Pfizer Inc.'s decision this month to close the former Global Research & Development headquarters in New London is just the latest in a series of downsizings and mergers over the past decade that have left industry insiders at odds about the company's research direction.

Some, such as Leerink Swann analyst Seamus Fernandez, believe New York-based Pfizer's latest move to reduce its global research-and-development space by 35 percent will pay off with a boost in profits. Fernandez issued a research paper last week that said Pfizer will outperform previous profit estimates in coming months.

"Condensing R&D activities to five main sites and nine specialized units ... is just the beginning in terms of strategies Pfizer management may pursue to boost its bottom line," according to Fernandez's paper.

But others, such as Miller Tabak & Co. analyst Les Funtleyder, see major problems ahead for Pfizer, not the least of which is the 2011 loss of patent protection for its leading medicine, the cholesterol fighter Lipitor. Lipitor is expected to contribute $11.2 billion to Pfizer's drug sales this year.

While some have seen Pfizer's $67 billion merger with Wyeth Pharmaceuticals completed just last month as an antidote to the company's overreliance on Lipitor, Funtleyder doesn't necessarily buy it.

"All mergers are unhappy in their own way," he said in a phone interview. "Generally, it's a big headache to do an acquisition. ... You're looking at two years, probably, before this is integrated - maybe more because they're (both) so big."

What's more, a whole host of mergers and acquisitions has led to a revolving door in the research department, contributing to difficulties in discovering new medicines that keep any pharmaceutical company churning out profitable products, industry insiders said.

"Pfizer really is trailing badly," said Larry Rothman, a blogger on the industry and chief executive officer of Pharma Flex, a temporary staffing firm in Fort Lauderdale, Fla. "They've had a number of spectacular failures."

Two of its biggest setbacks, the cholesterol drug torcetrapib and the inhaled insulin medication Exubera, cost Pfizer more than $3 billion to develop and market. Pfizer more recently has announced the failure of several other late-stage drug trials.

But others, including industry analyst Fernandez, point to "multiple (late-stage) pipeline possibilities," and say that Pfizer is a much stronger company now that its acquisition of Wyeth has added a stable of vaccines, nutritionals, generics and consumer products to the mix.

Top-down directives
are often problematic

Derek Lowe, an industry insider who writes the In the Pipeline blog, said Pfizer has been hurt by top-down directives that lead to "groupthink," with people not willing to toe the company line eventually forced out. Good research, he said, rarely has a straight line to success; sometimes, it takes a variety of approaches - and even seeming redundancies - to create a drug that works.

Lowe pointed out that Lipitor was the fifth or sixth in its class of drugs reaching market, and its developer Warner-Lambert had any number of reasons to kill the project. Luckily, he said, Lipitor got far enough into the clinical process that the company - later bought out by Pfizer - eventually found out that its drug worked far better than any other cholesterol fighter on the market.

"A lot of big discoveries in this business have come semi-coincidentally," Lowe said. "Nearly every one had to survive one or more dedicated attempts to kill it - sometimes for excellent reasons."

Part of the problem with top-down directives in a research setting is it pre-supposes that taking risks is wrong, when just the opposite is true, said David Cadden, a business professor at Quinnipiac University.

"Particularly in research, innovation hangs on the ability to tolerate failure," Cadden said.

Getting short shrift

One former Pfizer researcher, who asked not to be identified, said centralized directives have meant that research projects started in one company lab sometimes are transferred to another site. The result has been that these projects, often not appreciated or understood by the scientists who inherit them, can mean a promising new molecule gets short shrift at the new site, he said.

Adding to the angst, according to Lowe, has been Pfizer's implementation of a management practice taken from Jack Welch of General Electric that eliminated 5 percent of the lowest-performing scientists every year. The problem, according to insiders, is that after the first year or so Pfizer's tactic had managed to rid the labs of most of the dead wood and then started targeting good scientists who were seen as personality problems.

Perhaps not coincidentally, these scientists were likely those who didn't adhere to top-down directives, Cadden said.

What's more, according to Lowe, performance ratings in scientific fields are notoriously inaccurate.

"If a project doesn't go anywhere, it's not necessarily your fault," he said. "Managers want to be able to boil down R&D performance to a single metric, but not everything can be (measured)."

Lowe said that when the review process didn't winnow out enough troublemakers, Pfizer used various upheavals - including mergers - to "unload people that they couldn't find any other way to get rid of."

One area where Pfizer is looking to make cuts is among its U.S.-based chemists, according to Lowe. Much of the work, he said, is expected to move over to China, which begs the question of how the scientists who come up with ideas for new molecules will communicate half a world away with those who actually make the compounds.

"You can have all the communication capability in the world, but sometimes just being in the lab ... makes all the difference in the world," said Cadden.

'No magic bullet'

Funtleyder, the drug-stock analyst, said closing the New London site, which focused on the clinical trials that determine whether new drugs are safe and effective, likely was a dollars-and-cents decision, made because executives didn't see it as contributing to the company's bottom line.

But others pointed out that having a development site separate from Pfizer's Groton campus across the Thames River, where scientists are discovering new drugs, also didn't fit into the company's new model of small business units that have researchers and clinical-trial experts working side by side.

Some see the changes of direction - such as building the New London R&D headquarters and then vacating it a decade later - as a necessary component in a complex and ever-evolving field.

"There's no magic bullet to developing new drugs," Funtleyder said.

But others say the decision-making process has simply changed over the years. While George Milne, the former site leader for Pfizer in Groton, had the power to twist the arms of corporate headquarters to get the New London site built, they say, local officials today have ceded much of their power to New York.

"Decision making, especially in large companies, tends to get more centralized unless there's an active effort to overcome that," said Lowe, the pharma blogger. "But corporate headquarters is far away. The true situation on the ground is not necessarily making its way up."