June 15 (Bloomberg) -- When Hal Dvorak, a Harvard scientist whose ideas helped spur the advance of targeted cancer drugs, sought a partner recently to help him develop new treatments, he only had to walk two blocks to find one.
Pfizer Inc., which is spending $100 million to open a state-of-the-art laboratory in Boston, was there. For Dvorak, teaming with Pfizer “is an ideal arrangement,” he said, providing convenience and expertise bringing research into the clinic.
Partnerships between industry and academia, of course, aren’t new. Yet Pfizer, Sanofi, Merck & Co. and other drug companies are putting a new twist on the arrangement by stepping up their level of collaboration with universities. In the case of Pfizer, the world’s largest drug company is embedding operations in Boston, San Francisco, New York and San Diego, often in the very same buildings where famed academic institutions have labs.
“No matter how much money you have, nothing compares to the innovation going on out in the world,” said Jose Carlos Gutierrez-Ramos, the director of the Pfizer lab, in an interview. “We want to be here, integrated into this fabric.”
The push represents Pfizer’s strategy for long-term drug development at a time of uncertain prospects for new blockbusters. Pfizer gained its two biggest sellers, the cholesterol pill Lipitor and the painkiller Lyrica, in its $120 billion purchase of Warner-Lambert in 2000. As opportunities for such mega-deals become more scarce in the pharmaceutical industry, the need for long-range planning will become increasingly important.
That’s why Pfizer sees embedding in academic labs so crucial to its future. The ideas that show promise, “we’ll buy later,” said Gutierrez-Ramos.
In two to three years, Pfizer plans to have 50 drug development projects running in their centers around the country, all of which have been opened since late 2010, Gutierrez-Ramos said.
The initiative comes at a crucial point in the company’s history.
Lipitor, once the world’s best-selling drug with more than $12 billion a year in sales, stands to lose 80 percent of its revenue as cheaper generic versions grab market share this year. The company has also suffered a series of research failures since 2006, when a drug designed to replace that revenue, the good-cholesterol pill torcetrapib, was abandoned after being linked to heart attacks.
In response, Chief Executive Officer Ian Read has begun cutting back the size of the company, selling one non-pharmaceutical unit, planning to spin off another and trimming expenses. He has said he wants to rebuild Pfizer into a smaller, faster-moving company that focuses on development of new drugs.
“It makes sense to outsource anything that someone else can do better than you and that you don’t consider a core competency or source of competitive advantage,” Erik Gordon, a professor of business at the University of Michigan in Ann Arbor, said in an e-mail.
Pfizer gained less than 1 percent to $22.61 at the close in New York. Since Dec. 3, 2010, the last trading day before Read was named CEO, the stock has increased 35 percent.
Pfizer is turning to executives like Gutierrez-Ramos, whose job is to create strong connections within one of the world’s most creative hotbeds for biotechnology innovation.
In Boston, the Pfizer lab is located in the same building as offices of renowned research centers of Boston Children’s Hospital and Beth Israel Deaconess Medical Center, which would make some potential partnerships just an elevator ride away.
The Boston lab has reviewed 400 partnership proposals in the last year and is working on projects involving chronic kidney disease, osteoporosis and cancer, Tony Coyle, chief scientific officer for the Pfizer center, said in an interview.
Gutierrez-Ramos said he is trying to create an atmosphere at the lab where outside researchers easily come and go, and Pfizer’s scientists visit neighboring academicians on their turf.
Pharmaceutical companies, which historically are highly secretive about their work because of competition, need to be willing to take more risks in the future, he said, creating access to its inner sanctums to develop drugs earlier.
What Pfizer offers academic researchers are “extraordinary” resources for drug development that nearby university labs can’t match, said Harvard’s Dvorak.
Dvorak, in 1983, was one of the first scientists to demonstrate that cancer cells secreted vascular endothelial growth factor, or VEGF, the initial idea behind development of drugs, such as Roche Holding AG’s Avastin, that cut off the blood supply to tumors to stop their spread.
“An academic lab can only go so far,” Dvorak said in a telephone interview from Boston. “We’re good at identifying targets, but if you want to make monoclonal antibodies or take this to the clinic, we have no experience in that. That’s not our bag.”
Coyle, of Pfizer’s center, agrees. “We’ve cured diabetes in mice so many times” in the laboratory, Coyle said. “But there’s been a very poor appreciation from the academic community” about how to develop drugs for use in the clinic.
An example of the advantages for academics can be seen in a single machine located on the lab’s 18th floor.
Separated by a wall of glass from an open-plan suite for the group’s top managers, the machine has the ability to rapidly test thousands of compounds against Pfizer’s own chemical library to see if they match with known disease pathways or proteins that have been identified as possible targets. Past rows of lab benches, two rooms full of complex imaging equipment are used to identify how proteins interact.
Universities and research institutes need all the help they can get, according to a report by the Tufts Center for the Study of Drug Development released in April. Funding from the U.S. National Institutes of Health has been unchanged for a decade, at about $31 billion for 2013.
At the same time, pharmaceutical companies have cut their early-stage research budgets in a tough economy to focus on late-stage clinical development and marketing, the report said.
The partnership model now being pursued by Pfizer and a few other large drugmakers, “represents the most significant change in the innovative landscape we’ve seen in three decades,” said Ken Kaitin, director of the Tufts center.
Sanofi, based in Paris, has its own collaboration program, with Harvard, the University of California, San Francisco, and several others, the company said.
In March, Merck, the second-biggest U.S. drugmaker, announced it was joining the party. The Whitehouse Station, New Jersey-based company said it will spend as much as $90 million over seven years to help fund a new California Institute for Biomedical Research it will run in San Diego.
“With academic centers, with the reduction in NIH support, there’s almost a desperation that they must, must find new revenue streams,” Kaitin said in an interview in Boston. “That, in most cases, means working with industry.”
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