DEATH BLOWS TO LIFE SCIENCES R&D SPEND?

The concerns we have at Big Potatoes about the threat of cuts in R&D spending seems to be well founded with the recent announcements by GlaxoSmithKline and Pfizer concerning their plans to cut  R&D and other expenses as part of an effort to lower costs.

  • GlaxoSmithKline cited by the Wall Street Journal’s Health Blog, reported that it plans to save an extra £500 million a year by 2012 by cutting from R&D as well as sales and administrative expenses, with 70% of the savings going to the bottom line and 30% being reinvested. 3-4000 jobs are to go.
  • Things are no better for Pfizer: although Pfizer spent $2.8 billion on R&D in the fourth quarter of last year, R&D spending is about to fall pretty sharply. According to estimates from the company, R&D spending will fall to between $8 billion and $8.5 billion by 2012 (Pfizer expects to spend between $9.1 and $9.6 billion on R&D this year, a bit less than some Wall Street analysts had expected, and well below the $11 billion in combined R&D spending from pre-merger Pfizer and Wyeth).
  • Meanwhile at AstraZeneca, an additional 8,000 jobs will go over the next few years — about 12% of the company’s workforce. That’s on top of thousands of cuts previously announced by the company. And like the other companies cited above, these cuts will also impact their R&D department.

This is a very disturbing trend because in all these cases basic research capacity is being axed for areas that are now regarded as better guaranteeing returns on investment. In Life Sciences where successful innovation relies upon a huge amount of experimentation and failure, cutting basic research capacity smacks of an increasing instrumentalism which can only inhibit breakthrough innovation in the future. Short-termism, it seems, is now being institutionalised in an industry which is noted for its longer-term commitment and time-frames. Where next?

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