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Drug Industry Struggles and ,Chemists Face Layoff Wave

Lipitor Pioneer Is Out At Doomed Pfizer Lab;

A Blockbuster Drought

By AVERY JOHNSON

December 11, 2007

ANN ARBOR, Michigan -- In January, Pfizer Inc. announced it was closing its storied research laboratories here, laying off 2,100 people. Among the casualties: Bob Sliskovic, a 23-year lab veteran who helped create the world's most successful drug.

The closure and Dr. Sliskovic's abrupt change of circumstances are emblematic of the pharmaceutical industry's declining fortunes. It was at the Ann Arbor facility in the late 1980s that Dr. Sliskovic first assembled the chemicals that make up Lipitor, the cholesterol-lowering drug that has generated about $80 billion in sales since its launch and ranks as the bestselling pharmaceutical product ever. Today, Lipitor is nearing the end of its patent life, and Pfizer hasn't been able to come up with enough promising new drugs to replace it.

Following that initial breakthrough some 20 years ago, Dr. Sliskovic worked on several other research projects, but none panned out. His losing streak mirrors the industry's. A byproduct of the late-19th-century chemical business, pharmaceutical research thrived for more than a century by finding chemical combinations to treat diseases. But after contributing substantially both to human health and drug-industry profits, it has failed to produce significant innovations in recent years.
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High failure rates have long plagued chemistry-based drug research. Between 5,000 and 10,000 compounds are tested for every drug that makes it to market. In recent years, the problem seems to have gotten worse. Despite spending tens of billions of dollars more on research and development, pharmaceutical companies have fewer and fewer drugs to show for it. In 2006, the industry received Food and Drug Administration approval for just 18 new chemical-based drugs, down from 53 in 1996. Moreover, many of those drugs are variations of existing medicines.

Robert Massie, president of the American Chemical Society's database of chemistry research, says some researchers are questioning how many more chemical combinations there are that are useful against diseases. "It's like how coming out with metal drivers in golf was a huge innovation, but now it's incremental. You're just coming out with drivers that are a little longer or rounder," he says.

As pills like Lipitor made out of elements from the periodic table prove harder to come by, pharmaceutical research is being superseded by the newer field of biotechnology. The latter relies mostly on biologists who make proteins from live cells.

The shift is exacting a human toll, as big drug companies like Pfizer lay off thousands of chemists, casting a pall over what was once a secure, well-paying profession. "When I started in this industry in the 1980s, you didn't worry about things like this," Dr. Sliskovic says of the lab closure.

It isn't clear how many chemists have lost pharmaceutical-company jobs. But overall, 116,000 chemists were employed in 2006, down from 140,000 in 2003, according to the Bureau of Labor Statistics. During the same period, employment of biologists rose to 116,000 from 112,000. Just as the rise of biotechnology is contributing to an economic boom in Northern California, the decline of chemical-based research is hurting the Michigan cities of Ann Arbor and Kalamazoo, along with some regions of New Jersey and Illinois.

Dr. Sliskovic, a 50-year-old with a mustache and the scattered air of a scientist, was raised in Doncaster, a coal-mining town in northern England. His father, a refugee from the former Yugoslavia, found work there after World War II. As a child, Dr. Sliskovic says he was fascinated by such things as the properties that "make a mint minty."

That interest led him to pursue a doctorate in chemistry. In 1982, his Ph.D. adviser told him of a friend who worked as a consultant for a pharmaceutical company in New York. The company was looking for chemists to do postdoctoral research. Raised with a passion for American comic books, Dr. Sliskovic says he jumped at the opportunity to come to the U.S.

Two years later, his research completed, he received a job offer from Warner-Lambert Co.'s Ann Arbor labs. "Holy cow! I accept," he remembers saying.

Dr. Sliskovic was hired as the pharmaceutical business entered a golden era of huge profits. Its labs churned out drugs for chronic conditions such as heart disease and depression, while its armies of salesmen promoted them through aggressive marketing. Warner-Lambert assigned him to a team of three other chemists investigating a new idea: whether lowering cholesterol -- the soft, waxy substance that can clog arteries -- would help people avoid heart attacks. Other companies were at work on similar projects.

Dr. Sliskovic's new boss, Bruce Roth, had invented a chemical structure that he thought would work. In the late 1980s, Dr. Sliskovic fine-tuned the compound, isolating its potent part. An early version of the compound wasn't absorbed well by the body, so the team brainstormed about how to modify it to get more of it into the bloodstream. "We sat around the table and said 'You try this, you try that,' and they said, 'Bob, why don't you look at salt formation?'" Dr. Sliskovic recalls.

A calcium salt he tried solved the problem, and Lipitor was born. Though it would reach the market in 1997 after several rival drugs, Lipitor would turn into a blockbuster because it was more potent.

Its runaway success sparked Pfizer's $116 billion hostile takeover of Warner-Lambert in 2000. Ahead of the takeover, Pfizer suggested one of Warner's main appeals was its research-and-development force. "We would like to keep them all," Pfizer's then-research chief, John Niblack, told The Wall Street Journal in 1999. "You need a big staff to run this strategy. Warner-Lambert offers us a nice instant fix."

With the acquisition, New York-based Pfizer inherited the Ann Arbor labs where Dr. Sliskovic worked and continued to base much of its pharmaceutical research there. Between 2001 and 2006, it invested $300 million to expand the facilities.

By that time, Dr. Sliskovic had moved on to other projects. As Lipitor traveled down the long road of animal and human testing in the early '90s, he led a group of chemists developing drugs to prevent cholesterol from being absorbed by the body and stored in arteries. Lipitor, by contrast, works by reducing the amount of cholesterol the liver produces.

One compound, called avasimibe, seemed to work well in animals. Despite skepticism from higher-ups, Dr. Sliskovic and his team persuaded Warner-Lambert to take it into human testing. For a while, it looked as though avasimibe could be a contender to succeed Lipitor. But it failed in an intermediate stage of clinical testing, and the company abandoned it.

Dr. Sliskovic had devoted about six years to the drug. He recalls needing pep talks from his boss about picking up and starting over. He blocked out disappointment, he says, by throwing himself into the day's science rather than thinking about the odds of creating a marketable drug. "You've got to develop the hide of a rhino," he says.

In the mid-90s, he tried to develop compounds to counter inflammation in the heart, which some scientists think can cause heart attacks. Those projects also flopped but got him interested in another area of research, inflammatory arthritis.

Dr. Sliskovic took on the challenge of finding a drug that would repair the cartilage that can break down between bones and cause arthritic pain. But the several compounds he concocted didn't meet testing requirements. In 1999, Dr. Sliskovic was promoted to a management role that took him away from the day-to-day work of drug discovery. He says his new job required him to teach his scientists how to remain excited in the wake of failure. "It was me who started telling them, 'Oh well, never mind. What can we do about this other project?'" he says.

But over time those failures added up. In December 2006, Pfizer killed torcetrapib, the cholesterol compound the company had placed its hopes on, because it was associated with too many deaths in clinical testing. It was a huge setback because Pfizer didn't have much else in its research pipeline to replace Lipitor's sales. The company relies on Lipitor for more than a quarter of its revenues, and the drug could face generic competition as early as 2010.

The company has had some successes: Pfizer appears to have a rich cancer-drug pipeline and has come up with two notable new chemical-based hits recently, the antismoking medicine Chantix and a pain drug, Lyrica, which was discovered in Ann Arbor. The company's new chief executive, Jeffrey Kindler, has emphasized biotech after taking over some 16 months ago. In October, Pfizer opened a new biologics center in San Francisco.

By January 2007, Mr. Kindler was promising to do something radical to shake the world's biggest drug maker out of its worsening slump. Rumors of layoffs were swirling at Pfizer. Few imagined anything as drastic as closing the half-century-old Ann Arbor labs, where Pfizer was just finishing the $300 million expansion.

Dr. Sliskovic says he learned of the closure on Jan. 22, in a morning meeting with the site's top managers. The room went silent, he says.

After the meeting, Dr. Sliskovic called his wife on her cellphone to tell her the news. She thought he was kidding. Realizing he was serious, she offered to increase her hours at her part-time job at a pet-food store. Later, at home over lunch, his 19-year-old daughter asked whether they would have to sell the family's three horses.

The announcement also took Michigan officials by surprise. The state, which has the country's worst unemployment rate, was already reeling from auto-industry cuts. Pfizer was also Ann Arbor's largest taxpayer, contributing $14 million a year into city coffers. At a press conference later in the day, local officials pledged to fight for scientists to stay in the area. Later, they pledged $8 million in interest-free loans for start-ups run by laid-off scientists or existing companies that hire them. A state-budget deadlock delayed the money for months, but it is now being handed out to scientists.

Pfizer offered about half of the Ann Arbor researchers internal transfers, mostly to its other big research facility, in Groton, Conn. But a higher proportion of those offers went to biologists than to chemists, former lab employees say. Though it is far from abandoning chemistry-based research, Pfizer has been increasingly outsourcing chemistry work to contract research organizations, some in India. Pfizer declined to comment on which scientists were offered transfers.

In April, about 80 laid-off Pfizer chemists from Ann Arbor traveled to nearby Detroit to hear a talk by career consultant Lisa Balbes. Ms. Balbes told them the story of a former chemist who now uses her skills to enhance acoustics in stereo systems. Her message: Start thinking about different career paths.

As winter turned into spring, Dr. Sliskovic found himself going to a parade of goodbye parties for colleagues. Dr. Roth, his former boss, left in April for Genentech Inc., the biotech pioneer based in South San Francisco. Dr. Sliskovic organized the send-off. In early May, David Canter, the head of the Ann Arbor site, threw a dinner party for other departing employees. A band played songs parodying Pfizer and the executive who symbolized headquarters' decision-making: John LaMattina, Pfizer's Connecticut-based head of research. To the tune from Evita, they sang, "Don't Cry for Me, LaMattina."

A few weeks later, Dr. LaMattina himself announced his retirement, as part of Mr. Kindler's broad reorganization of top company executives.Martin Mackay, who succeeded Dr. LaMattina as research chief and played a major role in the research restructuring, says the company was "very aware" of its impact on the community. "We made this decision after very careful and thorough review of all possible alternatives," Mr. Mackay said in a statement.

Scott Larsen, one of the chemists who attended the going-away party, came to Pfizer four years ago when the company merged with his former employer, Pharmacia Corp. He applied for a transfer to Groton but didn't get an offer. He tells his two sons, who are both in college and love science, not to go work for a drug company.

In August, Dr. Sliskovic's team stopped doing research and began transferring projects to other Pfizer sites. The labs are now being cleaned, inspected and sealed off. The 177-acre campus is a ghost town of empty rooms and boxed-up equipment.

Dr. Sliskovic didn't seek an internal transfer. He felt that moving would be too hard on his family. As acting head of chemistry at the Ann Arbor labs, Dr. Sliskovic earned far above the $112,000 a year paid to the average chemist of his experience level. Dr. Sliskovic says he will receive severance pay for between 18 months and two years. With two children in college and another in high school, he says, two years is the longest he could afford to forgo a paycheck.

Dr. Sliskovic has already repainted the family kitchen and living room. Now he is festooning the house and yard with holiday lights. Worried about their financial future, his wife, Cindy, took a second part-time job at the barn where they keep their horses. The irony that the drug her husband helped discover will bring in nearly $13 billion for Pfizer this year hasn't been lost on her. As a staff scientist, Dr. Sliskovic earned no bonus or royalties for his work on Lipitor.

Former Pfizer scientists have founded 23 companies in the area. Dr. Sliskovic says he would prefer to do the creative work of discovering drugs instead of the rote chemistry some such companies do for drug makers.

Instead, he dreams of being involved in another blockbuster. Sometimes, he says, he lies in bed at night wondering if it will happen. "If the best thing I did was Lipitor in 1988, it's like being the high-school athlete who was on the football team and that was that," he says.