For Pfizer Inc. (PFE) and Fellow Big Pharma, R&D Restructuring Ahead


Big Pharma companies are starting to face a painful reality,that they have to make adjustments in their systems to keep going. Falling revenue because of blockbuster drugs losing market exclusivity is one of the issues at hand for companies such as Pfizer Inc. (NYSE:PFE),  GlaxoSmithKline plc (ADR) (NYSE:GSK) and others are also in the same situation. For most of these companies, one of the ways to generate cash amid shrinking revenue is redoing R&D.

The common theme among the Big Pharma in the recent years has been the problem of developing new drugs. They are really bad at it even though Research and Development activity has increased to help boost approval and revenue. What is now happening at the Big Pharma companies is that they are not putting up R&D complexes as they attempted to do in the past years. Instead, they are altering the way they do Research and Development.

The model of hoping for huge blockbuster drugs from massive amounts of Research and Development seems to be fading.

Money from new approvals is inadequate

For names such as GlaxoSmithKline, R&D restructuring is a common feature, indicating that the company is going back to the drawing board. Although the company has been able to gain some drug approvals, such approvals have not been to the level of a blockbuster. It means that new revenue streams cannot fill the gap left by blockbusters losing their market exclusivity.

Before things started looking grim, GlaxoSmithKline boasted about its focus on research complexes. Such focus was expected to improve productivity, but very little has apparently been achieved with much of the R&D dollars going nowhere.

Pfizer is another big drug company that has interfered with its R&D, a move that has succeeded mostly in narrowing its product pipeline, but not solved much of the revenue concern. The company made a desperate attempt to buy AstraZeneca plc (ADR) (NYSE:AZN) but failed. AstraZeneca, a British drug company, is also redoing its research to improve productivity and revenue.

The issue of redoing R&D is everywhere among the Big Pharma companies. For some companies, strategic location of R&D campus has been an important thing. They seek to locate their research campus where they can rub shoulders with some of the top-rated researchers in the realm of drug development.

Better slimming than restructure R&D

Eli Lilly and Co (NYSE:LLY) is one particular drug company that has refused to do what its fellow Big Pharma are up to. As such, the company has been shrinking to the second tier and its R&D has also been growing thin to fit its new status. It is said to be cutting $1 billion in R&D, as it slims out of the top 10 group.

Valeant Pharmaceuticals, whom was recently rebuffed in its effort to purchase Allergan, has also had a similar model where it significantly slims R&D at companies focusing more on late stage R&D that is likely to work instead of long-shots.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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