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Sheer Economics: How We Got in This Fix

I hate to do another post on this subject, after a good part of the week has been devoted to layoff news and the like, but this one is too much to ignore. A reader sent along this link, which quotes a Morgan Stanley appraisal of the pharma industry as an investment. Here’s what they’re telling their clients:

“. . .Still significant value in Pharma – we see material upside to ROIC [return on invested capital], earnings and multiples as Pharma withdraws from most internal small-molecule research and reallocates capital to in-licensing and other non-pharma assets. Worsening generic pressure and R&D management changes lead us to expect material cuts to internal small research spend (~40% total R&D) in 2010/11, after a decade of dismal internal R&D returns. We expect AstraZeneca and Sanofi-Aventis to be among the leaders in externalizing research, and this is a key driver of our upgrade of AstraZeneca today to Overweight.
Reinvestment of internal research savings into in-licensing will yield three times the likely return, we calculate. Under in-licensing deals, downside risk for pharma companies is currently materially lower than for internally developed drugs. Although upside is also capped by pay-aways and milestone obligations, the net present value of these payments is more than offset by the lower risk-adjusted invested capital. Over one-third of pharma R&D spend is in pre-phase II, where the probability of reaching the market is <10%. our proprietary analysis indicates that, unless the probability of an in-house molecule reaching the market is 30% or more, the risk-adjusted economic value added, or eva, is three times higher under the external research model, with a greater predictability."

It could be said in fewer words, but it’s all there. If you’re looking for the reason the big companies are doing what they’re doing, look no further. Agree with it or not, there’s a case to be made – and there’s Morgan Stanley, making it – that the cost of running new drug projects in big pharma is just too high relative to the risks of failure. Those returns, in fact, are calculated to be off by a factor of three.
You may not believe that factor, and I have to say, I found it hard to believe myself. But let’s say the Morgan Stanley folks have their numbers off. Perhaps it’s only twice as profitable to bring in outside drugs as it is to develop them internally. Don’t believe that one, either? Maybe it’s only 25% more profitable – can you imagine making a move that would increase your company’s return on investment by 25%? Industries get remade by such changes at the margin, and this one is remaking ours. Why do we have any internal R&D left at all, if those figures are anywhere near right?
Well, no one’s tried to run a large company entirely by in-licensing, and I think that there are a lot of reasons why that wouldn’t work. (For one thing, I don’t think that there are enough things to in-license, and if one or more large companies announced that they were doing that exclusively, the price of each deal would go right up). And there needs to be some internal expertise left, if only to evaluate those external drug candidates to make sure you’re not being taken. But still. All this means is that internal R&D will stay around, but it has to get cheaper and will very likely get smaller.
We can argue about the assumptions behind all this, but there’s no doubt that a compelling business case can be made for this world view. Anyone who wants to argue differently – and a lot of us do – will have to come up with solid numbers and reasoning for why it just ain’t so. I’m not sure such numbers exist.
There are many corollaries to this line of thought. One of them – and I hate to bring this up, considering all the horrible layoff news recently – is that one of the most psychologically comforting theories that we in R&D have for our present fix is likely wrong. I refer to the “Evil Clueless MBA CEO” theory, which has its satisfactions, but is a hazardous way to think. It is always dangerous to assume that people who do things you disagree with are doing them because they’re just idiots or because they’re innately malicious. In general, I’d say that the first explanation to jettison is malice, followed by stupidity (Hanlon’s Razor). What that leaves you with is that these actions, stupid and malicious though they may appear, are probably being done for reasons that appear valid to the people doing them. I know, I know – some of these reasons are things like “So I can keep my high-paying CEO job”, and we can’t ignore that one. But a good way to lose a high-paying CEO job is to try to tell your board of directors (and your shareholders) why you’re going to pass up an opportunity to get three times your ROIC.
Another thing to think about is, if these cost estimates are right, how did we get here? The best reason I can think of for such a disparity is that small companies (the source of these in-licensed drugs and projects) are often betting their entire existence on these ideas. They are very strongly motivated to do whatever they can do to get them to work (sometimes a bit too motivated, but that risk is already factored in), and if things don’t pan out, they usually disappear. Basically, the in-licensing world unloads the risk from the large pharma company (and its shareholders) onto the investors in the smaller ones. The cost disparity will exist for as long as people are willing to back smaller companies. Now, this isn’t to say that the big companies are always going to do a great job picking what to bring in. We’ve been talking a lot, for example, about the GSK-Sirtris deal, and that one may or may not work out. But the idea of doing big in-licensing deals in general – that’s a different story, no matter how any individual company manages to execute it.
What that also means is that more of us are going to end up working for those smaller companies (which is something that I, and several commenters around here, have been saying for a while). If the large pharma outfits are going to devote more money to in-licensing, there will then be more opportunities for people developing things for them to in-license. The rough part is that all these structural changes in the drug industry are taking place (largely by coincidence, I think) during economic conditions which make funding such companies difficult.
And then there’s the internal cost-cutting, for the R&D that’s actually staying at the big companies. That, of course, generally means sending a lot of it to China, or wherever else it can be done more cheaply. And that’s going to continue as long as it can indeed be done more cheaply, which means “not forever”. Costs are already rising in China and India, although they have a good ways to go before they catch up to the US and Europe. I know that we can argue about how well that whole idea is going to work – there are clearly inefficiencies to doing a lot of your work through outsourcing, but as long as those don’t eat up all the cost savings, it’s still going to keep happening.
This, as a side note, is why I think that one of the suggestions that gets floated here in the comments from time to time, the idea of forming a “medicinal chemist’s union”, is completely useless. Unions form when workers have the leverage to preserve a higher-cost business model. In the end, the big industrial concerns of the early 20th century had to have workers, and they had to have them in certain locations, so the unions always had the threat of going on strike. At attempt to lower the boom under these conditions would result in everything going to China, and damned quickly.
So. . .what’s happening to us, and to our industry, is not really mysterious. Our cost structure does not look to be supportable, and since there are cheaper alternatives that appear to be feasible, those will get tried. The disruption and destruction that all this is causing is real, of course. But the best I can offer is to try to understand what’s driving all this upheaval, because that might help people to figure out how to protect their own jobs or where to jump next. Everyone has to give this some serious thought, because I don’t see any reason why all this won’t keep going on for some time to come.

110 comments on “Sheer Economics: How We Got in This Fix”

  1. David P says:

    Excellent analysis, Derek.
    A colleague of mine recently speculated that Big Pharma would coalesce into about 4 companies and that they would pick and choose over the individual projects that small companies develop. This Morgan Stanley piece makes it look like it is moving that way even quicker than he thought.
    On the plus side, I tend to prefer working in a smaller company (better work environment, despite lower salary/benefits), which will be handy if I want to continue in drug discovery.

  2. J-bone says:

    I don’t imagine you will make too many friends with this entry.
    As a new postdoc I’m left wondering what scraps will be available for me when I finish. I hadn’t planned on even doing a postdoc when I entered grad school, it just ended up being a necessity when the economy bottomed out. Now it looks as if I may end up having to do ANOTHER postdoc while job opportunities slowly emerge from the ashes.
    Although I have experience in pharma and fond memories of it, I am open to suggestions about alternative fields where I might apply my trade.

  3. John FitzGibbon says:

    This is an issue I’ve been thinking about for a while. Is a career in this model more or less attractive for scientists? While big pharma has it’s drawbacks it has (at least in the past and I mean no disrespect to the people who are feeling the cuts right now) been fairly stable as a career. Whereas if one were to work in small companies with finite lifespans you have what I would perceive to be less stability, searching for a new job every five years or so. It’s not something that really appeals to me.
    All I’m saying is that there are already a lot of obstacles to becoming a research scientist, grad school is long and while many of your friends are buying houses and starting families you’re sitting in lab on labor day running the longest column of your life. Then there’s post docs, and I’ve seen 5 year post docs easy. Then you step out of that into a situation where you’re not really stable? Is this going to push people away from science? I mean I already feel academia is doing that with the way it is. If the best and brightest are to choose this as a career there in some ways have to be other possible motivations than just love of science. Economic and family stability are things that a lot of people are looking for in life and I just can’t see the pharma industry providing it now or in the future.

  4. Dave says:

    Been a follower of yours both online and in Chemistry World for several years and I have to thank you once again.
    As a still wet behind the ears chemist, I had dreams of finishing my PhD and heading into big pharma to make a real difference. As I “ride out the recession” (or so I tell myself) in a postdoc position (med chem) I have appreciated yours, and regular posters to this blog, insights into what’s REALLY going on in big pharma. I don’t want to join a company that does clinical trials and paperwork, I want to take the incredibly small chance that someday I’ll make the drug that cures cancer/HIV/TB (take your pick).
    Is it wrong though to expect to achieve this with some modicum of job security? You expect me to believe that in China they have life-long contracts in their biotech companies? Do these economists put a price on such a simple commodity as loyalty? Or should I accept that mine will be the life of a wild rover until, footsore and weary, I finally tire of the travellers life and settle down to any old job. No matter what the number crunchers say, that model of life just can’t be right and surely there are arguments that settled workers are more productive? I would hope so.

  5. darwin says:

    I am going out to open a Chrysler dealership

  6. Nick says:

    So if the risks of internal R&D are so high relative to in-licensing, then how did we get to the current (now deteriorating) model of big pharma companies with internal R&D pipelines? Must one assume that the success ratio of R&D used to be higher? Is this current collapse entirely mediated by the exhaustion of low-hanging fruit and the shabby state of ladders to get us up to the higher branches? If so, then who, in this brave new world, is the giraffe?

  7. anonymous says:

    The Morgan Stanley appraisal is essentially the rationale GSK Sr. management have given for the lastest round of layoffs and divestiture from the NS therapeutic area- that the risk/ROIC does not justify the significant level of financial investment, particulary compared to a better ROIC/ risk profile with consumer healthcare products. Although the margins are lower, ROIC looks better for toothpaste, nutritional products, etc that depression compounds.

  8. paul says:

    There already is a med chemist union… it’s those with a PhD. rather hard for anyone without one to move up in pharma research; it creates a barrier to entry that artificially increases cost of labor.

  9. cookingwithsolvents says:

    Would someone with experience in the big pharma / start up be able to comment on the possibility of “loosing” more potential drug candidates to poorly run small companies just not getting the science done (well)? Is this a real possibility/fear? Certainly size buffers on against a bad decision which could easily sink a small company and a big R&D department allows more chances that the “right” person thinks hard about a crucial part of developing the drug.
    This certainly falls into the realm of “there is no data for that”. Anecdotes? Thoughts? I’m curious. . .

  10. J-bone says:

    Paul, you’ll be happy to know that many big companies have dropped the axe on Ph.D’s (usually first to go due to salary) and dissolved the barrier that once existed between BS and Ph.D.
    Back when I worked in pharma if I was looking for a job I skipped over everything titled “Scientist” because I knew it was for someone with a Ph.D. Now most of those same entries are looking for someone with a BS and 5 years of experience. Makes me wonder what I could be doing if I had continued with my previous company rather than go to grad school.

  11. PharmaHeretic says:

    But how sound is the business model of financial institutions for them to preach fiscal sanity to others?
    They are just publicly funded ponzi schemes, and therefore have no right to preach fiscal responsibilty.

  12. Hap says:

    Outsourcing, though, works (among other things) by lowering the labor costs – and while that can happen for a while, at some point (unless there is some sort of intervention) labor costs will balance – wages in China for drug dev people are supposed to be increasing, for example, and if the jobs in pharma end up mostly being lower-paying and riskier small company jobs, the assumption would be that people will migrate to fields where they can get paid more (or more certainly), which will eventually force either labor costs higher (because there are fewer people) or force further outsourcing (which would increase labor costs elsewhere). There’s also the issue of relative productivity, which this doesn’t address (but, I think, whose resolution is not clear).
    If outsourcing is mitigating early risks to smaller external companies, then won’t companies simply demand more for their candidates, knowing that their potential purchasers have none of their own to support their business? Outsourcing also can’t mitigate the expensive late-stage risks which seem to be the source of the cost issues (and which are, presumably, squarely in the niche that larger pharmas hope to secure for themselves), and outsourcing earlier risks will likely mean that risks will be pushed later (because, small companies have a large incentive to sell candidates, whether or not they may succeed in the long run, and unless diligence is good, larger companies will buy them and advance them to failure).
    None of the benefits of outsourcing seem to be long-term ones (except, perhaps, the development of expanding markets, but that doesn’t depend on outsourcing drug research, but on their general economic development). The method of outsourcing only mitigates those risks in the short-term (which, granted, is a requirement to reach the long-term) but does not solve them. It also creates problems for the long-term – for example, pushing people away from fields which require lots of learning to enter such as the sciences, for fields which either pay more or offer more situational flexibility (if my ability to get another job is my only security, then mastering a narrow field doesn’t help me). If the ability to produce useful things and ideas is important, then basing an economy on the ability to manipulate things and money while devaluing the ability to generate the ideas and things to be manipulated seems to be damaging to our country’s or society’s long-term survival.
    The incentives to outsource seems to be short-term cost cutting and not long-term company viability. The structure of executive pay (which seems to be fueled by low-cost stock options and direct pay, neither of which depend much on a company’s short- or long-term successes) lead to the “MBAs are killing us” theory of pharmaceutical failure – people behave according to their incentives, and if their incentives make short-term benefits trump all else, well, then management will behave accordingly. I think, though, that pretending that outsourcing solves pharma’s money problems is a management person’s (or financier’s) fantasy.

  13. g says:

    It seems fairly obvious that this is not some cyclical downturn, but rather a fundamental restructuring. Morgan Stanley is saying that big pharma will become conglomerates, where they buy up mid-sized and startup companies.
    The business model for these small companies is quickly becoming one where they madly rush to develop a drug, layoff everyone so they can pay for clinical trials, and then hope they can hold on long enough to show good Phase I and early Phase II data to get bought up.
    Big pharma will hold the purse strings and will be the feudal lords and everyone else will be the lowly serfs doing the work for their daily bread. With the consolidation of big pharma, prices for buying drugs/companies will go up in the short term. But long term, I am betting on implicit collusion between the 3-5 remaining companies to push prices down. End result for scientists doesn’t seem good-no job stability, downward pressures on compensation, and little likelihood for being around for the big payouts. eeep!

  14. LargerVier says:

    Well said Derek. Also, the portrayal of the industry as “villainous capitalist” by governments and their doting media lapdogs have helped catalyze this industry’s reorganization with increased pressure on pricing. Although in the short term, capital will be hard to find to support new drug company startups, over the long term, more VCs will be lured in by the potential of huge returns.
    It seems this will have a negative impact on the pipeline over the short term, but level out over the long term. Unfortunately, small market diseases may not see the opportunity for therapy they once had, and scientists may have to get used to bouncing from one venture to another with more compensation in the form of equity (risk spread even further). It would me nice to have a few “Pharmacon Valleys” spring up to avoid too much relocation during a career.

  15. Karel Krakatit says:

    So does this new landscape for drug discovery alter the mission for those of us running academic research labs? As a PhD student in Medicinal Chemistry, I was taught by my professors that our goal was absolutely NOT to discover new drugs. That was the job of the pharma industry, and it was foolish to think we could, or should, compete. Our mission in academia was to innovate new insights and new tools valuable for the drug discovery process.
    Now that big pharma is abdicating its role in drug discovery, should we step in to this vacuum?
    This would be consistent with some of the grant proposal reviews I have been getting lately, in which I have been dinged for not presenting ADME profiles of proposed new compound families.

  16. Ty says:

    I understand where Morgan Stanley is coming from. What it is is what it is. I believe it shows how this money-driven (ROIC, my ash) short-term ‘visions’ can take the entire industry down the drain. They did it for American electronics industry. They did it for American auto industry. Now, it’s pharma’s turn. They can save all the cost they want for now by externalising and in-licensing. But there are thing that you simply cannot translate into money.
    I don’t think anyone can change the tide. Don’t look now, but there will be Samsungs and Hyundais of pharma in 10, 20 years while the current big pharmas will still be struggling to survive, if not taken down by then (bail out anyone?). And it’s Western pharma company’s own doing.

  17. anchor says:

    Fantastic analysis and your take also informed us as to where this monster is headed. This Morgan Stanley analysis will put a serious dent on all those aspiring professors and students, if they really want to pursue carrier in organic chemistry/chemistry. What type of future awaits them, when they graduate? Opinion on this issue from your blog followers are much appreciated. Certainly, this sober article left me with a belief that our best days are behind us.

  18. Vader says:

    All this is moot. With the omnibus health care “reform” bill on life support, Obama, Reid, and Pelosi are going to look for easier targets, and de facto nationalization of pharma is likely to take place. Fair nor not (I don’t think it is) Big Pharma is not popular with many voters, and demagogues will take note and take advantage.

  19. BioBrit says:

    Interesting post, thanks Derek.
    So, I’m intrigued. Is the ROIC in a small company significantly different. Is it that much better because everyone cares more as they have ‘bet the farm’? If not, why would anyone put money into a small company rather than a big pharma? And, given the push over the last year or so, for small companies to cut their discovery, or to just inlicence themselves, who exactly is going to discover the new stuff in the future? We can’t all in-licence, surely those opportunities are going to dry up soon.

  20. Dster35 says:

    Great points.
    I’m relatively new to this industry and as such hear pinings for the “golden days” but didn’t experience them.
    I like the current environment as I’m resourseful and knowledgable and, due to the small cap science company I work for, am able to make an impact as my value is based on my aptitude and work ethic, not based on the number of years I’ve served or letters behind my name.
    For any new graduate looking for “stability” – the only real stability you will find is in a solid network, good attitude, willingness to be resourseful and productively add to the value of an organization. I think the average, even just graduated, PhD has the opportunity to make impacts on many more smaller organizations than they did in the big pharma’s that are just now adapting to the financial atmosphere of 10 years ago.

  21. David P says:

    Karen (17):
    There is a movement towards academic drug development. I believe the center at Vanderbilt University was the first (run by Jeff Conn), UNC has set one up more recently (staffed by several ex-GSK folks, naturally). I can see a place for them, especially now, where the drive is for publication and research rather than short term profit.

  22. processchemist says:

    From my european point of view things are quite simple. The interests of the top management of the big global players (pharma, banks etc) is totally conflicting with the interest of the workers in the scientific field. Workers of different nations have different rights/levels of protection, but no one, IMHO, in Europe or US can swallow the pill of his layoff thinking that is for “a greater good”. The real problem is that our contractual strenght, as singles or as category, has fallen to very low levels.
    About analyses coming from Morgan Stanley, or GS, O JPM, well, these dudes did an heck of a brilliant job in the last three years, or I’m I wrong?
    Sure, if they say so, in this direction things will go for some time (outsourcing to asia was heavily advertised from top world banks in the last three years).
    How we and consequently a reasearch oriented western pharma environment will survive, this is the problem. And I think it’s a collective problem, in the wider sense.

  23. Jack says:

    Thought provoking piece, as usual. A minor quibble. Your comment about no big pharmas being successful by simply in-licensing stuff. You’re probably too young to remember Marion Merrell Dow-they were hugely successful doing this, at least until they merged with Hoechst (remember them?). And today, Forest is a great example of a successful in-licensing only model. Sure, they don’t just rely on small biotechs as providers, but they have successfully gone to Europe for regional deals, too (eg, Lundbeck). Shire is another successful in-licensing only company. And there are a number of others in the specialty space. So it can be done.
    I agree with you that big P needs some discovery infrastructure to properly evaluate opportunities. And since a number of licensing deals are collaborations, there obviously has to be a coterie of qualified scientists within big P to enable that. In fact, when I was a big P licensing exec, I would “sell” our internal capabilities to drive the deal.
    One point you bring up is particularly depressing-given that big P needs small B, where’s the money going to come from to support the latter? Many VCs, thankfully not quite all, have become very gun shy of early stage discovery companies (they have good reasons to be this way due to the lousy financial climate); and big P is equally risk averse in this space-the heck of it is, that’s where all the innovations will occur. Or not.

  24. Lu says:

    Morgan Stanley seem to be interested in existence of small start-ups (borrowing money from banks) rather than large diversified companies financing research with their own profits.

  25. YoAdrian says:

    One thing not really mentioned is the NIH’s recent strong emphasis on funding “translational research” and away from basic science. This is basically subsidizing academic drug discovery efforts, which is where the IP originates for most small biotech start-ups.

  26. ManageThis says:

    You said it brother. With way more eloquence and perspective than I ever could. Keep on speaking the truth.
    I’ve been in both models, and the risky venture is the much more stimulating environment. Data go from your notebook to a presentation to investors in a matter of hours. Every success is an epochal victory and every failure is the brink of disaster. It’s a rush. I’m looking forward to getting back to it.
    And it’s not all about outsourcing to Chindia. Read Derek’s post carefully, the outsourcing bit only nibbles at the margins. In my experience, smaller firms actually outsource a lower proportion of their work, because they have to be nimble and they need to trust their data without double checking everything. So if one were really a sunny optimist one would say that the new model may actually result in more jobs for US/UK chemists. But nothing will happen until the VC money flows again. The financial crisis and the Madoffs of the world killed the VC spigot for a few years. As Derek alluded to, this is most unfortunate timing.

  27. hibob says:

    Derek: I’m guessing the reason for the difference in ROIC is so high is because the numbers Morgan Stanley calculated are dominated by changes in the stock prices of the large company after each milestone during R&D rather than the differences in actual expense of taking drug candidates to failure/market in a small or large company. At each milestone, the big company is free to say “OUR drug is succeeding” or “THEIR drug failed”.
    The “dumb management” theory has a refuge there too:
    “They are very strongly motivated to do whatever they can do to get them to work (sometimes a bit too motivated, but that risk is already factored in)”
    Compared to an in-house project, the management in charge of licensed projects have had less incentive to keep questionable projects going, and probably face more pressure to terminate them. Management in charge of questionable in-house projects have had more “valid” (to their own careers) reasons to keep them alive until they die on someone else’s watch.

  28. FMC says:

    So guys,
    before we all get way too excited, including Dr. Lowe I must add, I recommend to check what the Great Bankers of Wall Street are writing: “….our proprietory analysis……., with a greater predictability.”
    Well I have a couple of comments. When there is talk of a proprietory analysis, which I cannot check and people come up with a factor of 3 somewhere, favouring a new model then I must say that I do get a little suspicious, to say the least. Now when we are turning to more humble numbers, say like the ones quoted by Derek, then again I find that hard to believe (at this point of time). The additional issue I have with the analysis provided by Morgan Stanley, is that devilish half sentence: with a greater predictability !!!! Greater predictability of what? R & D spend? Reaching market? Not entirely clear to me. In this context, as we are talking outsourcing, in licensing and all that we should not forget, that the shift change in the business of big P that we are witnessing might finally bear a much larger cost on society than we can fathom at this point in time. Derek has touched that subject already marginally. If the workforce (highly qualified and driven) that was formerly needed in the US and Europe is obsolete (due to outsourcing into countries with a wage structure that is below ours) than one must think about the ramifications of this change also to academia. Furthermore, how in say 20 years time will it be possible to assess a good outsourcing/licensing deal, when the caliber of scientists that is available (well was available) to companies is just not there anymore ????
    Over and out. All the best to you folks that are in trouble at GSK ….

  29. Curious says:

    I am not in the pharma industry, but quite interested in what is going on in it. I found this forecast quite informative:
    Some obvious overlaps with Derek’s thoughts, though it seems to me the way big farma are headint to this future is too quick, agressive and risky.

  30. barry says:

    I am reminded that Merck was one of the most admired corporations in the US and one of the most profitable for decades, and it was based on small-molecule research, rather than on M&A. Nothing in the past decade of merger-mania has shown us that this has changed. I don’t know what’s wrong with MorganStanley’s model of reality, but it gives dangerously wrong results.

  31. Cloud says:

    Great post, Derek.
    One reason the small companies can do things cheaper has to do with the fact that it seems to be cheaper for them to do layoffs. I’ve been laid off from a biotech- I got 3 months severance, which I think is about average. I have friends who have been laid off from big pharma that, due to their years of service, got close to a year’s salary. I think the biotech world just expects companies to shrink as well as grow sometimes. No one thinks anything of it if you have a series of 2 year jobs on your resume, because that’s pretty normal.
    John FitzGibbons- you are right that if you choose to work in this environment, you have to live with job insecurity. I deal with that by having a big financial buffer built up to carry me through the inevitable job search period after a lay off. You also start to get some spidey-sense about when bad things are going to happen, and some people will choose to start looking for a new job before the lay offs hit.
    I personally enjoy the small company atmosphere and energy, and chose to leave a job at a large company to come back to biotech.
    And I would argue that job insecurity has come to big pharma, too. In fact, I think it is coming to everyone, in every industry and we need to figure out how to handle it, both as individuals and as a society.
    cookingwithsolvents- I think there are three big ways biotech companies fail: (1) bad science, (2) bad business model, (3) bad management. In my experience, reason #1 is the least common reason for failure. I’ve worked with a lot of great scientists in biotech. Small companies usually have a low tolerance for “deadwood”, since there is no place to hide them. However, I have watched many companies go down because they never figured out how to make money or because their management couldn’t figure out how to get them through the next stage transition.

  32. lynn says:

    I see the perceived advantage for big pharma in going increasingly for in-licensing from biotechs – but, will that fill pipelines? In the antibacterial field, most small pharma that have succeeded [thus far] have in-licensed cast-offs from Big Pharma [or Asia] and there has been almost no novel discovery success – in big or small pharma [or academia] for years. Lots of reasons for that failure, of course. Mainly, it’s hard. At least in the good old days, Big Pharma gave us more time [and many shots on goal] to come up with real candidates – and through that process, enabled a build-up of in-house experience and expertise. Time is not something small pharma will be able to provide. And, while some experience is provided to biotechs by ex-Big Pharma consultants, most of the biotech denizens (at least biologists) are not highly experienced.

  33. alig says:

    A Bear-Stearns analysis in 2008 showed that compounds that made it through phase 2 which came from inside a big pharma had a much higher chance of making it to market than ones that were in-licensed (something like 80% versus 50%). Since it doesn’t look like Morgan Stanley differientiated success rates post-phase 2, their analysis is fundementally flawed. >50% of development cost occur post phase 2, thus the “fail-fast” mantra inside big pharma.
    I also wonder back to Witty’s comment about no new NCEs from 98-07. He must be forgetting about Cialis(2003), which was discovered at GSK and given away by the BD folks after the marketing folks said there was no market for ED drugs. I wonder how a >$billion drug would have affected the ROIC of internal research.

  34. p says:

    “given away by the BD folks after the marketing folks said there was no market for ED drugs. ”
    Wow, really? Must have been an analysis conducted by a 19 year old jock. Sex sells. Rule 1.
    Good luck to everyone affected by all this.

  35. pete says:

    Well written, Derek.
    We all see that this change has been coming. But for me, with my 2 decades in Biotech, it’s still pretty stunning how quickly the landscape has altered of late. Comparisons to what happened to the US electronics/textiles/tool manufacturing industries don’t seem so off-the-mark anymore. The ‘Decade of the Brain’ ushers in the ‘Decade of the Headache’.
    Anyway, despite the gloom, I’m optimistic that smaller outfits will continue to provide an intellectually nourishing place for the energized life scientist. No doubt, though, it’ll be a gypsy-like existence for some.

  36. Cloud says:

    LargeVier: “It would me nice to have a few “Pharmacon Valleys” spring up to avoid too much relocation during a career.”
    They already have. San Francisco, Boston, and San Diego. To a lesser extent, Research Triangle. There are smaller concentrations in other places, too, and plenty of states vying to be next on this list.

  37. skyywise says:

    Although times may be changing, I would hope that any company thinking about moving their R&D to China would still have serious reservations about (and I write this being part-Chinese and having lived in China, albeit not having worked in China):
    1) The quality control of labs.
    2) The honesty of scientists & managers regarding “progress” and/or raw data.
    3) The likelihood that confidentiality will be broken or trade secrets will be stolen.
    4) The risk that Beijing will simply confiscate that which they want to.
    5) The hidden costs (graft/bribes) to foreign companies.
    6) The questionable enforcement of IP laws (despite the 50 Intermediate People’s Courts set up to primarily handle patent law).
    China may be a large looming specter, but it is still a third-world country with first-world cities. One can’t assume that laws and culture will give the same security as they do in the US or Europe. There is something to be said for conducting research where you don’t have to worry about risks outside of the science itself.

  38. dearieme says:

    “there has been almost no novel discovery success – in big or small pharma [or academia] for years.” And there you have it.

  39. Anonymous says:

    Um……how about privitization of the industry? I haven’t read about any giant cuts at Boehringer Ingelheim. All you have to do is stay in business by turning a profit each year. You could even save (gasp!) some of your money for when your blockbuster goes off patent.

  40. biobug says:

    I think the Morgan Stanley piece is completely wrong. The Big Pharma companies have gone through bouts of in-licensing and merging, then cutting back on in-licensing. The trend has little to do with ROIC which is virtually impossible to calculate for these companies due to poor visibility into costs, and extremely long development time-frames. Do you take the ROIC based on R&D spend from 10 years ago? How many of these companies existed with the same name and structure? Innovation is not a strict money in, widget out proposition as you’ve often mentioned.
    Instead, patent expiration moving billions and billions of dollars out of drug spending, is forcing a wide across the board contraction in all drug development activity. That’s it. Until the FDA loosens requirements on drug approval, or there is some new break-though in therapeutics (such as stem cell or gene therapy or RNA technology suddenly starting to work), expect the industry to not resume robust expansion until at least 2015-2017.

  41. Gomer Pyle says:

    Derek said-
    “This, as a side note, is why I think that one of the suggestions that gets floated here in the comments from time to time, the idea of forming a “medicinal chemist’s union”, is completely useless”
    Actually you seem to have limited vision with regard to unionization. Drugs are allowed onto the US market by the FDA. The FDA can also set the terms by which a drug is granted exclusivity, regardless of patent status.
    I think legislation which mandates preferences for drugs developed on US soil should be a national security priority. This can take the form of tax breaks or FDA regulation.
    The notion of “OMG, we’re offshoring the entire US drug industry and there’s nothing we can do about it!!!!!” is absurd.
    And yes, there is a problem with sociopathic managers destroying their businesses to secure there own bonuses (or didn’t you notice the trillions going to the banks????). Do you think the managers in Pharma are any different???

  42. iridium says:

    We always discuss assuming that new drugs will be made because we need them, but someone has to pay their price.
    While we can certainly agree on the need, are we so sure we will have a buyer for our very expensive products? No matter which model you pick (outsorcing or not, small biotech or big pharma) it will cost a lot of money.
    What about “our” system crashing due the too high risk/price? Maybe there will be a word without med.chem… or not?
    Did I take it too far?

  43. Wavefunction says:

    Excellent analysis and post Derek. I think your point about the MBAs having their own valid reasons for acting the way they do is well-taken. It’s not pretty but it seems to make sense.
    The question then is; will there actually be great science for us to do in these small companies from which the big behemoths will in-license? As a pharmaceutical scientist I think I can speak for others that our first goal is to do great drug discovery science. Also, do you think that careers in these small companies will be more stable than in big ones, at least until they progress to the in-licensing stage?
    And lastly, while you have not mentioned it, do you then see more basic drug discovery research happening in academia (with all its limitations?)

  44. Realitycheck says:

    #28 is spot on, this analysis is much too “proprietary” for me. Now I’ll admit my own bias & that I’m in a big company. We’ve inlicensed molecules from academia/spinouts, and usually when we get our hands on the compound it’s been worse than what we already had. Big pharma is MUCH choosier about what it puts into the clinic because it doesn’t have to generate hype (or publications) to survive. If your project doesn’t deliver something you’re confident will progress, you shrug and move onto another target. By that time a small biotech will have run out of cash and will have to put out a press release to raise some more.
    I wouldn’t be surprised if the success rate from big pharma PhI compounds is at least 3 times higher than those from academia/spinout.
    Fortunately for the academic drug discovery sector, if big pharma management understands that it chooses to ignore it. There’s plenty of kudos for having the vision to inlicense compounds to fill your pipeline, and when it all goes tits-up they know they’ll be long gone.

  45. Tok says:

    Morgan Stanley says “Jump!” the entire industry says: “How high?”
    Clearly they were right about the housing market so they must be right about pharma.
    Talk about power.

  46. oldtimer says:

    Gomer Pyle
    Re US preferences
    Before you do that recognise that we live in the real world as far as Pharma is concerned and there is no US domination. A quick look at the asthma market will show you that the really successful treatments for that disease all came out of Europe, specifically UK, Sweden and Germany. Montelukast may measure up in termms of sales but not in terms of efficacy. The last thing this industry needs is a tariff war, the patient will be the loser.
    On the other hand beware the risk that Chindia will renege on IP or even nationalise your assets.

  47. Anonymous says:

    In the chemical industry, when a company decides a particular business area isn’t a good fit for their long-term strategy, they usually either sell it to another company or spin it off. I don’t understand why the big pharma companies are just chucking everything in the dumpster instead of trying to sell or spin off pieces of R&D, especially when it seems like small biotechs are the way of the future.

  48. outsider says:

    Drug research is very much driven by the frequency of attempts, where each attempt has a certain probability of success (just like the Arrhenius equation). To maximize the frequency it is probably ideal to have a lot of small low cost start ups, with people working lots of overtime for small salary.
    Bigger companies have a lot more overhead, plus stability for employees’ also has a non-zero cost. From the observed rates of successes, there don’t seem to be many synergies from having several projects taking place in the same location (like in a big pharma). There is an advantage in having a big distribution network with marketing dollars pooled together for sales and advertising.
    So, the following things can be seen in the crystal ball:
    -many small companies funded by VC
    -a lot less stability for employees
    -worse benefits
    In short, better for investors, worse for science employees. Certainly not a good career path, if you ask me!
    Welcome to the service economy, where the coveted jobs are pizza delivery, and manning cash registers in Walmart.

  49. Mutatis Mutandis says:

    I think the flaw in MorganStanley’s analysis is the assumption that the internal R&D productivity of the big pharma companies is what it is, and cannot change relative to that of the smaller companies. If that can be called a flaw, it is more an assumption. But I think it is wrong assumption, because I think internal R&D productive not only CAN improve, but MUST improve in order for the large pharma companies to survive. It must improve because I don’t think a pharma company can run completely on in-licensing. All my experience suggests that having internal research programs is an important precondition for successful in-licensing of external compounds. With that internal know-how, a company is shopping blindfolded.
    The key to the productivity of small companies, as Derek writes, is that they will do whatever it takes to develop their drug successfully, because their entire survival hinges on it. They are product-driven. But in large companies process-driven thinking tends to prevail. The question their management asks is not “How can we bring this drug to market?” but “Would it not be more efficient to set up a standardized process to bring drugs to market?”
    Process-oriented thinking is fine if you are building the Ford model T, but in the pharma industry every product is a prototype, and building a fully automated production line for prototypes doesn’t make much sense. Yet high-level managers are addicted to tinkering with processes, in part because there isn’t much else they can do, and in part because it gives them a reassuring feeling of control. (I don’t want to blame it on the MBAs, because many scientists develop similar reflexes when they enter management positions.)
    But it simply cannot last. In the long run –perhaps the very long run– ‘Big Pharma’ will have to learn to think like a biotech.

  50. Cellbio says:

    outsider, it is not that bad. Yes instability is probably higher, benefits not much different, but you gain the ability to participate in bigger financial upside. Plus, you can actually make a difference, make a drug, as opposed to trudging along company dictated project paths, with metrics and processes often drafted by the likes of McKinsey, with a very modest prospect of having a single days work amount to anything useful.
    Oh, and mixing with new folks, in new ventures, is not to be dismissed either. I can tell you I feel much more invigorated and inspired after leaving a bigco. I am now on my third venture, and have several other opportunities coming my way. In fact, with this network, I feel more secure in my career while also knowing my time at any one shop may be short. I did not have this outlook when working for the bigco. I could only think of trying to replace that job with a similarly constructed one, but now would not go back.
    If you are truly passionate about the science, does it matter if you turn right or left out of your driveway? Maybe the science would be more pure if scientists were more mobile? I certainly judge the science behind a venture when evaluating my career choices. Previously, inside bigco, I would push for as much good science as the organization would. Why accept the false limits?
    OK, so having a salary vs. not is an issue, but if you find yourself forced out, don’t give up on science when alternatives with real benefits exist.

  51. milkshake says:

    #50 Cellbio please would you drop me an e-mail? My gmail address is tvojkovsky. Thanks a lot.

  52. Jumbo says:

    @Mutatis – well put, product vs process. I have worked both at large, ‘old school’ pharma and at very big biotech and one thing they unfortunately had in common was elaborate flow scheme rubriks: “compound must be of MW x, with potency at target of 25%, and CYP450 profile of n.” And don’t forget the need full a fully actualized biomarker strategy before beginning clinical trials. And what is the actual proof that this generates ‘better’ drugs? Not much, if you ask me.
    Will all pharma become big in-licensing conglomerates? I hope not. Does Merck really look at 6000 programs to license 50 / yr. Depends on how you define program. No one thinks that there are 6000 drugs to license each year. But there are over 200 drug development members just of BIOCOM, the SoCal biotech organization. There is likely more opportunity for a licensing weighted model than one might think.

  53. Jumbo says:

    Well, my previous post for some reason didn’t as clearly as I meant. Perhaps this makes a little more sense:
    @Mutatis – well put, product vs process. I have worked both at large, ‘old school’ pharma and at very big biotech and one thing they unfortunately had in common was elaborate flow scheme rubriks: “compound must be of MW x, with potency at target of less than 10nM, %F greater than 25%, and CYP450 profile of n.” And don’t forget the need full a fully actualized biomarker strategy before beginning clinical trials. And what is the actual proof that this generates ‘better’ drugs? Not much, if you ask me.
    Will all pharma become big in-licensing conglomerates? I hope not. Does Merck really look at 6000 programs to license 50 / yr. Depends on how you define program. No one thinks that there are 6000 drugs to license each year. But there are over 200 drug development members just of BIOCOM, the SoCal biotech organization. There is likely more opportunity for a licensing weighted model than one might think.

  54. BioBrit says:

    @50 Cellbio: Agree that biotech is really pleasurable work environment and comparable money & benefits relative to BP. A previous poster had mentioned shorter severance, that is very true, mine was 7 weeks, woohoo. For my own viewpoint, I’d much prefer to work in biotech, even given the instability. But biotech seems to be following BPs lead, in-licensing and outsourcing (specifically medchem). It’s not like their are a suifeit of opportunities there, is a new crop of biotechs really going to pick up the surplus talent when they often only have a single advisory chemist?

  55. Cellbio says:

    Biobrit- very fair points. I think of companies as big or small, narrow focus or portfolio managed. Big biotech is much like pharma.
    Also see many “biotech” start-ups based on small molecule approaches. Hopefully they will employ more than just the advisory chemist, but for sure there is a broad belief that outsourcing is cheap and easy. However, as time goes by, these experiences are not all positive and the zeal for going to China or India has cooled a bit, at least for some.
    FInally, yes opportunities are slim, but at least on the west coast of the US, it seems like funding conditions are improving.

  56. umesh says:

    Well analyzed Derek…
    I worked for a contract R & D (in India) and know about the pros and cons about this concept. In my opinion – its difficult and may not be that easy as it is the case with BPOs (& software)- where there is no need for established infrastructure. There are a few companies with good infrastructure and skilled manpower but in my opinion its a long way to go..

  57. Jose says:

    It really doesn’t matter if the MS analysis is specifically correct- the changes are already occurring, and once a corporate mania of “Oh shitte! we have to do it too, or we won’t be competitive” kicks in….
    Sorry, but DD is damn hard under any circumstances, and doing it at a tiny, resource constrained startup where your entire future rides on one project?

  58. CMCguy says:

    Derek Excellent post. I will try to remember this one for Blog of the Year voting.
    Many superb comments. I am one who has been at Big Pharma, Medium Biotech and a several smaller outfits and in Drug R&D all are inefficient albeit in different ways. Bigs are typically overly Political and Bureaucratic, Linear thinking/actions and carry significant dead weight (in management levels/empires). But they have enough or right resources; people, facilities, support and financial to push the process along, often slowly, and correct or recovery from issues. Makes for cumbersome and inefficient means to get done. IMO with the Merger mania many have transitioned from Big to Humongous today which exacerbate the problems without corresponding benefits. Smalls can have (somewhat) less Politics/Bureaucracy and in general more favorable environments for scientist types, can also be nimble and not iterative approaches but frequently lack the appropriate expertise or resources so stumble through which even when successful is not very efficient. The medium had a “Big Attitude” and trust not all are like that because have most potential and possible balance.
    In-house verses In-licensing R&D does not have to be mutually exclusive options for innovation as seemingly offered. Unfortunately in real world conflicts between NIH (not in house) mentality or “cheaper and faster route” are not easily reconciled. I understand the MBA math analysis but not simple calculation of if getting Drug to point A costs $X internally but can buy for $Y externally, when $Y less than $X then would seem obvious. This is flawed as most often the point A may not be equivalent from the two sources and more often than not have to spend more on top on $X outside project. In a way the MBA approach is “stupid” as may save money today but tomorrow will neither have in-house to build on and the rest of development so eroded can’t progress the in-licensed projects.
    As suggested is Morgen Stanly a reliable source for this assessment? Aren’t they a significant player in Biotech IPOs/Funding (if that has meaning these days) so would benefit without internal competition . If one compares project success by number of drugs vs number of companies and the total costs my assumption is that biotech would be worse than pharma (Bad and badder) .

  59. Tok says:

    So, Morgan Stanley calculates a difference in ROI of a factor of 3, but what if it’s a factor of 2 or just 25%, but again, what if it’s -25% or -3? You have a post right on this site that’s not even off the front page that suggests that may be the case with GSK and Sirtris.
    Derek, I find it amusing you mistrust the results of thousands of scientists’ independently verified conclusions, but when Morgan Stanley’s quants say that pharma can get 3x more ROI on outsourcing you immediately believe them and defend a massive reorganization of R&D that is far more extreme than the situation calls for.

  60. Usedtobeatirbm says:

    Oldtimer: It reads as if you think Montelukast was discovered in the US. That isnt the case. It was discovered in the Merck labs in Montreal (hence the Mont in the name). This has been the most productive lab in Merck, by far. I wonder how long that will last… (the lab, not the productivity). Success is no guarantee of security in big pharma, as you see from my name.

  61. Bored says:

    Unions are just legalized blackmail. They always devolve to thuggery.

  62. Glinkst says:

    As usual, very well said. Unfortunately, since the business cycle for big pharma is so long, it will be years before we know if this grand outsourcing experiment works. If you are a US citizen, the best you can hope for are some major IP snafus at the hand of these companies to reverse this unfortunate trend.

  63. weirdo says:

    I was wondering when Derek would get around to the MS missive.
    A lot of the questions/dismay/disbelief displayed here seem to address the basic tenet of the report, while Derek rightfully points out that it can be off by a lot, but the conclusion will be the same: in-licensing pays off better.
    But why? Are biotechs better at research than Pharma? Some will say yes, or blame “management”, or culture, or metrics. But I think it’s a lot simpler than that.
    Take ten projects and duplicate all ten of them. Call them A1-A10 and B1-B10. Now distribute A1-A10 to ten different biotech companies, and put B1-B10 at a Big Pharma company. Staff them with reasonable people. Stir, and wait five years.
    Now what?
    Most of the A projects will have found clinical candidates and 4 or so will be in the clinic. The really bad 2-3 will have taken their companies down. The Phase 1 molecules can be sold to any one of several partners for a pretty penny. One of them is in an area so exciting, the project is sold for something in the high 8 figures. The others might be able to get something, too.
    The B projects probably found better molecules. (more resources, more experience, etc.) I don’t want to argue this point — it’s simply been my experience. But there will be new upper management in place, there will be different therapeutic areas of interest to the greater corporation, there will have been a re-org (or two). One of the Phase 1 molecules will have been scrapped because a tox guy had a preclinical experiment run and saw something he didn’t understand, and another will have been stopped because it’s not differentiated enough from somebody else’s molecule (this competitor molecule later fails in Phase 3 due to an unforeseen tox issue, so this B molecule would have been the forerunner eventually). One molecule has had a successful POC Phase 2a result and the project team is happy. But the indication is not exactly what the (current) TPP requires, so there is little corporate excitement for moving it forward. That leaves you with a few Phase 1 assets, several projects put on the shelf, and an upper management team wondering why Company B doesn’t have a better pipeline.
    And Morgan Stanley writes a report covering these 20 projects and points out that in-licensing is obviously a better investment.

  64. MCH says:

    One item I haven’t seen addressed yet is the TYPE of disease areas that a one molecule shop might take on versus Big Pharma. We’ve all read in previous Derek articles about the mine fields and false leads in certain therapeutic areas.
    While the small shop in-licensing model might be better for Big Pharma, will it be better for the Patient? Especially in more challenging/resource intense disease categories (that aren’t orphan drug license worthy)?

  65. Cellbio says:

    Weirdo, not so weird, you nailed it.
    Add to that mix the fail fast mentality in pharma, and the odds are bleak. I saw the safest molecule ever tested in my experience not go forward because of one finding in male rats at a very high dose. The sentiment was not to move forward, appropriately safe, but to go back and find another. It is as if the process of drug discovery is the end itself. Meanwhile at small biotech, as many have pointed out, molecule quality will often be compromised by the priority to find out if it works. This can create hype-filled hot air balloons that burst with flair, but also opens the door to pleasant surprises, like your example of the solid front runner blowing up, and the lesser TPP now being the standard.

  66. Hans&Franz says:

    “What we’ve seen this year is unprecedented in the 40 years I’ve spent in the financial industry,” Morgan Stanley chairman John Mack said. “There’s no doubt that we as an industry made mistakes.”
    Morgan Stanley got $10 billion dollars of bailout money for those mistakes last fall.
    I believe that there is a general consensus that greed and incompetance in the upper echelons of the banking industry significantly contributed to the financial meltdown of the banking system. And they rewarded their incompetance with giant bonuses this year.
    Fast-forward a half a dozen years and it will be some pharma CEO testifying up there before congress giving the same line of bullshit. But it doesn’t matter, because that CEO has already brokered a deal behind the scenes with congress(wo)men who have sick family members promising them if they get a bailout they’ll give 100% of their research effort (all 15 of them in Chindia) to their loved ones. And the congressional panel will look all annoyed like “how could you let this happen” but they’ll give them tons of money anyway. And then the tax payers will piss and moan and pharma management will give themselves multimillion dollar bonuses for “turning everything around” and I can watch it all unfold on the TV while working the nightshift at the local Quiwki Mart. And there will be some fat bastard buying his OTC Viagra telling me how we simply couldn’t let pharma die because they provide life-saving medicines like the one in his hand. And then I can go home and read “In the Pipeline” talk all about it………again.
    That’s okay. After I finish stripping down these fractions, I’m going to stop by the local university and take an NMR, because we don’t have one like the big company I used to work for. And then I’m going to go home, pour myself a drink and take in some Direct-to-Consumer advertising on the boob tube provided to me by some twit in pharma Marketing who makes even more money now that they’ve been firing all those useless research people.
    Listen to me now; believe me later.

  67. Hans&Franz says:

    “What we’ve seen this year is unprecedented in the 40 years I’ve spent in the financial industry,” Morgan Stanley chairman John Mack said. “There’s no doubt that we as an industry made mistakes.”
    Morgan Stanley got $10 billion dollars of bailout money for those mistakes last fall.
    I believe that there is a general consensus that greed and incompetance in the upper echelons of the banking industry significantly contributed to the financial meltdown of the banking system. And they rewarded their incompetance with giant bonuses this year.
    Fast-forward a half a dozen years and it will be some pharma CEO testifying up there before congress giving the same line of bullshit. But it doesn’t matter, because that CEO has already brokered a deal behind the scenes with congress(wo)men who have sick family members promising them if they get a bailout they’ll give 100% of their research effort (all 15 of them in Chindia) to their loved ones. And the congressional panel will look all annoyed like “how could you let this happen” but they’ll give them tons of money anyway. And then the tax payers will piss and moan and pharma management will give themselves multimillion dollar bonuses for “turning everything around” and I can watch it all unfold on the TV while working the nightshift at the local Quiwki Mart. And there will be some fat bastard buying his OTC Viagra telling me how we simply couldn’t let pharma die because they provide life-saving medicines like the one in his hand. And then I can go home and read “In the Pipeline” talk all about it………again.
    That’s okay. After I finish stripping down these fractions, I’m going to stop by the local university and take an NMR, because we don’t have one like the big company I used to work for. And then I’m going to go home, pour myself a drink and take in some Direct-to-Consumer advertising on the boob tube provided to me by some twit in pharma Marketing who makes even more money now that they’ve been firing all those useless research people.
    Listen to me now; believe me later.

  68. HTSguy says:

    @63 – Weirdo, your comment fits my experiences in large pharma. More than one of my former colleagues is making a good living after being let go and arranging to take “on the shelf” compound(s) with them.

  69. Anon says:

    #30 Barry: I don’t know what’s wrong with MorganStanley’s model of reality
    Depending on fools to model reality is … well, foolish.

  70. Anon says:

    #61 Bored: Unions are just legalized blackmail. They always devolve to thuggery.
    Yes, I guess it’s better to let pharma decimate the scientific R&D ranks than to try to organize.

  71. lefscienceawhileago says:

    59) The report writers are not quants, they are analysts (not be confused with the term as used to describe the rank given to someone joining wall st. after college).
    It does pinch a little having to listen to someone else making an almost pejorative assessment of your work and your company, but you can feel good about the fact that a lot of analysts have been “in the trenches” before they joined Wall St. They often (though not always) have a relevant industrial background and science cred (e.g. Ph. D. and even M.D.)
    Their job is to crunch a bunch of data and try to figure out how the company is doing strictly by looking at it from publicly available information, and advise clients who invest.
    Now their buy/sell recommendation has to be taken with a grain of salt. The numbers are probably all done correctly, but naturally, they don’t really consider hard-to-predict edge cases that could have a profound effect on a companies stock price (e.g. a meteor hitting the earth unleashing a new disease).
    Basically you have to look at set of analyst estimates and treat those as “the best guess that you could probably make”, since you probably don’t have the time to sift through all the numbers. If the realized earning are way out of line, that suggests that there was a very significant unknown that could not be predicted from publicly available numbers.
    It’s also important to note that even if the numbers are accurate, it doesn’t mean that they necessarily should be used to make trading decisions (=what the future condition of the company actually is). I am sure someone somewhere has shown that you would lose a lot of money by trading off of report recommendations alone. How an investor uses the numbers from these reports to predict stock prices, is up to the investor.
    Try not to be too hard on them, since they subject their own industry to the same cruel analysis (excluding themselves and their direct competitors, for CoI), look at MS’s recent recommendation on BofA.

  72. NotImpressed says:

    I wonder if all these ‘analyst predictions’ take into account that research chemists are not merely so many robots or farm animals who will just work full speed ahead no matter what and continue to appear in plentiful and qualified supply. Creating this kind of environment will make it increasingly likely that the older people will leave and the younger people will never want to enter. I mean why would anyone want to dedicate themselves to a career path with possibly even less stability than academic work and probably declining salaries as well? Given the clearly low morale on display here, I can’t imagine that this won’t act as a deterrent. The flow of people will shift and the best and brightest will be drawn elsewhere.

  73. gmoney says:

    #71, I agree. I am a synthetic organic chemist who was laid off a year ago and I am changing careers. This will not only effect the Pharma industry but also other supporting industries, as others pointed out. Why would talented individuals give up 9-12 of the best years of their life to wait in an unemployment line. I think the best and the brightest will pick fields where the jobs are (in the USA, not Chindia). I wish I could go back and redo things, but it is harder with a family and a mortgage. Best of luck to those in GSK and AZ.

  74. AHarlow says:

    I agree with the ROI assessment here, but there is another reason why its easier now to cut research.
    We as a community have done a terrible job with PR, very few new major discoveries are attributable to a named research group or person outside the immediate field it was discovered in. No-one on the high street could name a discovery or ongoing project in R&D developed in the UK or US.
    Given the apparent lack of a modern day Lister, it does make it appear that research can be done pretty much everywhere if its discovery is attributable simply to a large global organisation. I bet no-one on the high street can name a single person who worked on Viagra, Alli, Augmentin, Crestor etc.

  75. MedInformaticsMD says:

    An interesting article, but I have a fundamental problem with the premise: i.e., taking the words of the financial wizards who’ve put the U.S. and world into an economic mess not seen since the late 1920’s as anything more than the misguided crap that the words are.
    Unfortunately, the crap that serve as senior management at pharma suffer sumptoms of the same disease – stupidity and narcissism, to name a few – as the purveyors of the economic “wisdom.”
    Someone else on these boards commented about “financialism” – a focus on making money through shell games that do not improve productivity and in fact decrease it through the exit of, and failure to acquire, talent. They pointed out that this short term strategy is necessarily detached from reality.
    I, for one, care little about what those who are detached from reality have to say on any matter.

  76. spark says:

    How much confidence could you have that Morgan Stanley would be able to disect one drug discovery model over another. Most expert financial institutions seem to have been totally unable to assess their own industry’s situation over the past years, let alone someone else’s. What seems to have been overlooked is that big Pharma’s spend on R&D is far higher on the ‘D’ than the relatively small ‘R’. Yet the idea that small biotech’s will lead to great efficiencies can only be made on the what is currently their small % ‘R’ spend. The ‘D’ is the process that is necessarily the large phama part – a small biotech would not be able to fund a third party to carry this out on their behalf and would have to be paid for one way or another. What needs to be recognised is that now most of the ‘low hangers’ have gone an even higher percentage of income needs to be spent on R, whilst at minimum maintaining the current D effort … efficiencies that need to be made lie in marketing, sales and admin to pay for this new paradigm, inverting the current funding ratios. The information tech age means you don’t need an inefficient personal visit to your clinic or a slick advertising campaign to induce you to buy what may be second best, that information is readily avalaible online even to lay people with savvy, and to an increasing extent will rely on government/agency guidence in any event. So, sure some of these extra funds should go on stimulating small research biotechs and buy in’s. However, it would be a folly to leave yourself in bidding wars against all the other herd-like big pharma who have cornered themselves into relying on this new model with no option to utilise in-house research to pursue lines of discovery inadequately covered by IP or apply sledgehammer approaches to improve on the knowledge/compounds that have been brought in. You also need thriving internal research to carry out due diligence on items you do bring in. Remember, also that when your internal research comes up with a solution independently, you take all, despite the 10 year delivery window to market. Of course short termism and over focus on current share price could spook even a supposedly rock solid CEO into panic slashing of R&D – decisions that won’t come home to roost until 10 years time …. still they’ll be long gone then, so perhaps I can see the reasoning behind leveraging to the absolute maximum long past investment in R&D.
    BTW when most of the Pharma R&D has been moved to Chindia due to globalisation (fair enough), as a taxpayer in a what is touted as being a global market, I will no longer be prepared to pay three times the amount they do for medicine, when I am ill … has Morgan Stanley factored this socio-political aspect into their equations for the future?

  77. Oldtimer says:

    Sorry isusedtobeatirbm,
    My memory let me down. Agree about Montreal, far enough away from the seat of power to get on with it, cf cimetidine, discovered by a small team in the UK.
    The fact that montelukast was not a US drug makes the asthma position even worse. Applying the NIH principle to new medicines helps no-one

  78. Jose says:

    From the link above- “Sensing the wind in their favour, revolutionaries on Wall Street and in consulting argue that shareholders will be best served by Big Pharma ending all early-stage drug research entirely.”
    Sweet jesus, mary and joseph. And Beelzebub and Cthulhu, too.

  79. Anon says:

    “Sensing the wind in their favour, revolutionaries on Wall Street and in consulting argue that shareholders will be best served by Big Pharma ending all early-stage drug research entirely.”
    Unfortunately, that wind is coming from their distal intestinal orifices.

  80. Anon17 says:

    The biggest problem with M&S etc imho is, that they know business, but not science, more or less like politicians who rule the health laws.
    So who is going to do the new medications that the generica companies are supposed to do?
    As mentioned, the small pharmas don’t exist (enough) to sustain this and academia doesn’t have the resources for the fast turn-over-demand.
    And the CRO companies don’t have the knowledge either (yet?).

  81. RB Woodweird says:

    “In the end, the big industrial concerns of the early 20th century had to have workers, and they had to have them in certain locations, so the unions always had the threat of going on strike. At attempt to lower the boom under these conditions would result in everything going to China, and damned quickly.”
    You are misremembering history. In the early part of the 20th century there were always more workers than jobs, and the nascent unions which did exist had no great resources to sustain their memberships in prolonged job actions. Without the intervention of the government in the owner-employee relationship, many of us would still owe our souls to the company store.

  82. cynical1 says:

    After a thorough reading of your post and the coments above, I would like to make a humble suggestion: I think you should change the name of your blog to “Where’s the Pipeline?”……

  83. > The disruption and destruction that
    > all this is causing is real, of course.
    There’s a concept in economics called “creative destruction”, which I think may apply here. In a nutshell, the idea is that in a free-market economy, inefficient businesses are sometimes defeated and forced out of the market, not because what they accomplish doesn’t have value, but because somebody figures out a way to accomplish it with fewer resources. Long-term, in the big picture, this is a good thing, because using fewer resources to accomplish a given thing means more resources are available to do other stuff.
    It’s like taking apart your Lego house that uses fifty pieces, to build one of otherwise equal quality that uses only forty of the pieces. You have ten bricks left over, which you can use to build something else.
    So long-term it’s not a bad thing.
    But it does mean that people have to make changes in how they do things, and maybe even in what they’re doing. These changes, in the short term, can be uncomfortable, and it often feels, to the people who are in the middle of it, like destruction. Even though, ultimately, something new (hopefully something better) is being created, it still hurts a little to see your particular Lego structure dismantled, especially if you put a lot of time or effort into building it.
    You usually can’t yet see exactly what the new structure that’s being built is going to look like, so it’s hard to be confident that it’ll be better. Even if you understand, in principal, that market forces wouldn’t be tearing apart the existing structure if it were the most efficient one possible, you don’t always really believe that applies when it comes to your particular business. I mean, you put all that time and effort into it, so it’s gotta be the best thing going, right? How could it not?
    But sooner or later creative destruction hits every industry. It’s just a question of when and how.
    Look at it this way. Nobody wants to go back to the industrial economy of the fifties, when people considered themselves fortunate to have one car per family, one phone per house in any color you want as long as it’s black, *maybe* one camera per family, and people saved up for a couple of years to buy a washing machine that didn’t run on human muscle. The economy we have today is better. Even if it does mean GM and Chrysler are dying and Pfizer is laying off R&D people, it’s still better. Our salaries, inflation and the recession notwithstanding, still give us more buying power today than they did thirty years ago.
    That’s creative destruction. It’s an integral part of the free-market economy.

  84. processchemist says:

    In the long term we’ll be all dead, quoting Keynes.
    Economy is not a natural phenomenon, but a sum of human behaviours. The “creative destruction” thing, the “Chigago boys” economic theories… wonderful artifacts to justify few ones cashing on the tragedy of many others…

  85. Hap says:

    Just because companies are being destroyed, though, doesn’t mean that the destruction is creative – Enron and the banking industries come to mind. Sometimes businesses are destroyed out of incompetence or greed, and not necessarily because a better way exists to do their jobs (or out of an attempt to do so better).
    In any case holding on to our jobs may be like trying to grab the wind, but that doesn’t mean that we ought not to complain about the actions that make the grasping seem necessary.
    The other part of the problem is that, while companies and governments complain about the unwillingness of talent to enter the sciences and engineering, they remove (or help to remove) many of the conditions that make it attractive to do so. Also, when the people who led the digging of empty holes are rewarded while the miners they sent to dig the holes and find the gold that wasn’t there are cashiered, it’s hard to believe in the beneficence and justice of the market, or at least in the absolute correctness of its judgments.

  86. YAChemist says:

    One problem I have with the MS model is the following: investors reward risk. If the risk of discovery activity is transferred from larger companies to smaller companies, then that risk will eventually command an investment premium. This is particularly relevant now, where the perceived premium is low enough that investors for discovery companies are in short supply. The assumption appears to be that the greater efficiency of the small company model will prevail and that at net investment levels, greater returns will be had by both parties.
    But anyone who has worked in large pharma and dealt with acquisitions knows that without careful control of the data for acquired programs, these analyses get very skewed,very fast. For example, many such programs need to be internally made ready for development by large amounts of internal research, and most importantly, the cost of the failures needs to be properly accounted for.
    Personally, what I see is a little different – the cost of developing new ground breaking small molecule medicines is outstripping society’s willingness to pay for them. This means that eventually this will only be a commodity business, or somewhere, sometime, society’s expectations need to change.

  87. jess says:

    After this post, I read this article on the scientific research output in China in the Financial Times. Both very thought provoking…

  88. LWH says:

    As an extension to comments by BioBrit, Hap, RealityCheck, spark, others, some random thoughts:
    1. How does this model continue? Why stop at R&D? Start to outsource development, then clinical. Then outsource all the management. The logical end point – all companies end up completely in China and India. Ditto for other industries.
    Then WE become the source of cheap labor, and the cycle starts to reverse.
    2. The assumption seems to be that smaller biotech companies can develop candidates more cheaply than big pharma. But is this really true? Each one has inevitable startup costs, building up resources from scratch, whereas big pharma has established processes and resources ready to go. Is it that having those resources adds such a large fixed cost that they are not worth it? Is it that the small biotechs are just so much more innovative? Or is it that R&D is just so risky that the only sensible business model is to let someone else pay for those risks (and failures), and you just swoop in and benefit from the successes? In the end, isn’t this just a shell game, and doesn’t a society pay those expenses one way or the other?
    3. R&D costs are a fairly minor component of the total cost of drug discovery. Why not try to acheive real savings by reducing the cost of clinical trials, for example?

  89. Skeptic says:

    LWH, the “society” you believe in is an illusion.
    As of year 2000, 98% of all foreign exchange transactions are speculative, and only 2% relate to the real economy. The capital development of a country has become a by-product of the activities of this global casino.
    And with the new developments in derivatives, such as unbundling each piece of risk and trading it, we have a particle theory of finance developing
    Every government in the world including the US is being policed by the global foreign exchange markets. If a government anywhere in the world dares to challenge these financial diktats, capital flight will almost instantaneously force it back into orthodoxy.

  90. Skeptic says:

    The US consumer is exhausted, debt saturation has been reached, so its hard to see the case for therapeutics.
    Molecular diagnostics is the place to be for researchers.

  91. MedInformaticsMD says:

    The capital development of a country has become a by-product of the activities of this global casino.
    Brilliant. Perhaps we all better understand the “global casino” concept, which for two words captures one hell of a precise portrayal of the pathology we all now face.

  92. MedInformaticsMD says:

    85 Hap – The other part of the problem is that, while companies and governments complain about the unwillingness of talent to enter the sciences and engineering, they remove (or help to remove) many of the conditions that make it attractive to do so.
    This reminds me of the HR-type posting I saw somewhere about the unemployed responding to the interview question “tell me why, if we hire you now at a pay level below the job you used to hold, you won’t leave as soon as some other higher paying job comes along.”
    My answer was that – the question itself makes the asker look very, very bad; who the hell are companies anymore to ask about issues of loyalty?
    It’s the applicants who should be asking “tell me why I should take this job, knowing that the slightest stock fluctuation or unspectacular margin projection could result in my summary termination in the next layoff [, Mr./Ms. H.R. moron].”

  93. ManageThis says:

    Still more of the “everything will go to Chindia” rants. You guys aren’t listening.
    The only things that get outsourced are things that can be outsourced. Repetitive work, grunt work, stuff with SOPs or literature precendent. You can’t outsource decision-making. You can’t outsource innovation. Trust me when I tell you that the educational and cultural environments in those countries are still 50 years away from producing companies like Apple, Genentech, or Google. It’s the filial piety thing, they’re not programmed to throw out the rulebook and do things a new way. For 2000 years career advancement in China was based on success on tests of rote memorization. Those kinds of cultural roots are not pulled up in just a hundred years, even.
    Is it cheaper to discover drugs in biotech, hell yes? Why? Because you do it by the seat of your pants, a little halfed-assed, with a lot less data than you’d like, and you hope and pray. And you usually fail, but that’s OK because so do the big guys. And then you do it again. It churns and it roils and people go on wild rides and there are bullshit artists and con men and old pharma hands smiling and shaking their heads thinking if their old colleagues could see this mess what they’d say. That’s the kind of future many of us face and it’s a hell of a lot of fun. And it can’t be outsourced.

  94. Hap says:

    The problem now is that what can’t be outsourced (at least without destroying a company’s ability to survive)…is. None of the activities being outsourced now seem like the repetitive, low-value-added tasks that are the prime targets for outsourcing. The outsourcing seems instead seems based on the hope that smaller companies who pay less and work their employees harder will be cheaper sources of discovery chemistry. Which they probably will – in the short term (at least five or ten years).
    But when people see their future and see less security in discovering drugs than selling them or merging the companies that still make them, well, where do you think the people with talent will go? If there aren’t people to do the work here, the push to outsource will be harder (because the choice for companies will be to pay high wages to find someone with the talents they require, or find one of a growing population in other countries willing to do it). There are plenty more people elsewhere, and ultimately where the jobs and money go, so does the talent. (Grad school populations have been the harbingers of this.) There are probably enough people to train those interested elsewhere in discovering drugs, and barring that, it didn’t take that long to build the US drug industry (ten years?) from nothing, and with more people and more cash, it won’t take that long again.
    Roller coasters are fun once in a while, but I don’t think the job market for people desiring to ride a roller coaster for 60 h/wk at their job is all that large. People tend to want other things in their lives as well, like kids, that require time and resources, and as long as drug chemistry and a family are incompatible (or as long as drug chemistry and any stability are incompatible) it’s going to be hard to get people to enter the field and to retain people. There is always room for risk-takers and usefulness in their existence, but I don’t think they will sustain the industry on their own. I’ve been wrong before, but it seems like a relatively stiff bet to put the house on.

  95. Cloud says:

    Hap, I understand what you’re saying, but…. life in a small company isn’t so bad. I have a family, a mortgage, etc. I work in biotech and frankly, I love it. I don’t work obscene hours. And I think the chance to feel like I can actually make a difference in the outcome for my company more than compensates for lower pay and less security- if in fact my pay is lower and my job less secure than it would be at a big company.
    For the record, my pay actually went up when I moved back to biotech. My benefits aren’t as cushy, though (good-bye 401k match, for instance).
    As for job security- does anyone really have that anymore, except for tenured professors? At least in biotech, I know where I stand and work in a community where there isn’t any great stigma from having a layoff on your resume. As someone earlier in the thread said- I may have less security at any one job, but I feel pretty good about my prospects overall. I manage the risk by making all financial decisions under the assumption that I might have a lengthy period of unemployment just around the corner. That sounds painful, but once you build up a buffer of cash, it is not really a problem.

  96. Skeptic says:

    You guy’s don’t understand the US dollar reserve system. Go read Peter Gowans book “The Global Gamble: Washington’s Faustian Bid for World Dominance” to understand why this economic configuration is taking place.
    Washington is in the deep end with the housing fiasco. Lots of overpriced dubious financial assets need to floated. Perhaps the dream of every American being a house “owner” needs to morph into every American house needs to become a miniature hospital loaded with remote monitoring/data gathering sensors, medical devices (microfluidics), etc. Whew, what a convenience not having to go to the doctor for routine tests! Its a collectivists wet dream, endless new useless insurance schemes, etc.
    The so-called Smart Home, what a bonanza for corps like Apple/Microsoft/Google too.
    Just make the value of my home equity go up up and up! And my 401(k) gets saved too.
    Who cares about some fools making lifetime investments in science and engineering? Gotta stick with the efficiency ethos and play bait and switch!
    Consumerism, aint it great!
    Long live financialism where the shysters win and the scientists lose.

  97. CMCguy says:

    #93 Managethis you state “You can’t outsource decision-making. You can’t outsource innovation.” I am not sure the current industry “leaders” are aware of that because that is the direction things are moving as its gone well beyond getting just grunt work done.
    You describe an accurate picture of biotech which is why I do not see it as possible to provide a greater ROIC than more traditional approaches, a cumulatively is more wasteful. It just seems so few places, small or big, have lost focus on what drugs should be about, helping the sick and not only making high profits/share value.

  98. Hap says:

    I know that a lot of people like working in biotechs or smaller companies, for a variety of reasons, and that it’s hard (and probably) fruitless to expect certainty from anything, at least from a job in any case. I can’t really denigrate the environment of small drug companies work, not having worked in one.
    I don’t think the underlying presumption of the shift to smaller companies, though (that everyone likes or will like that environment) is sound. The length of the education involved in making a career in chemistry (a significant commitment) knowing that you’ll be working sort of insecurely (or working and banking lots of your money as you’ve done) probably limits the field to those that really love chemistry and are willing to work wherever to achieve that or those who are less risk-averse. The number of foreign graduate students enrolled in graduate schools implies that domestic students already don’t see chemistry as a good field to enter (and that there aren’t enough of them to sustain graduate schools), and if the jobs go elsewhere, the foreign graduate students will also.
    While I don’t think you can outsource innovation (and the shift to fewer people more committed to chemistry might make individuals more productive of ideas), the narrower range of people willing to be chemists in drug development will also likely limit the innovations that come from them – if there’s no one in left field, there’ll be no ideas coming from there, either. Management skills and chemistry skills are not common in and of themselves – narrowing the domain of chemists will also likely limit the number of chemists with chemistry and management skills. You may not be able to outsource those skills, but you can make people with those skills rare enough that finding them is costly enough that no one even bothers looking for them here.

  99. Skeptic says:

    “have lost focus on what drugs should be about, helping the sick and not only making high profits/share value”
    The current sickcare system has not resulted in an enlightened society. That mysterious wonder drug hasn’t made the average citizen pick up a text book and learn how biology works. A $1000 sequencer might though. And its not queer like drug discovery, because it starts you on the path to understanding the disease state and its progression rather than the cowboy antics of “Ride that compound through clinical trials”.

  100. gmoney says:

    #93, Alot more than just the grunt work is getting outsourced to Chindia. I worked at a company where two chemists managed 40 chemists in China. That is a little more than grunt work. That is alot of jobs, that US chemists used to do. This little experiment that Pharma is doing will kill the US Pharma industry, and other industries associated with it.

  101. Skeptic says:

    Once the sovereign default wave hits home, biotechs will be swept away. The entire life science spectrum will eventually be nationalized. Then, with the advent of the omic’s data sets, the systems biology quants will move in and take centre stage.

  102. Bored says:

    Nationalizing just about anything is a shure-fire way to fuck it up. Von Hayek pointed out long ago that it is impossible to know enough about all the variables in a complex system to manage it from a central-planning perspective. Additionally, no centrally-planned system will operate with any efficiency because the planners lack profit incentive. I hope you are wrong in your prediction.

  103. RandDChemist says:

    Wow, what a discussion.
    Some points (not all connected, but hopefully related):
    1. Failure sucks, but instructs (via Robert Sutton). Making the same mistakes again and again is another story.
    2. Those who forget history are doomed to repeat it (Santayana). R&D is not simply a numbers game. Otherwise combi-chem would have saved us all and cured everything.
    3. Guidelines are just that, guides! You don’t want to chase every exception, but to me, following the data in a sensible, thoughtful manner will lead you to new discoveries. Fortune favors the prepared mind.
    4. Anyone who says they have the answer(s) has zero credibility.
    5. Greed, pride, stupidity, etc. are not solely provinces of one discipline or another.
    6. It takes all kinds.
    7. Managers and leaders are prone to being myopic, and do not take the time to understand the entire scope of a given situation. Sometimes it is due to arrogance, sometimes trying to do to much, and sometimes who knows? Intellectual laziness ruins a lot of people, projects, ideas, etc.
    8. A little knowledge is dangerous in the wrong hands.
    9. Stupidity is a powerful force, it can be used for good or evil (from Dilbert).
    10. It might seem sensible, but that does not make it correct. Sometimes the truth is counter-intuitive.
    11. Be careful of the behavior you are encouraging (via Robert Sutton)
    12. Innovation is a messy process.
    13. Discovering and developing drugs is not easy, and certainly not for the faint of heart.
    14. If start-ups start pushing for IND, then fire people, then people will not work together. Bringing a drug to market requires a considerable amount of collaboration.
    15. Having a monopoly is not always the best thing. Sometimes having one competitor (or more) opens up the market and you have a net gain, even though you do not control everything (see Peter Drucker).
    16. Who’s to say how much you should spend on R&D? In any industry?
    17. A company that realizes that its most valuable assets walk out the door each day is one that has a greater chance of success. It needs to act like it too. There are companies that do.
    18. A few years back outsourcing contract synthesis to Chindia was the thing to do, until the realization that there were greater costs hit. Then things started coming back to the US.
    19. Focusing on short-term results, gains, etc. is the surest way to failure. Patience and discipline are a must. You need to be flexible, but not blown about by the latest fad or problem.
    20. The concept of base load seems to have been forgotten. It could be generics, OTC, or something else. You need a stream of income to get through the ups and downs of bringing a new drug to market. It’s not high return, but it is income.
    21. Employees who feel psychologically safe will take (more) risks.

  104. Cloud says:

    Hap, like I say- I don’t necessarily disagree with you. It does change the landscape for people looking at whether they will do chemistry as a career. But I also can’t get too worked up about this. Don’t get me wrong, it sucks to lose your job. I know, I’ve been there. It sucks to look around and realize that no one really has your back, and it is up to you to make sure that your job insecurity doesn’t turn into financial insecurity and bounce your family out onto the street.
    But here’s the thing- the problem isn’t unique to chemists, or pharma in general. I work at the interface of drug discovery and IT- sometimes I’m doing more science, sometimes I doing more IT. Anyway, the IT half of my contacts have been dealing with the “new” world of outsourcing for many, many years. I’ve watched entire groups get laid off while their work got sent to India, and in some cases, I’ve watched those same groups get built back up again when the outsourced projects crashed and burned and got brought back to the US. I’ve watched people panic, and the IT industry change, but noticed that most of my friends are still employed in their chosen fields, and none of them had to move to India. I’ve worked on multinational projects and I know that managing that collaboration is not an easy thing. Just scheduling a teleconference can be a multi-day task.
    So I’ve come around to thinking that some part of the work in global companies will be done, well, globally, and some part will stay in the US. And as much as it hurts me personally if my job gets sent overseas, I can’t really make the case that I fundamentally deserve a job more than some hard-working Indian does. So I think I have to suck it up, look around for what is next, and figure out how to live my life in the world as it exists now. The “old” world of jobs that last a lifetime is gone and it isn’t coming back.

  105. Hap says:

    I know that the world of lifelong (or even semi-lifelong) employment is gone, and its loss probably is constructive but hard to deal with. People are still going to get sick and need medicines, or plastics, or any of the other things chemists make. It bothers me, though, that the spoils of years of drug development go to those least contributing to them (heck, those who appear to be actively destroying them).

  106. NotImpressed says:

    Meanwhile Witty got a big spread in the NYT about how much he cares about curing poor people:

  107. Jose says:

    The buzz around those compounds in the global health sphere is astonishing, and sadly no-one seems to realize how cynical and Machiavellian it is. Wow! garbage “hits” from combichem libraries to fulfill an evil, empty CRS mandate. It is making me furious to see all the positive press that POS is getting.

  108. Chloe says:

    I’m not sure what “in-licensing” is, but I think I get the idea. This sounds like the same business model that technology companies use. Many people form .com and tech startups to be bought out by Microsoft or Google, and plenty of angles and VC still invest in them.
    This blog seems to be complaining about jobs… if you still want a job I would go for the highest tech fields that have not been outsourced yet, like nanotechnology or genetic engineering. Like riding a wave until it crashes and the labor becomes a commodity. Those two fields should be safe for at least 10 years.

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