All is Well…All is Well…Lets Outsource R&D
Swine Flu has not gone away. However, some drug companies may be repositioning themselves to find a better marketplace than with the tired old scary flu. It seems that the more “hip” drug lords are looking to their bottom lines to beat a path into the emerging markets for new frontiers of new profitable diseases to find cures for.
Maybe the business model for the 21st Century is to out source all jobs requiring intelligence at cheap rates. The Times of London illustrates just how far the drug companies are willing to go in their pursuit of more profits. Is this the next step toward making China the world’s cheap center for drug R&D?
GSK will be diverting investment away from pure research and towards products that will enable the company to catch a greater share of the consumer dollar. The focus on emerging markets will entail more investment in branded products that treat curable illnesses rather than in funding research into new medicines for incurable diseases.
From The Times
February 1, 2010
Drugs companies face deeper cuts in research
Carl Mortished, World Business Editor
The extent to which the recession has cut into high-value research and development jobs in the pharmaceutical industry will be laid bare this week as job losses in the industry climb to 12,000.
GlaxoSmithKline (GSK), the British drugs group, will announce plans on Thursday for further restructuring with the loss of 4,000 jobs, of which nearly half will be in GSK’s research and development centres.
The company employs 99,000 people, of whom 16,000 are located in the UK. The global job cull is likely to be felt in Britain, where the company has six R&D sites. The move will follow that of AstraZeneca, which last week announced a global job cut of 8,000 workers, of whom 3,500 are employed in R&D.
GSK’s third restructuring effort since 2007 will heighten fears in the medical research establishment that the recession is beginning to affect high-value scientific and technical jobs.
GSK will disclose plans for the upheaval when it announces its annual profits for 2009, which analysts believe will exceed £8.5 billion. The new round of cost cuts will raise the company’s target of cost savings from £1.7 billion, announced a year ago, to more than £2 billion. The company is also expected to increase provisions for restructuring, which total £3.6 billion at present, of which three quarters are cash costs. It will scale down activities at research facilities in Britain, across Europe and in the United States as it builds its activities in emerging markets.
The job attrition at the medical research coalface reflects widespread unease in pharmaceuticals companies about the loss of revenues from a small number of blockbuster medicines. This year GSK will lose patent protection for Seretide, an asthma treatment worth $4 billion (£2.5 billion) to the company, and AstraZeneca is facing the imminent patent expiry on Arimidex, a breast cancer drug that generated $878 million in sales last year.
Adding to their problems, the pharmaceuticals groups face a European Commission inquiry into allegations that they are delaying the arrival of generic medicines by offering payments to rival manufacturers. In response, the companies are seeking efficiencies in their labs, with greater focus on targeted areas of research.
AstraZeneca said last week that it would seek to outsource more of its research. The company is transferring almost all its manufacturing of pharmaceutical ingredients to a facility in China.
GSK started reshaping its business in 2007 by focusing on three areas: vaccines; consumer healthcare, including over-the-counter medicines and non-medical products, such as Lucozade and Horlicks; and emerging markets. The shift towards consumer products and emerging markets also reflects the group’s concern that it faces more cuts and penny-pinching among national healthcare buyers.
This will have ramifications for the R&D activities of all the big companies in the sector. “Their strategy is to diversify and to move away from work on small molecules,” one industry insider said.
GSK will be diverting investment away from pure research and towards products that will enable the company to catch a greater share of the consumer dollar. The focus on emerging markets will entail more investment in branded products that treat curable illnesses rather than in funding research into new medicines for incurable diseases.
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