Margareta Pagano: NB all politicians: Pfizer's closure is an opportunity...
Sunday 06 February 2011
The political capital being made out of Pfizer's decision to close its Sandwich plant, with the loss of 2,400 jobs, is shameful.
Opposition politicians and union leaders are being utterly disingenuous in their comments about why Pfizer has decided to close this plant, using the loss of people's jobs as a football to score points off the coalition.
And, sadly, most of the press surrounding the closure has been equally sensational. If anyone had bothered to look, they would know that even Viagra-maker Pfizer, like all the Big Pharma drug companies, is facing financial crisis. This latest closure, to be phased out over the next 18 months, stems from Pfizer's decision to slash its budget by more than a fifth to make ends meet. An obvious area to cut was one of the drug areas where it has little competitive advantage – allergy and respiratory disease research, which is based at Sandwich.
That's the reason the American group is closing the plant. It has nothing to do with the UK not being up to research. Nor has it anything to do with our tax regime or that the coalition is not doing its job in backing innovation with grants or R&D allowances – which is what unions and opposition politicians are trying to claim. Neither is Pfizer planning to move any of these jobs overseas to cheaper places. Indeed, the reverse is true, as it's trying to find jobs for as many of its scientists at its Cambridge site as it can.
The reality is that Big Pharma, like the dinosaurs they have become, are near extinction. Developing a blockbuster drug today costs around £1.4bn and takes at least 15 years; high stakes even for Big Pharma. Couple this with the fact that big drugs companies are seeing patents come to the end of their lives – Pfizer is set to lose its statin Lipitor when it comes off patent shortly. When it does, the new generic firms will fill the gap.
There are other factors at play. The new drug discoveries of tomorrow won't come out of 1970s factory-style laboratories where research scientists test their small molecules on mice; they will come from clinicians using patient data and human tissue from hospitals – they are the new laboratories for what's known today as translational medicine; developing drugs is going from the bench to the bedside. In many ways, future inventions are going back to basics, and today's discoveries are more likely to come about in a similar manner to that which inspired Alexander Fleming to discover penicillin. And the next generation of Lipitors is expected to come from a clinician sitting dreaming by his window at one of London's teaching hospitals.
So, while David Cameron and the coalition had nothing to do with Pfizer's decision, here's a great opportunity to turn the disaster into a growth story. Working with Pfizer, the site should be turned into a sort of "trade fair" which the UK's leading biotech entrepreneurs and venture capitalists can visit to meet the scientists and see what spin-outs or intellectual property might be salvaged. It's been done before – when the Swiss Ferring group closed its Southampton site a few years ago, it gave birth to a new spin-out, Vantia, which today employs nearly as many people. The Government may need to stump up some money in the short term to cover transition costs, but if jobs can be saved and new enterprises created, it would be worth every penny. A little jam today could stop Sandwich turning into toast – and not even a dose of Viagra could help it then.
Tryrie's plan for publishing bankers' pay would add a touch of magic to Merlin
I'm told the Project Merlin, which will be announced this week (the sixth week it has been expected), is more or less identical to the Project Merlin which was put together before Christmas. And the reason the so-called peace agreement between the bankers and politicians on bank lending and bonus restraint has taken so long to emerge has nothing to do with differences of opinions between the two sides, and everything to do with the politicians disagreeing among themselves.
Nor has it been a straightforward disagreement. Most of the angst has been on the Lib Dem side of the coalition where Nick Clegg and Vince Cable have had to broker some bitter disputes between their ministers and MPs to get them to agree a compromise package, which they appear to have now done.
One thing they haven't got from the bankers is a promise to provide more transparency in pay. That's why the intervention last week by Andrew Tyrie, the chairman of the Treasury Select Committee, in asking the FSA to provide a break-down of all bankers earning over £1m, was so sensible. An earlier suggestion by Sir David Walker that banks should publish the number of employees paid more than £1m in bands, was dropped by the Treasury after banks objected that it would damage competition.
Tyrie's plan is much cleverer, and gets around their objections. He wants the FSA to provide bands of the highest paid bankers in our biggest banks so regulators can see how many there are and assess the nature of risk being built up by looking at the number of highly incentivised employees. He tells me that this will help internal risk officers and outside regulators to assess build-up of risk. Look back over the past decade; if they had seen what was paid to traders in asset-backed securities, regulators might have spotted just how risky some trades were. If the authorities want to show they are serious about tackling risk, Tyrie's idea is a no-brainer – and it will give Project Merlin a bit of magic too.
Wolf's Prey: Hermès satisfies its investors – for now
The decision by Hermès to pay its first interim dividend to investors out of its¤¤830m (£700m) cash pile is a smart move and likely to keep the founding families happy for now. So far, the Puech, Guerrand and Dumas families – which own 70 per cent of Hermès – have shown a united front against the advances of LVMH, which has a 20 per cent stake in the headscarves-to-handbags group. LVMH's Bernard Arnault – or the "wolf in a cashmere coat" as he is better known – faces an inquiry by French regulators over worries that he broke disclosure rules while buying the stake in Hermès, whose bags are seen on the arms of such celebrities as Kim Kardashian. As always, Arnault was right that Hermès was on the up: sales soared to ¤2.4bn in the last quarter, while LVMH itself reported profits a third higher on Friday, with booming sales of its TAG Heuer watches and Céline fashion in the Far East. But despite that regulatory bother and his nice words about his prey, the wolf won't lose his appetite.
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