Pfizer slips from top spot in R&D

Pharmaceutical giant Pfizer Inc. no longer can claim the top spot among drug companies in its spending on research and development, according to an industry blog's annual ranking, but it didn't fall as far down the list as some had expected.

Pfizer came in at No. 2 in the annual rankings of R&D spending by FierceBiotech, which had predicted last year that the New York-based company might fall as far as No. 5. Pfizer's $9.1 billion in R&D spending last year represented a 3 percent decrease from the previous year, but didn't come close to the cuts the company had projected.

"Pfizer has yet to deliver on the bulk of the $1.5 billion in cost cuts that it has promised - though that is still in the works," industry analyst and FierceBiotech editor-in-chief John D. Carroll said in the report. "In order to reach its goal, Pfizer still has to trim away more than a billion dollars in R&D expenses this year."

A cut of this magnitude would likely boot Pfizer out of the Top 3 in R&D spending, though the company would remain on the Top 10 list.

Carroll noted that Pfizer managed a 7 percent drop in R&D spending in the fourth quarter of last year - bigger than in previous periods - indicating cuts would accelerate this year.

Pfizer, with its largest worldwide research presence in Groton, had told Wall Street it intended to reduce R&D spending last year to the $6.5 billion to $7 billion level, including a wave of 1,100 layoffs locally that were to conclude this June. But Carroll's analysis indicated that it shaved only about $300 million, thanks largely to severance packages and other downsizing costs as well as its acquisition of King Pharmaceuticals.

Trying to keep costs down, Pfizer earlier this month announced to employees that it would be reducing severance benefits starting May 14. Health coverage that used to last a year would be slashed to eight weeks, according to reports, and severance checks would amount to a minimum of eight weeks pay rather than the 12 weeks offered previously.

At the same time, Pfizer has been spending millions on transitioning its discovery research efforts from campuses in Groton and elsewhere to innovation hubs located near major academic centers in places such as Boston, San Francisco and New York.

"The heat ... is on late-stage R&D," Carroll noted, including the potential blockbuster bapineuzumab for use in Alzheimer's patients, tofacitinib for rheumatoid arthritis and Eliquis to fight blood clots. "Setting aside the inherent problems of any Alzheimer's drug work, this could be a good year for Pfizer R&D."

While Pfizer is committed to downsizing and realignment, other drug companies are deciding to make new investments in research. And a slight uptick in drug approvals last year has fueled an appetite for increased spending levels at some companies that go against a long-term trend of job cuts across the industry. Three of the Top 10 companies for R&D spending saw cuts in their budgets last year, but everyone else notched spending gains.

"This past year, the top 10 (R&D spenders) collectively registered expenses of a bit more than $70 billion, up slightly over the year before," Carroll said.

Novartis spent $9.58 billion last year on R&D, launching it from fourth to first on the list with increased spending of 6.4 percent. Rounding out the top five were Roche, Merck & Co. and Johnson & Johnson.