Pharma majors are more interested in acquisition than on developing new drugs

I was shocked to read the recent news that Pfizer is closing down its research lab in Sandwich, UK.  Few years ago GSK too closed down one of its research operations. One interesting things that I observed is, when the Pharmaceutics company need to reduce its expenses to increase the profit, one of the first operation it targets is the research and development.  I wonder, how can a Pharma company develop new products without an R&D division? Another strategy that I observed is, rather than improving the productivity and innovation inside the company, Pharma giants go for merger and acquisitions at a very high price.  In October 2010, Pfizer agreed to buy King Pharmaceuticals for $3.6 bln in cash or $14.25 per share.  Pfizer also bought pharmaceuticals rival Wyeth for a combined US$68 billion in cash, shares and loans, including some US$22.5 billion lent by five major Wall Street banks. 

"The record of big mergers and acquisitions in Big Pharma has just not been good. There’s just been an enormous amount of shareholder wealth destroyed" - Gary Pisano ( Harvard Business School). 

It not only destroys the wealth of the shareholders, but also harms the company itself. In the case of Sandwich research lab that is going to shut down, several millions were spent to set up that facility. The scientists and other staff have been paid for all these years and all these money are going to be wasted. The company is losing brilliant brains by firing the scientists, not just that but also the money spent on their projects.  To sum up, closing down a research facility is a wrong strategy for a Pharmaceutical company to increase its revenue. In short term it may show a jump in stock but in long term, the company will suffer. This is evident in the case of Pfizer, its share value has gone down -57.07% during the last 10 years (02.03.2001 until 28.02.2011)