Last month, Pfizer (New York City) reported its first quarter earnings and told Wall Street analysts that it planned a $4 billion cost-cutting program. Recent FDA actions, including a recommendation that the company pull Bextra from the market and Celebrex include a stiff warning label linking it to possible heart attacks, no doubt played a role in this decision.
Wall Street analysts are speculating that Bextra and Celebrex could meet a fate similar to Merck's (Whitehouse Station, NJ) Vioxx. Such a measure could have a major impact on Pfizer's bottom line. However, the company insists it still intends to invest approximately $8 billion in its research programs.
With Merck's Vioxx pulled from the market and its cholesterol-lowering drug, Zocor, due to come off patent in a couple of years, rumors are rampant that Pfizer will make a hostile take-over bid for Merck. A few years ago, speculation about a merger of the two pillars of the American pharmaceutical industry would have been considered sheer lunacy.
Dr. Hsu insisted that any cost-cutting strategy employed by large drug companies such as Pfizer must include a change in the company's infrastructure and business model, making them more nimble and flexible in a rapidly changing business environment.
Developing countries are home to many life science companies, many of which have reached critical mass. They will, most likely, become the low-cost service providers for pharmaceutical companies looking to outsource some of their internal programs in the development chain from optimizing lead candidates to offshore clinical trials.
Biotechnology companies, on the other hand, are less vulnerable to outsourcing because the companies are heavily reliant on innovation in developing new technologies and therapeutics, explained Dr. Hsu.
Until there is global harmonization of intellectual property protection, Dr. Hsu doesn't believe that biotech research programs will migrate offshore.
As pharmaceutical companies change their business model, Dr. Hsu added, they might become more dependent upon biotech companies for research and preclinical development of novel therapeutic products.
If this is indeed the case, the pendulum may be swinging back to where investors focus their attention toward biotech companies with innovative and strong technology platforms as well as toolbox companies. The storm clouds over the large pharmaceutical companies could give rise to the silver lining for the cash-starved biotech industry.