping re-prioritization scheme in January 2007.

But the company is going even further now by seeking to create a greater focus in disease areas with the best opportunity. It also is realigning its global R&D footprint to increase its presence in locations known for their biomedical innovation, as well as outsourcing services that don’t drive competitive advantage for Pfizer.

Forging deeper and more active partnerships with leading academic and medical centers will be part of the plan. Pfizer added seven major research-based medical centers in New York City to its Centers for Therapeutic Innovation in January. The network of partnerships aims to speed the translation of biomedical research into life-saving medicines, leveraging Pfizer’s investment in discovery and early-stage drug development by funding pre-clinical and clinical development at leading centers.

Pfizer has also taken steps to build its strength in strategic areas, such as when it established a new rare diseases research unit in Cambridge, Massachusetts in June 2010. It will now move the handful of top researchers it retains to such hubs, which include locations in San Francisco, New York, La Jolla, California, and Cambridge, U.K.