Drug-firm mergers can slow research

Who has time to peer into a microscope when everyone at work is standing around talking about their search for new jobs?

A merger and accompanying job cuts can distract employees at any company. But that risk may be greater at drug companies, which depend on years of diligent research for tomorrow's profits, several experts said.

Merck & Co. on Monday announced plans to acquire Schering-Plough Corp. In January, Pfizer Inc. said it would buy Wyeth.

In mergers like these, scientists often leave or lose their jobs. Those who remain may have to cope with a large bureaucracy that stifles innovation, said Joseph Schlessinger, chairman of the pharmacology department at Yale's School of Medicine. He started three smaller biotech companies and worked at a large pharmaceutical firm, Rhone-Poulenc-Rorer.

"It's impossible to organize and be productive while running such a large group of scientists," Schlessinger said. "They stop working and they talk all the time and they start to look for jobs and they are really worried. It's extremely counterproductive for a long time, and it's demoralizing."

In his Pharmacist Activist newsletter last month, Daniel A. Hussar, a professor at Philadelphia's University of the Sciences, said Pfizer's long record of acquisitions had not transformed it into a scientific whiz kid.

"Parke-Davis, Pharmacia, Upjohn, and Searle each, at one time, had excellent research programs," Hussar wrote. " . . . Even after acquiring these companies, Pfizer's research program is mediocre at best for a company its size."

In a statement, Pfizer said it "is committed to maintaining Wyeth's robust research program, and together we will have the funding that gives us the flexibility to pursue many different paths to innovation. The new company will have the world's largest research budget."

Merck chief executive Richard Clark says a planned $4.2 billion in cost savings is only one motivation for the $41.1 billion combination with Schering-Plough.

"Both of these companies have powerful pipelines," he said. "This is about the science and not just about synergies."

One example: Both companies are working on a monoclonal antibody for colorectal cancer. Because both compounds work similarly, the combined company will be able to select the compound with the best characteristics, Peter Kim, president of Merck Research Labs, told investors Monday.

But Daniel Hoffman, who researches the pharmaceutical industry in Chester County, said mergers almost always "close down lines of scientific inquiry."

Even if pharmaceutical companies were turning out new drugs at the faster clip of the 1980s and 1990s, other factors are driving mergers, Deutsche Bank analyst Barbara Ryan said. Federal regulators are approving fewer drugs, and competition from generics has increased, she told clients yesterday.

She called "aggressive mergers and acquisitions" necessary to boost earnings.

Merck, based in Whitehouse Station, N.J., said it would cut about 16,000 jobs in connection with the Schering-Plough deal, but few cuts are expected at Merck's three Montgomery County facilities, which employ 12,000. New York-based Pfizer and Madison, N.J.-based Wyeth plan to cut about 20,000 jobs, but they have not yet said how that will affect Wyeth's Collegeville and Malvern sites, which employ 5,000.