Wednesday, January 28, 2009

Pfizer/Wyeth Merger And Sacrificing The Future: "Laying Off Scientific Staff All Over The Place"

In yet another massive waste of money, Pfizer has been touting its merger with Wyeth via full page ads in major newspapers. I saw the ads yesterday in the Wall Street Journal and my local Philadelphia newspaper under this large self-aggrandizing banner in capitals:

CREATING THE WORLD'S PREMIER BIOPHARMACEUTICAL COMPANY

A website with the presumptuous name "www.premierbiopharma.com" has also been created.

What is pathetic is an apparent continuing belief that mergers of two companies in trouble
for essentially the same reasons can produce a company that is successful.

Each individual company has not been doing well despite billions in expenditures. They will continue not doing well despite the merger because they suffer an organic problem, namely, they both mismanage R&D.

This "merger = miracle" belief persists, in part, because those in charge are unable to see the problems that impair R&D. The problems are "hiding in plain sight." The reason the problems hide in plain sight from the leadership is that the leaders are blind.

Those in charge cannot see that which the domain specialist sees.

They cannot see because they lack the training, experience, and what is described as 'meta-competence' (in this brilliant article on competence) essential to seeing that which is obvious. Obvious, that is, to those who do not lack these characteristics. In addition, I've also observed that some lack the fundamental analytical abilities essential to understanding and managing the complexities of biomedical R&D.

Why those without domain expertise are in charge of organizations whose long term viability depends entirely on the most advanced and creative pursuit of biomedical 'miracles' is another matter. I won't address this here, other than saying it reflects the adverse consequences of a bias that has evolved in management "science." That bias is the belief that all the world consists of faceless labor resources performing easily definable processes upon interchangeable widgets, and that management can therefore be done by generic managers, exclusively. Some of the world is like that, but some isn't, such as biomedical R&D.

Management in the absence of domain expertise in this industry is, in fact, mismanagement.

There is nothing here to spin, there is nothing to debate. There is nothing to discuss. This is a first principle. Failure to accept this reality results in corporate failure.

Under this mismanagement, pharmaceutical R&D has become R&D in name only.

My own observations from working in the industry in a direct R&D support role tend to validate that description:

  • The budgets for informatics tools essential for R&D were controlled by non-scientists such as IT personnel with their own agendas, causing scientist to have to utilize extremely inefficient paper based information wasting much time, or avoid difficult and innovative research pursuits altogether.
  • Research support staff were micromanaged by non scientific superiors.
  • Scientist recruitment efforts were impaired by generic HR workers who served, in effect, as a barrier to creative talent not fitting the "judgment" of HR as a good fit (or whose defective eRecruiting systems rendered the CV of such people effectively invisible). Generic HR staff have no idea about who really is the best talent, as they (like many senior executives) lack the background to render such judgments. Talent often never gets seen by the hiring managers as a result.
  • Scientists were burdened with meetings, inundated with needless emails calling for equally unneeded information, requests for ill conceived "metrics" on productivity, and other petty tasks distracting them from actual scientific and intellectual focus.
  • Scientists were burdened with the time consuming bureaucratic insanity of developing yearly "management by objective" plans where they defined what they would accomplish for the year to then be evaluated upon (e.g., for bonuses), as if that were even possible and did not in effect create an atmosphere of "covertly lowered expectations." Scientists were also burdened by an increasing number of tedious and onerous HR processes for ongoing performance evaluation of themselves, their reports and their peers, again a distraction and disruption from scientific focus.
  • Scientists were forced to play nasty politics due to the pressures of constant downsizing, distracting them from useful work. At one pharma, for example, at times of downsizing scientists were made to "bid on their own jobs" as well as others, or face layoffs if no "match" was found. It was as if the company involved did not know what its people did, could do, and what it needed them to do. Nor did it seem to care that such a degrading process was anathema to innovative discovery.
  • Some VP or other executive comes up with some impractical if not crazy pet idea and puts scientists to work on it. The scientists know the idea is a bad one but are intimidated against speaking up lest they be "downsized" or otherwise penalized. Their time for more creative endeavors is thus wasted.

My colleagues in other pharmas describe similar circumstances.

A better description for what I describe above is perhaps the term coined by a correspondent, Felix Fulmer. He summarizes the situation as follows in this pithy and insightful statement:

What we today call pharmaceutical R&D is in reality busywork disguised to look like R&D, in effect a well engineered, well managed, massively expensive failure.

He opined that a small fraction of prime scientist intellectual horsepower and time is actually spent on true R&D, the rest wasted on feeding the bureaucratic corpulence that is the modern pharma research lab.

When you spend tens or hundreds of billions of dollars, you should have something to show for it if you are doing real research. The low hanging fruit haven't been that fully picked. That contention is supported by the accomplishments of the far less bureaucratic biotech and academic research sectors.

Today's Wall Street Journal editorial hit the nail on the head about the merger (my business-speak translations are in red italics):

The risk is that the cost savings [i.e., reduced personnel expenses gained by putting people out on the street -ed.] and bureaucratic mayhem from combining labs and streamlining R&D [cannibalizing good people -ed.] end up stifling research productivity [creativity - ed.]

Pfizer CEO Jeffrey Kindler is a lawyer [i.e., lacks biomedical and scientific education, experience and insight -ed.] who came to the drug giant from McDonald's [the hamburger joint - ed.] in 2006 and has been laying off scientific staff all over the place.

I had commented on Kindler's credentials in my July 2006 post "Pfizer brings life to my 'If you've run McDonald's, you can run anything' metaphor."

Merging with other companies and laying off scientific staff (instead of keeping them, hiring more of the best, and repairing the defective environment that distracts them from their work) is apparently the only "solution" that non biomedical business managers in this industry can proffer. They, like their impaired scientists, also suffer a lack of creativity in thought and application.

Through what magic is a merger between two companies that no longer know how to carry out effective R&D believed to work a miracle?

(Perhaps it is some form of ... management alchemy?)

Company growth depends on the new drug pipeline. Pipeline depends on R&D. R&D depends on leadership and research talent just as a good movie depends on both a good director and good acting. When both are lacking you cannot have growth, therefore why bother merging?

I simply do not see how shareholder value is created via this merger. I hold no stock nor financial interests nor relationships with either of these companies or any pharmas. I've chosen not to as a result of my observations from within the industry. It is also a fact that many if not most large mergers do not actually produce gains. I therefore suggest that individual and institutional investors and analysts take a bearish view of this merger.

Finally, the full page ad touting the merger mentioned at the beginning of this post ends as follows:

"The talented people we have the privilege of working with have a tireless commitment to improving the health of the patients we all serve. We look forward to working together to meaningfully advance our shared mission of applying innovative science to improve world health in the years to come." - Jeff Kindler, Pfizer Chairman and CEO, and Bernard Poussot, Wyeth Chairman, President and CEO

I guess the "talented people" and the "we" in the above self-aggrandizing passage doesn't include those scientists and other people who will find themselves on the street during the worst economic downturn since 1929.

As I observed in my July 2007 post "Happy Accidents in pharma doubtful: Tax Break Used by Drug Makers Failed to Add Jobs", the people who actually write this copy must understand the shallowness of their words.

Further, employees who read this rhetoric fall into one of two groups: those who believe it or are comforted by it, and thus are deluded, and those who don’t believe it, but cannot speak up due to fear of retaliation or layoff, and thus may easily become demoralized and cynical.

Environments of the deluded, demoralized and cynical are not the best for leading-edge drug R&D.

-- SS

Addendum Feb. 5:

Based on a Feb. 2 interview in Financial Times entitled "An Acute Talent for Innovation", Nobel prize winner and drug inventor Sir James Black would probably agree with many of the assessments above. I particularly like his recollection that:

Max Perutz, director of one of the most successful postwar science institutions, Cambridge University's Molecular Biology Laboratory, had compelling ideas on how best to nurture research, says Sir James: "No politics, no committees, no reports, no referees, no interviews - just highly motivated people picked by a few men of good judgment."


and his observation that:

There is no shortage of scientific talent, he says. "But [I am] much less optimistic about the managerial vision [of the pharmaceutical industry] to catalyse these talents to deliver the results we all want."


-- SS

3 comments:

Steve Lucas said...

Forgotten in all the noise about the merger we find Pfizer will pay $2.3B to settle charges regarding off-label marketing of Bextra. Last week it was Lilly paying $1.4B for questions regarding Zyprexa and finally GSK will pay only $400M for marketing problems with a number of antidepressants.

Thus making the grand total only, oops the calculator broke, $4,100,000,000.00.

This really gives you confidence that pharma is bringing the management skills necessary to find new and effect drugs to the public.

Steve Lucas

MedInformaticsMD said...

ops the calculator broke, $4,100,000,000.00.

Steve,

Must have been made by the same people who design electronic health records - you know, the ones the National Research Council calls "inadequate."

Anonymous said...

But Wyeth had just hired a scientist as President of R&D... who will presumably be let go in the acquisition. So just when Wyeth was about to resolve its previous errors, it enters into a deal with the devil.