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Biotech gains from pharma’s loss

Pfizer's closure of a UK facility is part of a broader trend of pharma companies outsourcing research to small biotech companies.

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Pfizer's closure of a UK facility is part of a broader trend of pharma companies outsourcing research to small biotech companies.

This week, Pfizer announced that it would shut down its research laboratories in Sandwich, resulting in 2,400 job losses and the end of a 57-year association with the town. The facility is famous for developing the anti-impotence drug Viagra, but it also gave birth to heart drug Norvasc and the blood pressure medicine Istin.
 
A number of pharma companies are cutting back on R&D. GlaxoSmithKline (GSK) has reduced its global research staff by 20 per cent. In the past 18 months, the top ten pharmaceutical companies in the world are believed to have cut 27,000 R&D jobs, according to Jacques Bouwens, a healthcare recruiter at Russell Reynolds.

“For years now the returns generated from R&D investments made by these very large organisations have been disappointing,” said David Pinniger, investment manager of the International Biotechnology Trust.

“As a result, pharmaceutical companies have increasingly been outsourcing R&D to smaller biotechnology companies, who can work on the same projects faster, with greater capital efficiency, and ultimately with higher success,” he added. 

The timing of Pfizer’s move is embarrassing for the UK government, which is currently pushing through a policy designed to keep research programmes in the UK. The "patent box" reduces corporation tax levied on income from patents from 28 per cent to ten per cent.

Last month the UK prime minister said that he had spoken to Pfizer’s chief executive Ian Read in a bid to keep the company in the UK. Meanwhile, Pfizer’s rival GSK has been supportive of the government’s policy and committed £425m to R&D programmes in the UK.

The patent box was slammed by the Institute for Fiscal Studies (IFS), which said that the policy focused on income rather the research itself, and therefore created weak incentives for firms to undertake additional research. 

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