Kenneth A. Getz
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Since this past summer, the most common questions that I receive during my conference and meeting presentations revolve around
the current recession and its impact on clinical research.
Though reluctant to openly admit it, inquisitors are responding to growing concerns about announced layoffs, tight financial
markets that once fed smaller company R&D spending, and project postponements and cancellations.
The questions are not easily answered. Historically, I explain, clinical research has weathered recessionary periods extremely
well, leading analysts and insiders to conclude that biopharmaceutical R&D is somewhat immune to economic cycles.
A Tufts CSDD analysis of the past five recessions since 1973 shows that R&D spending continues to grow, though at a more modest
rate compared with healthy economic periods. Active Phase I–III project volume continued to rise steadily during the past
five recessions. And, according to PhRMA, clinical research personnel growth has typically been flat or has slightly increased
during recessionary periods. I add, however, that the current economic crisis appears to be an anomaly.
Unusual volatility
The impact of this global recession has hit clinical research squarely and broadly, although a few select sponsors and CROs
have emerged unscathed and eager to pursue market opportunities.
Pharmaceutical and large biotechnology companies have announced that they will be terminating—or leaving unfilled—more than
50,000 positions, of which about 10% will come from R&D. Additionally, a number of major drug development sponsors have announced
plans to focus research priorities.
In the past few months alone, for example, GlaxoSmithKline has announced its plans to eliminate hundreds of research positions
as part of an operations overhaul. AstraZeneca and Merck also announced plans to cut thousands of positions worldwide—including
those within R&D—during the next several years. Pfizer, which recently acquired Wyeth, reports that it plans to eliminate
19,500 jobs—or 15% of its combined workforce.
In addition, Pfizer indicated that cardiovascular disease, long a major focus of its innovation, is not a core R&D area of
interest at this time.
After cutting 1200 jobs a year ago, Abbott Labs announced that it will be eliminating another 1000 jobs. Belgium's UCB Pharma
reported that it would cut 2000 jobs, or 17% of its workforce. And Procter & Gamble is now apparently looking to pull out
of the drugmaking business altogether.
Good and bad
Amidst downsizings and consolidation, there is a smattering of positive news.
Sponsors with very strong pipelines have reported solid sales and profit growth during the current recession. As such, rumors
are circulating that some of these top-performing companies are attractive takeover candidates.
Bristol-Myers Squibb, for example, posted very strong revenue and earnings growth in 2008. Schering-Plough and Novartis also
posted very strong financial performance in 2008. Novo Nordisk reported a 138% increase in net income for fourth quarter 2008.
For small pharmaceutical and biotechnology companies, the current operating environment is particularly volatile. Many of
these companies face the bleak prospect of scarce funding from capital markets and major biopharmaceutical companies.
There are numerous cases, at this time, of financially distressed small biopharmaceutical companies roiled by the current
operating climate.
To name a few: Myocor Inc., which had a promising atrial defibrillation device, folded this past October. Orchestra Therapeutics,
while developing a treatment for multiple sclerosis, filed for Chapter 7 bankruptcy the same month. Titan, a small biopharmaceutical
company focused primarily on CNS disorders, significantly downsized this past December. Altus Pharmaceuticals announced it
is cutting 75% of its workforce—or 107 jobs—and will reduce its research focus to a single program.
