Session 2010-11
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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 805-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

SCIENCE AND TECHNOLOGY COMMITTEE

PFIZER’S DECISION TO CLOSE ITS RESEARCH AND DEVELOPMENT FACILITY AT SANDWICH

MONDAY 28 FEBRUARY 2011

DR RICHARD BARKER and DR DAVID M. HOLLINSHEAD

DR OLIVIER BRANDICOURT, DR ROD MACKENZIE, DR RUTH MCKERNAN and RICHARD BLACKBURN

Evidence heard in Public

Questions 1 - 119

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Science and Technology Committee

on Monday 28 February 2011

Members present:

Andrew Miller (Chair)

Gavin Barwell

Stephen McPartland

Stephen Mosley

Pamela Nash

Graham Stringer

Roger Williams

Examination of Witnesses

Witnesses: Dr Richard Barker, Director General, Association of the British Pharmaceutical Industry, and Dr David M. Hollinshead, Royal Society of Chemistry, Science Policy Director, AstraZeneca, gave evidence.

Q1 Chair: Good afternoon, gentlemen. Thank you for coming to this important session. For the record, I should be grateful if the two witnesses would introduce themselves.

Dr Hollinshead: My name is David Hollinshead. I am employed by AstraZeneca in a group called R and D science policy and science relations, but for today’s purposes I am representing the Royal Society of Chemistry.

Dr Barker: My name is Richard Barker. I am the director general of the Association of the British Pharmaceutical Industry.

Q2 Chair: Thank you, gentlemen. Obviously we are here to look at Pfizer’s decision to close its site at Sandwich and whether that has implications elsewhere in what is a very important industry to the United Kingdom. What alternatives to the closure of the site at Sandwich could Pfizer have adopted?

Dr Barker: First, thank you very much for holding the hearing and asking me to give evidence. Would it be okay if I give you a little context before answering that question?

Chair: Yes.

Dr Barker: I am a chemist, and have worked all of my life in life sciences, so I empathise very much with the people involved. They are highly skilled people and have invented a number of very important medicines that we use today. It is most important to put into context what has been happening in the global industry in the past few years. First, R and D expenditure has gone up, but R and D output has not, so productivity, measured by dividing one by the other, has languished rather badly.

Secondly, on the commercial side, many countries have actually pressed down on pricing across Europe, and indeed elsewhere in the world. Some substantial medicines have either gone off-patent or are about to go off-patent. My sense is that this collision of forces-the perform storm, if you like-is causing the industry to look not just at the level of its R and D expenditure, but at how it does R and D. Underneath the decision-not for me to talk about, but for Pfizer-are these forces at work, which enable companies, or in fact force them, to seriously examine the R and D they do and the way they do it.

To answer the question of what should happen, what could happen and what could have happened with Sandwich, we must look at the resources that are there, and no doubt Pfizer colleagues will actually explain that in some detail. What they have are people who are very skilled in discovery and early development in allergy and other inflammatory diseases, as well as services to the whole Pfizer group. Those are the capabilities that we have on offer and the kind of things that it is probably talking to others about, such as how better to deploy them.

Finally, the most important thing to say is that this is not about one company. What we have in the UK is a real ecosystem of four different players: the academic researchers who do much of the early-stage discovery work; the small and medium-sized companies; the large companies like Pfizer that alone have the capabilities to take new medicines worldwide, through clinical trials and commercial exploitation; and the national health service. I hope that we have some time as the session proceeds to talk about how the ecosystem should work more effectively for everybody, particularly for patients.

Q3 Chair: In the context that you describe, are you therefore saying that it is reasonable and expected for Pfizer to close that site?

Dr Barker: It is a perfectly understandable result of the dynamics that apply in the industry, yes. It may be the largest, but it is by no means the only such decision taken in recent years. Four or five companies have closed sites or parts of sites that have been significant R and D investments.

Q4 Chair: That is a serious point; I will come back to it. Dr Hollinshead, do you want to add anything?

Dr Hollinshead: I echo what Richard said with regard to the drivers for change in the industry possibly being economic rather than based on arguments that pertain to the UK. I think that our colleagues from Pfizer would probably give a more satisfactory rendition of that. To echo what Richard has already said, Pfizer had a pre-eminent R and D facility in Sandwich. It has a track record probably on a par with nobody with regard to its success in R and D, and it has a host of very talented people in early clinical development and research, which it is to our advantage to examine.

Q5 Graham Stringer: Professor Blakemore, one of our most eminent scientists, said: "This is a shocking wake-up call…one of our most important industries no longer has confidence in the future of British science." How do you respond to Professor Blakemore’s comments? Do you agree with them?

Dr Barker: Colin and I have known each other for a number of years. He is absolutely right that this is a very loud wake-up call. That is why I would congratulate you on focusing on this issue, because it gives us an opportunity to talk about many of the factors that either give people confidence or don’t. I think that the decision Pfizer took in this instance is not primarily about the UK environment; it is about the areas in which they were researching in the Sandwich site. For us to lose the opportunity to take stock and say what more can we do to make sure that not only Pfizer but other companies invest in this country, keep the jobs here and collaborate with the rest of what I call the ecosystem would be a really important miss.

Q6 Graham Stringer: That is a really interesting answer, because in one sense you say that if we put more money or less money in, it would not make any difference. Does that mean that the amount of money that we have put in has been misplaced? It is not a party political issue: the last Government and this Government have both supported the pharmaceutical industry.

Dr Barker: As you would imagine, I would be the last person to try and discourage that investment, but that is the investment in the first part of this four-part ecosystem. Without really great basic research and what we call translational research-how you take the medicine, so to speak, from bench to bedside-there is none of the rest of it. The value chain beyond that does not exist. We were exactly right-indeed, we argued for it-to keep the science budget constant, and in particular to protect the Medical Research Council expenditure, with all the research and Nobel prizes that it has won over the years. It is not that that has been a waste of expenditure, but unless you have the small and medium-sized sector really vibrant and able to take some of those discoveries forward; unless you have active large pharmaceutical companies able to collaborate with academics; and, most importantly, unless the NHS becomes a little more innovation-receptive, then the overall environment is not one that can utilise the money to the fullest extent.

Q7 Graham Stringer: I am still not clear what the Government can do. What level or kind of support should we offer if we want to keep such a vital industry in this country? Are we going to have pharmaceuticals as a major player in our industrial base? What should the Government do?

Dr Barker: To me, that is exactly the right question.

Q8 Graham Stringer: Have you got the right answer?

Dr Barker: I have part of the answer; I’m sure other colleagues will share it. At the skills end, there are some things that we need to invest more in to make sure that the people that the whole ecosystem needs-in practical terms, experienced biological graduates, sufficient clinical pharmacologists and sufficient people who are adept in animal welfare and experimentation-are being produced in sufficient numbers, so that there are some basic skills there. But I think that the small and medium-sized sector-the second part of my ecosystem-is really important. We should look for some targeted measures-perhaps taxation measures-to encourage those companies to be founded here and to flourish here, because all too often they go offshore. There are indeed some things that Government can and should do, and perhaps we will come later to the NHS and making it more innovation-friendly, which I think would make a big difference.

Q9 Graham Stringer: Thank you. Dr Hollinshead, do you agree with that?

Dr Hollinshead: I would like to challenge your question and rephrase it in another way. What you are asking-or challenging-is: can the UK lead in wealth creation from innovation in the health care sector? Has the investment made by the Government so far been wasted?

If I am correct in interpreting your question, I think the answer to the first part is: "Yes, it can," and it can by virtue of a number of reasons. The reasons are to do with the experience that exists in the UK, by virtue of the investment we have had in R and D-based pharmaceutical industries in the health care sector. It is a positive academic environment which is increasingly becoming more and more in tune with collaborative strategies, to deliver not just fundamental research but the applications of fundamental research-in this case, to health care benefit. As Richard has already alluded to, for me one of the true areas of innovation and incentivisation can come from the SME sector.

The second part of what I reinterpreted as your question was: have we spent money wisely? I think the positive attitude to innovation that the Government in the UK have shown is great. Channelling that in the right way is important. If you are concerned about the fact that you have not realised a huge return on the investment, then the time to realise a return on investment in the pharmaceutical and health care sector is substantial. It is not measured in the order of a couple of years: it takes time to put capability together.

In the pharmaceutical area, if we go back to the heyday of the industry in the ’80s and early ’90s, the UK was a preferred destination for people to invest in, by virtue of the innovative climate, a good cost-effective research base and a fantastic geographical distribution of industry relative to the high-density of academic strength, which allowed those arguments to prosper. However, the fact that it takes time for investment to be realised is one we should not walk away from.

Q10 Graham Stringer: Finally, we were talking about Government support for industry. Do we have a figure for how much that is?

Dr Hollinshead: Sorry, would you say that again?

Graham Stringer: Do you have a figure? Can you tell the Committee how much you believe the Government support is?

Dr Barker: It is about £2 billion, I think. That’s the number I have in my head.

Q11 Graham Stringer: Where do you get that from?

Dr Barker: May we come back to you on that, and set it out? We have got all those numbers, I was just worried that-

Graham Stringer: You will send us the details later.

Q12 Gavin Barwell: Dr Barker, in your answer, you were talking about the ecosystem with its four different components. In the recent past, there have been a number of consolidations within the sector-for example, Pfizer acquired Wyeth. In the light of what has happened, do you think that it was a mistake to allow those acquisitions to take place, or do you not think that they are a factor in what has happened?

Dr Barker: I do not think it is a primary factor, because if you look at what Sandwich does-this might be something you will explore with Pfizer-it doesn’t duplicate in any way what I understand it acquired from Wyeth. I think that what the almost inevitable mergers in any industry over a period of time do is call into question what will be most important and the highest priority for the future.

Every merger, in my personal experience, generates closures of sites or slimming down of programmes, but I cannot imagine a world-perhaps you can-in which you would forbid mergers on those grounds. There are good grounds for forbidding mergers, where market dominance results, but this is a natural process in the industry. The important thing, if I may coin a phrase, is for continuous creation to occur-for us to have the early-stage companies growing up to replace the ones that have been acquired.

Dr Hollinshead: I think the changes that we are reflecting on at the moment are the consolidation of an industry footprint. The implication of that is that maybe the industry is now doing less science, particularly in the R and D area, than it did in the past. I would counter that. I actually think that our pharmaceutical sector is doing more science. It is just that we are doing it through a different model.

The old-fashioned model used to be one whereby we had enough critical mass-enough size-to be able to do it ourselves. In fact, we were very competitive in how we did it. We tended to do it under lock and key, never letting anything out of that, because that knowledge was key to our success.

In the consolidation that is happening, which is driven largely by economic factors, the cut and thrift that has been referred to and other things, what is actually happening is that the pharmaceutical industry is making investment decisions on where it chooses to invest and where it delivers core value. As a response to that, it is beginning to say that maybe we need a more federated approach to R and D inputs into our business process, recognising that our core value is probably about development. By virtue of that, the consolidation in internal R and D is more than compensated for by a big externalisation of R and D through a number of different avenues, and we can possibly explore some of those avenues as we go on.

I think I am right in saying that there is actually more investment going on, despite what you see from industry consolidation. That in turn-going back to wealth creation from innovation-is leading to a new challenge: to ask how the UK can compete in this arena, in what is essentially a global environment, where companies such as my own and Pfizer are making investment decisions based on the global horizon, as opposed to what happens in just one particular territory.

Q13 Gavin Barwell: Dr Hollinshead has partly pre-empted the next question that I was going to ask, which is about the trend to a collaborative model-essentially of investment in R and D. Could you say a little bit more about that? You said that you could explore what some of those models might look like going forward. Could you tell the Committee a little bit more about that?

Dr Hollinshead: Yes. The simplest collaborative model that the industry started off with was direct sourcing-in other words, you ask for something, you pay for it and you get it. Typically, that works for a lot of supply-chain sort of arguments. Where things become more critically wedded to R and D interests-where you are actually looking for things like fundamental knowledge to underpin an area-it is an industry-academic collaboration, if you like, whereby there are incentives for academia to do research in an area that eventually gives us the wherewithal and knowledge to translate fundamental knowledge into an exploitative activity in the industry. That is another traditional model.

Moving on a little bit, the model is beginning to change. Across the R and D-using industries, and the R and D pharmaceutical industry, we are beginning to look at different models, and we are beginning to be more open on what it is we do with one another to pool our knowledge, and hence to be more creative and successful in areas in which we have found it very difficult to be successful in the past 15 years.

Pre-competitive collaboration with the outside world and pre-competitive collaboration with our direct competitors are things that the UK is starting to do-I think very well. In fact, again by virtue of the sort of collaborative nature that we’ve got, it is possibly an area that we could be leading in, relative to the rest of the world.

Q14 Chair: Are there areas where you could give examples that can go in the public domain?

Dr Hollinshead: Yes, Pfizer and GSK have set up, I think it might be in Scotland-excuse me; I defer to my colleagues at the back if I can’t remember this correctly. There is the HIV institute in Cambridge, where Pfizer and GSK are working with one another to advance HIV therapies. Ourselves and GSK are working on an area that I am not at liberty to talk about at the moment, but that again is another example of where we are talking to one another proactively, in collaboration with universities, to deliver some of the fundamental research such that the industry itself can do what the industry does best, which is to exploit the useful knowledge from that.

Dr Barker: I could probably add a couple of things to that. GSK, for example, has been quite public that it aims to do 50% of its research externally, working with SMEs and individual areas of academic research. It has just announced its intention to award 10 grants to researchers within academia, who in a sense can be leading its early-stage activities in particular therapeutic areas. I cite that because of the importance of thinking about this holistic problem of the sustainable ecosystem, because unless we have the small companies with which companies like GSK can work, unless we have academics who are incentivised and attuned to commercial exploitation of their discoveries, and unless we have an NHS that wants to use them, as I say, we haven’t got the pieces that I think we need to flourish in the future.

Dr Hollinshead: May I add to that? One of the things that looks attractive to me, and also from the point of view of the Royal Society of Chemistry, is the bringing together of three components: academic research; industry knowledge, experience and skills-drug discovery and development are a little trickier than we think-and the involvement of the SMEs, which is where, as I said before, a lot of true innovation might also come from. Bringing those together in the right sort of model is quite important.

An example that has been part of the thinking so far is the technology and innovation centres. That might be a good focus for getting the benefit from what the UK already has in terms of its assets: physical ones, such as laboratories and sites; skills and knowledge, by virtue of what pharma consolidation is offering with regards to its people; and the innovation assets that we have through supporting SMEs, which should be instrumental.

Q15 Gavin Barwell: My final question, to a degree, picks up on some of Graham’s questions that you were answering a second ago. Do other countries, particularly in the EU or North America, adopt an industrial policy for the sector that is more attractive than the UK’s? Are there lessons that we can learn from abroad?

Dr Barker: I think that there are some pieces of lessons that we can learn, although I wouldn’t admire an individual country in the round. I read over the weekend that the German chambers of commerce were commenting very favourably on the UK’s policies on things such as new life sciences, supercluster, the patent box and UKCMRI. People are looking at us and saying that we are doing many of the right things.

With the example of the patent box, we picked that up from the Netherlands, where people had started to work on it. The TICs were based on some of the principles of the Fraunhofer institutes. I wouldn’t look abroad and say, "Look. Here is a place where we’ve got all the pieces right." We have the opportunity-and, hopefully, the humility-to learn from these various other countries.

Q16 Gavin Barwell: You picked out the example of the patent box as what we have learned. Is there anything abroad right now that you think the Government should be picking up on?

Dr Barker: Most of the major health systems are much better at getting early use of medicines in their health services. In France, for example, once you have been through its somewhat protracted pricing negotiations, you can be pretty sure that your medicine will be used. Therefore, one of the areas that I would like to emphasise is that we can learn from other countries how the domestic market can be hungry for innovation, be ready to use it and, as will increasingly become the case, be a place not just to do good clinical trials, but to observe the medicine in routine practice, and gather the clinical safety and economic information that will be all important for future decision making. I’d love to see the NHS being that kind of place.

Q17 Stephen Mosley: You’ve described the new model very well and in a lot of detail. Do you think that, in the UK, the pharmaceutical industry and the Government have worked together to bring the new model along quick enough?

Dr Barker: I’d love to say that we’ve got it all right. We’ve done some useful things together under the previous Administration and the current one. We have the Office for Life Sciences with a blueprint that we’re pursuing. We had a meeting with Ministers just the other day about their thinking on the growth strategy, and you’ll probably be talking to David Willetts later in the week about that.

I would say that we’ve got lots of the pieces right, but the area of interface between, shall we say, health policy and industrial strategy is one that we’re not the only country to be struggling with. If we could get a breakthrough in that, we would be significantly ahead.

Q18 Stephen Mosley: Is that the No. 1 thing that you want us to take away from this?

Dr Barker: In the round, yes. It is obviously quite some distance from the science issues. We could go into detail about what our input does on that. I wouldn’t want to lose the point that we both made earlier about small and medium-sized companies and getting an environment where those can be founded and grown. There are various pieces to this, but it’s certainly this interface between health and industrial policies that I think is one of the toughest nuts to crack.

Q19 Stephen Mosley: Let us move on to policy and the regulatory regime. On new drugs and new drugs policy, what role does a country’s regulatory regime play in the decision-making process of the large pharmaceutical companies?

Dr Barker: The regulation-or at least the regulatory approval of all medicines-is now in European hands, so the European Medicines Agency is responsible for setting the standard, so to speak. Individual country agencies will play the rapporteur role. The MHRA is a leading rapporteur in that regard and it also gives the approval for clinical trials to proceed in the UK.

I don’t think that there is a local regulatory issue, but there is a global one. It now costs northwards of $1.6 billion-more than £1 billion-per new medicine to get through this complicated pipeline and these high regulatory barriers. A while back I founded a group with the senior regulators from across Europe and the companies to try to tackle the problem, but it is a global problem. Unless the Americans, Japanese and Europeans all say, "We can get benefit-risk data more quickly and inexpensively," and then observe the medicine in routine use, which was one of the earlier points, and bring the number down, medicines will, over time, be increasingly unaffordable.

Q20 Stephen Mosley: So is there a threat from countries that have less onerous regimes? For instance, is China starting to develop new drugs that are more expensive to produce in the EU or north America?

Dr Barker: No, not really-or at least that is not a strategy that it has followed so far. It has tried, in a sense, to mimic the FDA-I think that the Chinese FDA is trying to put the same kind of standards in.

Q21 Stephen Mosley: You have talked a lot about the perfect storm and restructuring in the industry. Do you think that taxpayers have a role or that they should be footing a significant part of the bill when it comes to restructuring the pharmaceutical industry?

Dr Barker: No. I think that the Revenue has a role, as I suggested, in the early stages of a company’s formation-giving tax advantages to companies to be here. Should the country seek to bankroll the whole process? No, probably not. It is not very good at spending public money towards the individual medicine end of the process. It is very good at stimulating basic research, which continues to be at three of the top ten bioscience universities. We are doing that part of it well.

I would not advocate that the taxpayer does more than create a few places such as perhaps a TIC or the regenerative medicine that people are talking about. It should be something like that, but targeted on areas in which the market is not working fast enough.

Dr Hollinshead: To echo what Richard has said, I think that the taxpayer’s investment should be in securing the science base. If we believe that we want to compete in the global arena for wealth creation from the health care sector, the proper investment in fundamental research that leads to the translational investment that allows exploitative opportunity is significant, and has to receive some support from the Government.

Q22 Chair: So in conclusion on that point, neither of you is saying that there is a structural regulatory problem that is specific to the UK, nor that taxpayers’ money should be spent on areas such as UKCMRI, Kent Task Force and so on, rather than on specifically supporting the industry.

Dr Barker: May I make one caveat? It is not "regulatory" in the normal sense of the word, but the way in which individual trusts have historically been required to examine every single clinical trial on their own terms and in their own way-and, frankly, in their own time-has been a barrier. I don’t think of it as regulatory, but probably they do. The individual R and D committees across the different NHS trusts have made starting new trials a slow process and the recruitment of patients a delayed process.

Q23 Chair: Correct me if I am wrong, but from your earlier remarks, do we take it that, within the same regulatory regime, some other countries-you cited France as an example-operate more smartly?

Dr Hollinshead: Yes.

Dr Barker: That’s fair.

Q24 Graham Stringer: Would the full implementation of the recommendations in the Cooksey report help?

Dr Barker: For those who have not read it lately, it had two gaps. His first gap was translating events to bedside-translational medicine. That is the sort of thing that I would expect UKCMRI to get involved in. That is what the supercluster, which we have created under the OLS, is involved in. That is beginning to work. It is the second translational gap-from a medicine being available to being in regular and well-observed use in the NHS-that still exists. That report is well worth looking at again, but we have had a lot more progress on the first gap than on the second.

Q25 Pamela Nash: Since 2007, nearly 7,000 jobs have been lost in the pharmaceutical sector throughout the UK, including in my constituency when MSD closed its Newhouse facility. Those jobs are often highly skilled. Can I ask each of you whether you have any idea what has happened to those who have left those roles? Have they gone abroad, or have they found other jobs within the UK sector?

Dr Hollinshead: I can start, I think. Every change creates opportunity for individuals, as well as a threat. Taking the wider consolidations across the UK-based industry, you will find that a lot of people have taken that experience and formed, or slotted into, equivalent roles in industries, where those have appeared. As time has gone on, fewer equivalent roles have been available in the UK. It has been an opportunity for some people to inspire their own careers as well and to generate new business opportunities. Not everything is lost in that sense.

I am not aware that there has been a huge outage of people. Some people have moved country. With respect to AstraZeneca, I know that we are specifically looking for people in the respiratory and inflammation area to take their skills to Sweden, which is where we are setting up our facility on the basis of the consolidation of our site at Charnwood. In the main, there are people who have moved into existing roles and people who have generated new opportunities following adversity, as well as people lost by natural wastage through retirements and everything else.

Dr Barker: Let me just give a couple of specific examples. One of the companies in our membership that closed its site outsourced that activity to a major clinical research organisation. Another that closed neuroscience on one of its research sites created a spin-off company that some of those folks went to. I support what David is saying. We have good examples of constructive things happening. I do not have a statistical view, but we can look at what we can do to collect that. My guess is that it depends a lot on where the jobs are lost.

Dr Hollinshead: Again, to reiterate a point, when people have moved into a similar role, it is often not within the large pharmaceutical organisation, but in part of the supply chain, because the nature of that job has been outsourced or put outside the organisation. Many people have moved into CRO-type organisations.

Q26 Pamela Nash: If figures are available, it would be helpful to have them.

Dr Barker: We will do the best we can, but I cannot guarantee anything, because people do not always keep track of what happens when folks leave.

Q27 Pamela Nash: I appreciate that. Looking at the announcement that was made earlier this year, what assistance could Pfizer provide its staff at the moment? Also, what about other companies like Pfizer that are going through the same kind of changes and lay-offs? What could they provide, and what should they provide?

Dr Barker: They will clearly be providing the normal consultation to employees on what their options are and what the situation is. That is something that all major companies are well set up to do. My understanding-I should not expand on it-is that Pfizer is in some pretty constructive discussions with people who may be able to do one of two things that I have said other companies have done, which is either to spin out a technical services operation or to take full action programmes and create a company around them. Switzerland, for example, has created several high-potential companies out of products and people that have come out of its major companies in Basel. That has been done before and it is possible. It requires there to be a business case, because someone else has to invest in those assets and people. I think that the early signs are that there are some interesting things that could be done.

Dr Hollinshead: The Royal Society of Chemistry is trying to help out with members based at the Sandwich site. It is offering career consultations and career fairs over the next six months or so, and online support and one-to-one support for people who are affected by the Sandwich closure.

Q28 Pamela Nash: On top of the assistance you’ve just referred to, the Government have announced a taskforce for east Kent in response to the closure at Sandwich. What does each of you feel its priorities should be?

Dr Barker: I would say: to quickly engage with realistic prospects for either companies or services that might come out of Sandwich. I say "quickly" because once someone knows that their job is at risk-or whatever the technical phrase is-they start thinking about their options quickly. So, time is of the essence. Looking at other site exits, that is what usually happens. There needs to be the minimum of bureaucracy and delay in having those discussions proceed.

Dr Hollinshead: I agree with that: time is of the essence. Once you begin to lose critical mass, you can’t recover it, and at the moment there is, as you rightly pointed out, a nucleus of highly skilled, highly trained, experienced people. If we could take the wealth of that experience and knowledge and play it into a strategy to drive wealth creation, that would be excellent.

Q29 Pamela Nash: Just to go back to that core of highly skilled people that we have in the UK and that we’re trying to build upon, have you seen any evidence of students not studying life sciences as a result of what might be perceived by them as instability in the UK sector or the haemorrhaging of jobs? On the same note, are we also losing British graduates from the sector?

Dr Barker: I don’t see a general trend of that kind. We have a very active education department at the ABPI, and lots of school students access our websites to find out about careers. Don’t forget that there are other careers that very talented people used to find attractive but now find slightly less attractive. A lot of people used to go into the City with sciences degrees. So, I don’t think we’ve seen that, but it does depend a bit on geography-on where people want to live. There is a high concentration in some parts of the country, especially in the south-east, but also in Manchester, Liverpool and such areas, and in several parts of Scotland-Edinburgh, Glasgow and Dundee. So, as long as people don’t think purely about the big company that they might work for, but about the sector as a whole, I think the opportunities are still interesting.

Dr Hollinshead: I think we also need to monitor the situation, because it takes a bit of time before impact translates into decisions that students are making. I recall that at the end of the 1990s the number of applicants for chemistry, for example, was in steady decline, but then students started making decisions based on what options scientific qualifications gave them in terms of advancing their future careers and their careers, and they started to come back into science training and education, as opposed to training in other subjects. As our industry is very often predicated a lot on PhD training, as one of those graduate-level people you need to measure the impact over a longer period, because it takes a while for people to filter through.

Q30 Chair: Can I just pick up on your word "monitoring"? Earlier you referred to the work you’re doing in Sandwich, and I presume you have some data in the Royal Society of Chemistry on the broader trends in this sector. What’s happening to people is important in terms of attracting the bright new undergraduates and graduates into the profession, and tracking people’s careers. Are you in a position to use your involvement in the Sandwich exercise to collate some data around that? This is a hugely important group of people, many of whom are in the early stages of their career-they are not even mid-career-and if we do not understand what is happening to groups like that, planning for the future gets very hard. Are you in a position to help out?

Dr Hollinshead: I am not certain how difficult it is to do that. I must be careful how I respond on behalf of the royal society. The notion of being able to do that would provide some useful data to augment some of the questions that we have already had. What does happen when a big decision like this is made? What does that mean to the skill base that we have invested in?

Q31 Chair: My final question to both of you is this. The NHS has come up on several occasions. What changes would you like to introduce to the relationship with the NHS to improve our competitive position while at the same time not disadvantaging patient care?

Dr Barker: The first point that I would make, as you might imagine, is that if patients are on clinical trials-whether in the study arm or a control arm-and if they get new medicines, they are in better hands than if they got the normal standard of care. The most important thing is a combination of leadership and incentives. Historically-we are going back probably 60 years, not just the past few-leadership in the NHS has not prioritised research as a major focus of its activities. A very senior NHS leader said to me recently, "I have never had a target on research in 25 years."

Being attuned to the life science enterprise at the senior level of the NHS is really important. Making sure that doctors who do clinical trials or engage in collaborative activity with industry have incentives to do so would be really important, but probably the toughest nut to crack is that the NHS has traditionally resisted the new-with much greater success, if I can put it that way, than many other health systems in the world-because it is expensive. Providing a top-sliced budget for those things that have been NICE-approved or have been through value-based pricing might be one way you solve that problem. Another might be having metrics to make sure that individual PCTs or individual trusts are measured on whether they are up with modern practice, or having quality standards that incorporate the use of new medicines. We have to think about quite strong and radical tools like that, particularly as we are going through a period in the next few years when the NHS knows that it is under economic pressure. There is a risk that we would move backwards on this front, not forwards. It is that kind of thing that we need to seriously consider.

Dr Hollinshead: I think that the introduction of the concept of the academic health site centres a few years ago was actually really great, because it was about trying to get more research focus into the NHS. At the moment, it is about trying to do that more with influence than anything else, and as Richard said, a lot of the trust directors often do not have research as a key component of what they are being measured on. If I were to add to that, I would say that trying to incentivise innovation and a healthy attitude to research would be important. It would also be important to making the mission of the academic health science centres effective as well.

Q32 Graham Stringer: We have concentrated on the structure of the industry. It is obviously restructuring itself. The importance of the industry is that it either prevents or cures illness. I want to ask an imprecise, impossible-to-answer question to finish with. I get a rather pessimistic view from you that there are going to be less breakthroughs in the industry over the next 10 or 20 years, partly because of the restructuring. Is that right?

Dr Barker: I am actually more optimistic than perhaps I sound. We have more than 600 new medicines in the pipeline for various forms of cancer for which we do not have adequate treatments today, more than 300 for the unsolved cardiovascular problems, and more than 100 for Alzheimer’s, which we will all-certainly I will-be increasingly worried about. The raw material is there in the pipeline. The fundamental breakthroughs of biology are astounding-we understand how the web of life is woven together in ways that we have never understood before-but we have got to clear away some of the obstacles. We have got to clear away this £1.6 billion cost per new medicine-to try and reduce it, to streamline it. We have got to create-as I said, here in the UK-a winning and sustainable ecosystem that recognises the contributions of all the players and how they need to work together. If we can do that, I am relatively optimistic, not just about life sciences in general, but about the UK in particular.

Dr Hollinshead: If we have left you with the impression that things are terminal, then I think we have failed. I am actually incredibly optimistic. We have talked about the economics of the pharmaceutical industry’s decision making, and how it now conducts research relative to how it did some decades ago. The changes that are happening-at a fairly precipitous rate-in our understanding of underpinning mechanisms and in basic, fundamental research are phenomenal. It is about how we translate that knowledge into the medicines of the future. We are often hearing about, you know, a new breakthrough in cancer because of such and such a gene, but that is a long, long way from actually exploiting it to the benefit of the patients. It is about trying to make up that gap between the fast-moving round of scientific breakthroughs and the opportunity for new and beneficial medicines. It is a complicated process and it takes a long time. It takes 12 to 15 years for the sort of knowledge at a translatable stage to realise a truly beneficial medicine. Time is a critical factor.

Chair: Thank you very much, gentlemen. We shall now move on to our second panel.

Examination of Witnesses

Witnesses: Dr Olivier Brandicourt, President and General Manager of Pfizer’s Primary Care Business Unit, and co-chair of the company’s Portfolio Strategy and Investment Committee, Dr Rod MacKenzie, Senior Vice President and Head of Worldwide Research for PharmaTherapeutics Research and Development, Dr Ruth McKernan, Senior Vice President and Site Head, Sandwich, and Chief Scientific Officer for Pfizer Regenerative Medicine, and Richard Blackburn, Managing Director, Pfizer UK, gave evidence.

Q33 Chair: May I thank the four witnesses for coming this afternoon? For the record, you might like to introduce yourselves.

Richard Blackburn: Good afternoon. I am Richard Blackburn, managing director of Pfizer Ltd, so I am responsible for Pfizer’s commercial activities in the UK. My responsibilities do not extend to any management at the Sandwich site itself or of any of the people that work there, but I was involved in some of the communication and discussions with Government about the announcement we have just made.

Dr Brandicourt: Good afternoon, my name is Olivier Brandicourt, and I have been managing the primary care business unit for Pfizer. I am also the co-chair of our internal governance body overseeing R and D, and resource allocation in that space.

Dr MacKenzie: Good afternoon. My name is Rod MacKenzie. I am senior vice-president in pharmatherapeutics R and D. I have responsibility for a number of our global research sites, including Sandwich.

Dr McKernan: Hello. I am Ruth McKernan. I am the site head at Sandwich. I also have additional, specific responsibilities for the research units in Sandwich. I am chief scientific officer of our regenerative medicine unit in Cambridge as well.

Q34 Chair: May I ask you a very simple first question? Who took the decision to close the Sandwich facility?

Dr Brandicourt: I can answer that question, but maybe I can give you a bit of context and go through the different drivers that led to the decision. But to give you a straight answer: our board of directors took the decision at the end January 2011. They took the decision.

However, may I come back to the drivers? First, I would like to thank the Committee for the opportunity to be in front of you today and to explain why we took that decision. It was not a very easy decision for Pfizer management to take. As you know, Sandwich has been part of our company for 50 years. All of us at this table have been very close to our Sandwich colleagues. At one point, I was managing director of Pfizer Ltd UK, and I was very close to Sandwich, so it was not an easy decision. We understand the impact that the decision has on our colleagues, their families and the entire community.

You heard from Richard Barker that the drivers of the decisions are in fact global in nature. If you take the productivity of this industry in the last 25 or 30 years, it is actually consistent. This industry brings to the market about 15 to 25 new chemical entities every year-either medicines or vaccines. However, the cost of bringing those new chemical entities to the market has dramatically increased. I can give you two numbers. It was $1 billion in 2001 or 2002. It is $2 billion today, so it is close to what the ABPI number is. However, if you are in a company where your attrition rate is slightly higher than the average in phase 3, when you are actually bringing the real budget into the development of those medicines, you can very easily reach $4 billion or $5 billion.

So that is one side of the equation. The other side is the market and the conditions you find when you are lucky enough to bring one of those key advantages to the market. The conditions there have also changed. We are under the pressure of generics. Governments and payers are under fiscal pressure and putting in cost containment measures. It is all across the board. It is not only in Europe; it is also in north America. We are all, as you know very well, facing a very significant loss of facility. So, when you put those two aspects of the equation together, the business model is simply unsustainable. It can’t work any more. It has to be changed.

Q35 Chair: That does not explain why Sandwich should close. That just tells me about the problems in the broader industry, which we are well aware of from the previous witnesses and our previous investigation. What I was asking was who took the decision. Was it impacted upon by the fact that Ian Read replaced Jeffrey Kindler, and Ian Read has a long-standing relationship with and interest in Latin America? Was it a change of focus to Latin America from the UK?

Dr Brandicourt: Not at all. The big event that triggered the board of directors to ask us to review our R and D strategy was the big acquisition that we made last year. No doubt that was an important factor. That mandate from the board started at the end of August. Ian Read was head of pharmaceuticals at that point. Jeff Kindler was our CEO and chairman of the board. The project took about four or five months, up to the middle of January, before it was fully accepted by the board and we moved to implementation. I don’t think it was anything to do with Ian Read’s previous responsibility in Latin America.

Q36 Chair: Sticking with the question of who-Mr Blackburn, were UK executives consulted about the decision to close Sandwich, or were they told by New York that Sandwich was to close?

Richard Blackburn: The project that Olivier has described proceeded, as I understand it, through late summer and autumn of last year. It involved very small numbers.

Q37 Chair: As I understand it, that means you weren’t involved in it.

Richard Blackburn: I wasn’t involved in it. It was a small number of very senior executives, well-connected with the R and D network within Pfizer, and who have a good understanding of it. The nature of these reviews is that they involve a very small number of people at the senior levels of the organisation.

Q38 Stephen Mosley: What were the specific factors that made you decide to close Sandwich as opposed to somewhere else?

Dr Brandicourt: I can answer that question. Again, to fix the R and D engine, we don’t have a choice in this company. We have taken three or four steps.

The first step is to concentrate on a very limited number of research areas, rather than doing what we were doing in the past, which was to put more money to try to get to more, what we call, shots on goal. We are focusing our attention on five core areas, which are described in our submission. We are concentrating on those areas because we think that we have more chance to be successful, both scientifically and commercially. That means that we are exiting some research areas, and two exits are part of Sandwich today-the allergy and respiratory research unit and the internal medicine research unit. It’s not the only site that has been affected by the decision to concentrate on a limited number of research units, as you have probably seen. Other sites, including those in Germany, Canada and other countries, have been impacted.

The second step, which was touched upon by the ABPI speaker previously, was to try to limit our risk by externalising some of our research. We have started, are continuing and will reinforce the aspect of external research and collaboration with academic centres. Some months ago we announced a major collaboration with six or seven sites in the New York area and in California. The third aspect is to externalise and outsource the services that are not considered to be strategic in support of our R and D efforts. Pharm science is one aspect of this, and clinical development is another, where you can find very good CROs to help you provide the right level of services.

If you put the two or three drivers together, you end up with a decision that impacts Sandwich, limiting the number of RUs. One aspect that I didn’t touch upon is that we want to have our research unit located in R and D where science and innovation are the main factors that are well known-we call them biomedical hubs. Cambridge in the UK is one example of where we are locating our pain research units, or Cambridge in the US, for the same reason. If you take those two or three reasons, you end up with a decision that impacts Sandwich.

Q39 Stephen Mosley: The decision that you are withdrawing from allergies and respiratory conditions seems to us to be very abrupt. It’s almost that you’re closing it down and moving on. Why haven’t you adopted some sort of phased approach, going out and seeing whether there are people who are willing to take over those research facilities that you have and keep going on the allergy or respiratory front? You’re closing it down rather than trying to offer that out into the market for someone else to take over.

Dr McKernan: I’d be very happy to answer that question as head of the site. In fact, we’ve been very active in looking for opportunities for talented staff in Sandwich. In the time since we made the announcement at the beginning of February, we’ve collected more than 100 proposals and ideas, some from our staff, some from key scientific innovators in the UK and some from our local community. We have triaged those in the past couple of weeks and are really putting our effort and focus on trying to develop companies that would come in to the site, deliver the most jobs for our staff and provide sustainable employment in the area. We already have more than 10 confidential agreements with companies with which we are currently working, and we are actively supporting our staff in coming up with ideas for spin-outs and NBOs. We are very active in supporting them in doing that. So it is our intention to provide as much help and support as we can, in the time that we have, to bring in new opportunities to the site.

Q40 Stephen Mosley: It has been suggested, in some of the information that we have received, that the closure of the site is an effect of Pfizer’s over-ambitious acquisition of companies, such as Wyeth. Is there any truth to those suggestions?

Dr Brandicourt: I can try to answer that. I don’t think there is any truth to that. Wyeth has actually brought state of the art technology in one aspect of research where Pfizer was not very present, which is all aspects of large molecules and vaccines. So the acquisition of Wyeth was very much complementary, rather than conflicting or overlapping, with what Pfizer was doing and was interested in before the acquisition.

Q41 Stephen McPartland: Dr Brandicourt, you mentioned in an earlier answer how you wanted to relocate research to Cambridge in a biomedical hub. Would you be able to tell us whether you are going to be physically expanding your facilities at the Granta science park in Cambridge?

Dr Brandicourt: I think Ruth should answer that question.

Dr McKernan: I am the chief scientific officer for the regenerative medicine group and we will be expanding there. We will be forming a research unit integrating the work we have ongoing in regenerative medicine. We will be focusing on pain and sensory disorders. It will be a small, entrepreneurial research unit, very much of the same type and scale as the other research units that are sited in biomedical hubs in other parts of the world. We will have one in Cambridge in the UK. We will have several others moving from our site in Groton, in the US, up to Boston-so, a very similar model, and that is what underpins the change in our research and development model.

Q42 Stephen McPartland: How many jobs will you be transferring from Kent up to Cambridge?

Dr McKernan: At the moment, as you will understand, we are in collective consultation about the process of selecting colleagues who will join the new unit in Cambridge. Our expectation is that there will be 150 people also in Cambridge when we are finished, and primarily they will be coming from the Sandwich site.

Q43 Stephen McPartland: In your memorandum, you suggest that you favoured Cambridge because it offered access to deep and energised talent. Does that suggest that Pfizer does not believe that deep and energised talent exists in Sandwich?

Dr McKernan: The reason we like Cambridge is the reason we like other bio-innovation hubs-it has that lovely blend of academia, research hospitals, access to patients and biotech companies that provides a very vibrant environment to do really high quality innovative research.

Q44 Chair: Don’t you realise that there is a fundamental contradiction between the response you are giving now and the previous stated position: that you are going to do all of those grand things for all of those people on the site at Sandwich? It is almost as if you saying, by using this phrase, "deep and energised talent base", that there is no deep and energised talent at Sandwich, when in fact that is not true, is it?

Dr McKernan: I think it is having the right people doing the right work in the right places. We do have a very strong talent base in Sandwich and maybe if I explained all the different types of things that go on in Sandwich, then you would be able to understand why the very early, very research-based part of what we do is appropriate to have in Cambridge. There are many, many other components of the process, going from the initial idea of the drug target, all the way through to pharmaceutical sites, as in production. That is a lot of many different things, some of which are really appropriate to have in Sandwich. Those are areas where we are looking to bring in companies that will do some of the contract research organisation-type work that we are currently outsourcing. I think that that works really well in a technology centre environment, and we envisage having multiple different companies at the Sandwich site. That would provide stability to the area, by having not just one employer, and there are many aspects of the business that we could outsource to companies that would be well suited to the site.

Dr MacKenzie: Perhaps I could build on that. First, let me acknowledge that we have tremendous talent in Sandwich. Having spent the first 14 years of my career there, I can tell you that we have wonderful people there. It is a very talented group, and they have done tremendous things for health around the globe.

What you heard in the previous testimony is that the R and D model is going through significant change. When we talk about relocating to biomedical hubs, what we are talking about is the very early part of our research which, nowadays, has to be done in collaboration with major teaching hospitals, and in the presence of big, successful, world-class universities that can produce the kind of talent we need, as well as a biotech community, which we also need. That part is moving.

On the other hand, there is much of our industry, and everything that it takes to get a medicine to the market, which could easily be done from the Sandwich location. In fact, that is what Olivier referred to earlier when he talked about taking outside the company those areas that are not part of our core competitive advantage. Other people, quite frankly, can do that work as well as us, if not better.

Dr Brandicourt: Do you want to give some examples of those activities?

Dr MacKenzie: Yes. When we talk about biomed knowledge, we are talking about the very early lab-based discoveries where we take the fundamental emerging and, frankly, quite exciting new biology that is breaking very rapidly, as you heard from David Hollinshead, and try to convert it into molecules that are potential future medicines. Those are the lab-based activities that really need to be done differently from the way they were in the days when Sandwich was a thriving, fully integrated research site. Much of the downstream activity that is required when we start to develop the drugs, such as clinical development and the pharmaceutical investments that we need, is work that could be done on the outside better than, or at least as well as, by us-not all of it but some of it.

Q45 Stephen McPartland: Are you suggesting that if the facility had been located in Cambridge instead of Sandwich, you would still be shutting 90% of it down? You are closing 90% of your R and D in the UK and transferring just a small biomedical hub.

Dr MacKenzie: No, I am not saying that. We are seeing a completely different model of R and D emerging, where we actually have to do much more focused research in only five areas-we have made that decision. We are going to focus that early lab-based work in biomedical hubs and take out of the company certain aspects of R and D that we did internally. You will see that our total supply chain of R and D will be in different locations which are much more fit for purpose, instead of being co-located in a single location, which was our history.

Dr Brandicourt: An example of what has just been described is our Connecticut centre, which is also very large. The two research units there are moving to Massachusetts-to Cambridge, near Boston. That illustrates the fact that we are not doing that only in the UK-it is happening in other places as well.

Q46 Pamela Nash: I would like to try to establish some of the facts around the timing of the closure of the site at Sandwich. Could I ask you to clarify when a decision was made to close the site, and to say, Mr Blackburn, when the UK executives of Pfizer were made aware of the decision?

Richard Blackburn: The final decision was taken by the Pfizer Inc board at the end of January. Obviously that came at the end of the process that Olivier has described. Different people were brought in to the process at different points. Certainly, there was input from people such as Ruth before the end of January-before the decision was final. But, as I say, in the early phases, this process was limited to a reasonably small number of people, because of the nature of the project.

Dr Brandicourt: Again, to give you a little bit more context about the process we used when we got a mandate from the board of directors to review our R and D strategy, only a very small group of 15 senior leaders was involved in what we called the design phase. That took about 10 weeks, at which time it was necessary to include experts from the company to test and pressurise the assumptions we had made during that design phase. That was the planning phase, which started in early November and went on until late December or early January, at which time Richard, for instance, was involved.

Q47 Pamela Nash: Thank you for clarifying that. Following the decision at the end of January, when did Pfizer contact the UK Government?

Richard Blackburn: Our chief executive, Ian Read, visited 10 Downing street with myself and Ruth on 24 January.

Pamela Nash: Can I ask-

Q48Chair: Before you go on to that, let’s get these dates right. Am I not correct in saying that the Prime Minister met Jeff Kindler on 21 July?

Richard Blackburn: Last year, yes.

Q49 Chair: And nothing about the future of Sandwich was discussed.

Richard Blackburn: A wide range of things was discussed, including Pfizer’s current presence in the UK but, as Olivier mentioned, the instruction from the board to look at the R and D model wasn’t actually issued until late August last year. So, the Prime Minister’s meeting with Jeff Kindler preceded the kick-off of this project.

Q50 Chair: It had nothing to do with it whatsoever.

Richard Blackburn: No.

Q51 Pamela Nash: You said that there was limited dialogue-it wasn’t discussed in July at that meeting with the Prime Minister. Why does each of you feel that your company wasn’t able to open a dialogue with the Government about this decision prior to it being made?

Richard Blackburn: We let the Government know as soon as it became clear that we were progressing towards a final decision. We actually let the Government know several days before the final Pfizer Inc board meeting at which this decision became final. Obviously, we were conscious that it was a big decision for the UK and that it would attract a lot of comment, and we wanted to make the Government aware as soon as possible-24 January was ahead of the final decision, and it was the earliest that we felt able to have those conversations.

Q52 Pamela Nash: But it was never thought appropriate to involve the Government in that decision, obviously with the assumption that they may have been able to offer something to prevent that decision from being made.

Richard Blackburn: We have tried to be very clear that the drivers for this decision were global in nature. They related to our pressing need to change the way that we conduct our R and D model. There was no aspect of Government policy or the operating environment in the UK that was relevant to this particular decision.

Q53 Chair: There was a telephone conversation between the Prime Minister and Jeff Kindler some time at the end of November.

Richard Blackburn: As I understand it.

Q54 Chair: Did the Prime Minister seek to persuade Jeff Kindler that this was the wrong decision?

Richard Blackburn: I am not aware of the details of that conversation, but I would stress again that at that point there probably was no decision in relation to Sandwich. The work to review the R and D model and to think through the planning of what that review might mean were still work in progress at that point.

Dr Brandicourt: The decision was not made. As you can imagine, such a decision was very material for the company and for our employees. It was kept confidential until the board finally approved it by the end of January.

Q55 Chair: So, even though the Prime Minister himself had been in personal dialogue with the chief executive, no one thought to phone No. 10 some time after November or at the public announcement of the decision.

Dr Brandicourt: Again, if I may, in November the decision was far from being made. We included 150 colleagues in the projects to pressure-test the assumptions that we were making. The decision regarding Sandwich was not made in November.

Q56 Chair: I didn’t say it was. Twice in 2010, the chief executive of the company was in dialogue with the Prime Minister of the UK, and within a few weeks of the last conversation, a decision was taken to close Sandwich. Did no one in the company think it was courteous to contact No. 10 and say, "I am sorry, Prime Minister, but we have had to come to this decision"?

Dr Brandicourt: I think we answered your question by saying that when it was very clear that it was a decision and that we were going to move to the implementation phase, we asked for a meeting. That meeting happened on 24 January.

Q57 Pamela Nash: I want to just return to the staff at the Sandwich site. When were the last staff recruited to the Sandwich site?

Dr McKernan: We have had an ongoing recruitment programme all the time. When I became aware that it was a likely or a probable decision, we stopped recruiting people, where that could be stopped. You will appreciate that most people accept a job and then have a several-month notice period. As soon as it was announced that we would be closing the site, we rescinded the offers that we had in hand. I do not have with me the exact number of people whose job offers were rescinded, but I can certainly get that to you, if that is important.

Q58 Pamela Nash: That would be really helpful. You said that you stopped the recruitment process when you thought it might be likely that the site would close. When was that?

Dr McKernan: When I was aware, which was in November, we were recruiting for some key senior positions. I held on that in a way that was as professional as possible, without contravening any confidentiality about the ongoing discussions.

Q59 Pamela Nash: The Committee has also been made aware that the company has been trying to make the contracts given to Pfizer employees similar throughout the world, so that they all have the same rights. That has resulted in the UK staff having their severance entitlement reduced from three and a half weeks to two and a half weeks for every year that they have worked for the company. Was that decision made in the knowledge that this large redundancy may happen in the near future?

Dr McKernan: No. The discussion on the change in severance terms occurred after the acquisition of Wyeth, which was more than a year ago. At that point, discussions on harmonising terms and conditions across the world started. That is when that work began. You will appreciate that we are in consultation currently, and the area of redundancy is within the terms of reference for our colleague forum, which is looking at that and all our other policies.

Q60 Pamela Nash: So, that’s not been decided yet.

Dr McKernan: They are still in consultation on those policies and other policies too.

Q61 Chair: Again, there is a contradiction here. Dr McKernan is saying that she was consulting, although she was ducking and diving on how she dealt with potential appointments, in November. Yet, when the Prime Minister was phoned at the end of November there was no such ducking and diving; the subject of the possible closure just wasn’t raised.

Dr MacKenzie: Actually, I don’t believe that we know the content of that conversation at all-no one at this table does.

Q62 Gavin Barwell: Unless I misheard him, Dr Brandicourt just said in his evidence that in November the decision hadn’t been taken, but Dr McKernan just said that she found out about the decision in November.

Dr McKernan: No, I didn’t.

Q63 Gavin Barwell: We can look at the record-the transcript. Pamela just asked you when you stopped recruiting for new positions, and you said, "In November, when I found out." So, when was this decision taken? That is what we’re trying to get to the bottom of here.

Dr McKernan: If you’ll allow me, I’d quite like to clarify that for you. I was one of the 100 to 150 colleagues who were in the second part of the process, so I learnt of the process to look at research and development across the world in November, and at that point it was a very strong proposal that the Sandwich site would be impacted. Obviously, that was very disappointing news for me and my colleagues. Looking at the rationale for the changes, I made the decision that I would not continue recruiting senior-level people until I was confident that it would be the right thing to do for those people. That was my decision, with the people that I was trying to recruit in Sandwich. Even though the decision wasn’t final, and we didn’t go to talk to the Prime Minister until 24 January, I thought that was a prudent thing to do for those people to whom I was potentially offering jobs.

Q64 Gavin Barwell: Just to clarify this for the record: this was a two-stage process; you were brought in at the second stage; and it was clear to you from the work that had been done in the first stage that there was a very strong possibility-I think that was the phrase you just used-of the closure of Sandwich.

Dr McKernan: It was a very strong recommendation, and if I had been able to see another option, I would have voiced it at that point.

Q65 Gavin Barwell: So, it is fair to say that when the then chief executive spoke to the Prime Minister at the end of November, he would have been aware that there was a very strong possibility that Sandwich was going to close, but the final decision had not yet been taken. That’s what you’re saying, collectively.

Dr Brandicourt: He would have known that the first phase recommended the closure of Sandwich-you’re correct. However, I want again to emphasise that the second phase was absolutely critical because you were bringing on board people with the knowledge and people who were able to really test those assumptions, and between the first and second phases a lot of the recommendations were changed.

Q66 Stephen McPartland: Could you tell us when the second phase of the consultation ended?

Dr Brandicourt: The second phase was a planning phase, if you like, from the beginning of November to the beginning or middle of January. Most of the work would have been done by the end of December or early January.

Q67 Chair: From the first phase, a series of recommendations emerged. When did they emerge?

Dr Brandicourt: I was a co-lead on the first phase, so I can talk about it. It was at the end of October or the beginning of November.

Q68 Gavin Barwell: Let’s move on to some wider questions about the business consequences of the decision. First is a very simple, factual question: what was the company’s R and D spend prior to this review, and what will it be after the review?

Dr Brandicourt: In 2010, the R and D budget was, I think, $9.5 billion. We already had indicated that we were going to reduce our R and D budget for 2011 and 2012. The target for 2012 was $8 billion to $8.5 billion, but the review of the strategy led us to recommend a budget of $6.5 billion to $7 billion.

Q69 Gavin Barwell: The picture that we have from the evidence that you have given so far is that the review was about focusing R and D on five specific areas rather than trying to be master of all trades. If you are going to specialise on those five areas, is your R and D increasing in those areas?

Dr Brandicourt: Stable or increasing, yes.

Q70 Gavin Barwell: On the day that you announced you were closing Sandwich, you also announced that you were repurchasing $5 billion of your shares, and that was in addition to $4 billion of shares that are still to be repurchased under a previous announcement. What was the purpose of that exercise?

Dr Brandicourt: The purpose of that repurchase of shares is what companies are doing-you know, in resource allocation-in order to manage total shareholder return.

Q71 Gavin Barwell: Dividend payments, or share value?

Dr Brandicourt: It is a tool which, yes, increases or guarantees earning per share.

Q72 Gavin Barwell: What do you think it says about the business that on the same day that it announces a significant reduction in research and development spending it can find $5 billion to improve shareholder value?

Dr Brandicourt: They are two very different messages. One is fixing our R and D engine; the dollars we are investing in R and D are returning less than the average cost of capital, so you need to fix that. The other has to do with total shareholder return, as I mentioned before.

Q73 Gavin Barwell: On your website, you claim that most large multinational companies want to conduct responsible business practices. How do you reconcile that laudable aim with the decision to close the centre at Sandwich, the main employer in an already economically blighted part of the UK?

Dr MacKenzie: First, let me acknowledge that, as we have heard, it was not an easy decision to make, and we recognise personally around this table the impact that it has. We did it because we have to put our R and D on a sustainable basis for the longer term. What you have heard in testimony so far this afternoon speaks not just to the business drivers for that but also to the scientific evolution that is going on as we restructure this whole industry. Tough as that was, and is, it is important to us to be able to continue to do R and D, and to continue to capitalise on the science that is emerging, but do it in a very different way. But it is clearly a very difficult time, with a big impact on the local community.

Q74 Gavin Barwell: Earlier, when you described how you selected the five areas that you were concentrating on, you spoke about two basic criteria-one being where the best prospects for medical progress were, the other being where the prospects for commercial prospects were based. What is it about the two areas that you focused on at Sandwich that made them fail those criteria? Was it a reflection on the staff there, or was it something particularly difficult about the fields of internal medicine and allergy? Why is it that those two areas did not pass those two tests?

Dr MacKenzie: You won’t be surprised to hear me repeat that is not a reflection on the staff. The staff are highly talented, and many of them are outstanding scientists. This decision is not based on a lack of medical need, if you like, in the area; it’s simply that we can’t afford to continue to do everything. When you look at the combination of medical need that’s unmet by current medications, by the scientific opportunities we see, as well as the potential marketplace, eventually, for the medicines-when you balance those things up, across neuroscience, cardiometabolic information and allergy and respiratory, it turns out that allergy and respiratory doesn’t do so well relative to the others. But it is not a reflection on the people, at all.

Q75 Gavin Barwell: A final question from me. You spoke very positively several times about the quality of the people that you have there. That is on the public record, and I am sure that they will be pleased to hear what you’ve said. If they are so good, why not retrain them in some of the areas where you just said you are going to expand your R and D capacity, rather than losing those people in whom I guess you as a business have invested a great deal of money?

Dr MacKenzie: Well, I think I should let Ruth talk a little about the amount of time she spends with colleagues in Sandwich and what she spends it on.

Dr McKernan: They are talented individuals-some of them have ideas for spin-outs; some have ideas for a management buy-out, and in particular areas of our business we are actively supporting that; and some, who are expert in pain, will join the new unit in Cambridge. There are many other talents across the whole organisation, and some of those individuals would be very talented in other parts of the business as the business changes. So what we are seeing now are different units and components of research and development being separated out into different companies. My expectation is that some of our talented people will fit very well into those companies and contract research organisations. We are working really hard to keep as many of those jobs as we can in Sandwich, but managed and employed by other employers on the site, not ourselves.

Q76 Graham Stringer: Just to go back to Pamela’s questions, three weeks ago, Nature said that your employees on the Sandwich site were too frightened to talk to the BBC. Do you believe that is accurate, and will you tell the Committee what your policy is in terms of staff on site talking to the media?

Dr McKernan: The staff on the site are perfectly able to talk to anyone they want to talk to. We have no policy about them not talking to the media. We’ve had a very active policy to try to support them through this, because it is obviously an extremely anxious time for our colleagues. We are putting in place many things to support them in very different ways. For example, we have had people visit to talk about starting your own business; we have an entrepreneur programme; we are co-ordinating, as you heard from the Royal Society of Chemistry, with industry experts in each discipline to have a co-ordinated day to help people to think through what the next part of their career will be. Our human resources group has selected companies to come in and help to support our staff. We have many different ways of supporting them, and an active communication strategy, including town halls, a website, updates from the colleague forum, updates about this meeting here. Everything that is happening is on a website that is easily accessible for colleagues. They can find the information, including how to calculate their own redundancy, assuming that we are using the old system, which is, as we discussed, still subject to consultation.

Q77 Graham Stringer: So, Nature is just wrong.

Dr McKernan: Yes, actually.

Q78 Graham Stringer: That is clear. I think what this Committee wants to get to the bottom of and to make recommendations on is what regulatory regime could exist in this country that would help the pharmaceutical industry and the development of new drugs, and what hinders it. Was Nature wrong again when it said-it was not talking about this Committee-that that’s the wrong question, and that the pharmaceutical industry will take the Government for a ride because whatever that industry does, Governments will pay at both ends. They will pay for the fundamental research, and for the drugs at the other end. Was Nature wrong again?

Dr McKernan: Maybe I can answer a little bit about that, and then you may want to chip in, Richard.

Q79 Graham Stringer: Just before you do, are you familiar with the Nature article on 9 February?

Richard Blackburn: I am not.

Dr McKernan: Let me start by saying that, as I think we explained, this is an evolution of the industry to a more fragmented model where, instead of having everything in one place, different companies do different bits of it. I think the opportunity for us here is to look into the future and beyond the change that the industry is going through, and ask what can the life science community in the UK do, and which parts of the new model do we excel in that would make the UK the place where the rest of the world wants to come? There is an opportunity for us there, and I’m involved with the research councils and the bioscience for industry association to start asking those questions and work together to find some new opportunities in the UK life sciences industries.

Dr MacKenzie: I have heard of the Nature editorial that you referred to, and I think some of the language there was unfortunate and not particularly constructive.

There is a role for the Government, which I think the UK Government play well, to create the kind of environment we need. You have heard some of it from what David Hollinshead said in terms of talent. It’s about having world-class basic science and doing what needs to be done to stimulate a biotech community and entrepreneurs who want to take some of that academic science and create wealth and value from it. The role is also, I guess, in the regulatory realm, and I’ll let Richard say something about that.

Richard Blackburn: I think you heard from Richard Barker earlier that there are a number of ways in which the Government can support the life sciences industry, and a number of points have been covered there. One that was mentioned is that we want to make sure that there is a receptive environment for the innovation that our R and D produces, and that when we produce new and differentiated medicines, they are actively taken up by the national health service in the best interest of patients-that’s the final piece.

Q80 Graham Stringer: There has been help, though, from this Government, not just in cash but in an improvement in regulations-for example, tightening up on intellectual property rights and stopping piracy-yet we heard in your answers to Gavin’s questions that having had an improvement in that situation, with the view that that would lead to more R and D, and essentially more profits and development value, you have reduced your R and D. Does that mean that the tightening of that regulation was a waste of effort, because what followed was a reduction in research and development?

Dr MacKenzie: As we said earlier, the changes that we are implementing in the UK are based on the global economic situation. Anywhere we invest, we need to see very strong intellectual property protection. To that extent, that’s never a bad thing for countries that are looking for inward R and D investment; in fact, it’s probably an absolute requirement. We have to be protected in intellectual property.

Dr Brandicourt: I would just add that if we are successful in fixing our R and D engine, we still need to do R and D in places that are supporting R and D. The UK is a very good place to do that, with one element being the IP aspect. I would not relate the two together. We are fixing it, and we need to continue to evolve and to do R and D in places that welcome it.

Dr MacKenzie: I should say that we have confidence. We are creating a pain and sensory disorder unit in Cambridge. That’s a reflection of the fact that we see that as a biotech hub and as an environment in a country that recognises and protects intellectual property.

Q81 Graham Stringer: What changes in the regulatory regime would you like us to recommend to the Government that would improve the environment for your business?

Dr MacKenzie: Actually, I wanted to pick up on something that was said earlier. It’s not strictly in the regulatory world, but one difference that I see when I look across the globe is whether the national health service is interested in research. I said earlier that in biotech hubs, one of the parts that you recognise is very vibrant teaching hospitals, where a large part of the staff is interested in research. It is particularly important because the most critical part of what we do these days is the translation between the bench and the early clinical research that we can use to demonstrate that the science has real relevance to disease. That’s a very important piece that we could emphasise again here.

Q82 Graham Stringer: Is there anything in Government policy or the regulatory area that you would like to see improved specifically?

Richard Blackburn: The ABPI has put in a submission to the Government’s growth review that is specific to the life sciences and made a number of recommendations, which Richard Barker went through earlier. As a member of the ABPI, we would support all those points. Points were made about the fiscal incentives for R and D in this country, the availability of skills, the regulation applying to clinical trials and the uptake of medicines, and recognition of innovation in the NHS. All those things are important to maintain the positive environment that we have for R and D in this country.

Q83 Graham Stringer: Finally, do you think that greater transparency is important in the restructuring of the industry? We have talked about the Government’s regulatory side. You hold huge amounts of information that might be of benefit for the development of drugs, yet a lot of the data from clinical trials are never made publicly available. Do you think you can change and make those data more publicly available?

Dr McKernan: Well, I think there are a few things to say about that. The UK is a great place to do research and we’ve always valued doing research here. I think it’s changing. We heard earlier about there being a lot more pre-competitive consortia where we work with other companies, biotechs, academics and clinicians on the same project. I can think of a couple that specifically address that in which we are trying to understand the genetics that underlie a disorder so that we can help to discover drugs to treat specific populations and the biomarkers that underlie a disorder. Even in some of the early research, such as epigenetics, we’re pooling our knowledge and sharing tool compounds, such as through the Structural Genomics Consortium. The sharing of clinical data is another area and there are several consortia looking at that. That’s all part of the evolution of the industry, because there are many areas in which we’re finding that we need to share knowledge and our scientific approaches for the benefit of patients.

Q84 Graham Stringer: But you’re really talking about sharing on a commercial basis as opposed to being open with those data.

Dr McKernan: I’m talking about sharing data with other companies and academics in a very open way.

Dr MacKenzie: Actually, the world is changing quite dramatically in this area. One of the things that Olivier mentioned earlier is that we need to address our cost base. That’s not simply about cutting our R and D costs in the way that we’ve done painfully at Sandwich. It’s also about doing things differently in the industry. It was mentioned earlier, but it’s worth repeating, that a lot of what we do is just not competitive. Some of the basic biology is simply stuff that we should share. To give you one example, we at Pfizer and Merck and Lilly got together to look, in Asia, at the molecular underpinnings of the drive in Asian cancers. What we do is we share the costs and we publish the data to everybody-not just our own companies; we make the data publicly available. These are the early things that are symptomatic of what you’re going to see much more of, which is us recognising we’re not competing in that space and therefore we should share it, reduce everybody’s costs-everybody will benefit from that-and make the data publicly available.

Q85 Chair: I just wonder what we should conclude about the nature of the company in front of us. In response to questions from Mr Barwell about the share price, you were referring to things that were covered by a sophisticated press release from the company dated 1 February, all related to City matters, yet something that is fundamental to the nature of the business that you’re in and the R and D side of the business you’re in, which you now claim is inaccurately reported, is in an article in Nature that none of you has been briefed about. That seems extraordinary me. Will you go back and rattle a few sabres, and find out why people have not corrected what Dr MacKenzie regards as mistakes?

Dr MacKenzie: Well, we cannot respond to every editorial that is published.

Q86 Chair: It is not an editorial. It is an article of 9 February written by Colin Macilwain in Nature. I do not know whether he has an axe to grind. You clearly think that he has, but you have not bothered to correct it. You know all about the City details. It leaves one with the wrong feelings about the nature of the business.

Dr MacKenzie: As I said, we are not focused on responding to everything that has been written about these decisions. We are focused, as Ruth said several times, on doing the best we can for colleagues at Sandwich, which is trying to mitigate the job losses as far as we possibly can.

Q87 Graham Stringer: But Nature is not just any outlet. It is one of the most prestigious journals in the world. Are you not concerned if it is printing articles like that?

Dr MacKenzie: I certainly disagree with some of the things that are written.

Chair: But you have not read it, though.

Q88 Stephen McPartland: There has been a lot of talk today about a move towards a new research and development model. When you look at possible spin-offs from the company, in terms of what is happening at the facility, how much product services do you guys envisage giving to small companies, businesses and universities that you will be outsourcing the R and D to in the UK?

Dr McKernan: It is very early days. We are only 28 days in, post the announcement, but what I have said very publicly to people who have asked me is that we will consider any reasonable proposal from our colleagues, from people outside. We have had many. I am expecting more and, over the next 18 months to two years, we will put all of our effort into trying to get jobs for our talented staff. That is what I am focused on. Any sensible proposal will be considered.

Q89 Stephen McPartland: But as an organisation, Pfizer, you seem to be moving further away from doing your own R and D and asking other organisations to do it for you. In October, you signed a deal with an Indian company that will do all the R and D. I think it is called Biocon. It will produce biosimilar products, and you will just do the marketing. So it is almost like Pfizer is moving away from R and D. You mentioned earlier to Gavin that you are reducing your budget down to $6 billion from $8 billion to $8.5 billion, so it looks like you are moving more towards being a packaging and marketing company.

Dr MacKenzie: First of all, I remind you that we are talking about very substantial investment in R and D-$6.5 billion to $7 billion is a lot of money. We are trying through the changes to use that money as wisely as we possibly can, and set up the R and D engine that we have for future success. The deal you were referring to is actually about more established products not the innovative part of R and D that we do in our own laboratories in the UK.

Dr Brandicourt: Yes, I think the Biocon aspect is related to insulin. It is in area of biosimilar, you are right, where we have said that we want to be in the future, but again the engine and the $6.5 billion or $7 billion is still an amount that is extremely competitive within the industry, especially if you consider that our innovative pharmaceutical sales are about $40 million to $45 million. That gives you a ratio of 15% or 16%, which is very competitive within our industry. We are not abandoning or moving away from R and D. We were hoping to have left you with a message that we were trying to improve the output of what we are doing in our R and D.

Q90 Stephen McPartland: I am trying to identify whether you are reducing your R and D spend in the UK or are you going to be outsourcing the R and D spend to universities and smaller companies?

Dr Brandicourt: Collaborating with university and academic medical centres, as I said before, is part of the strategy. It is part of increasing output and diminishing and reducing risk, so certainly it is one option, but, again, we are going to focus on those five areas and continue to spend the same amount of money for each of these areas-or sometimes even more than we were in the past. So I think we are very serious about staying in R and D and becoming more productive.

Q91 Stephen McPartland: I think you said earlier on that you are withdrawing from two of the areas-I think it was respiratory and allergies-that are the main areas developed at the facility in Sandwich, so because you’re doing that you’re not going to replace the R and D spend in those budgets.

Dr McKernan: Maybe I could add a bit about the UK position here. We have actually about 200 collaborations with academia in the UK, and that goes all the way from PhD studentships to actually having staff embedded in a university, as we have at the King’s pain collaboration in London. So we will still be accessing the best external science that we can. We haven’t been able to go through all of those collaborations, but our expectation is the majority of those will continue after we’ve left Sandwich.

The other thing I would say is that although the research work that has been done in Sandwich won’t continue with Pfizer, if we can find a way for that to stay in the UK we would really support that, and that would be our preferred option.

Q92 Stephen McPartland: You mentioned earlier biotechnology. In my constituency, Stevenage, the Government have signed an agreement to develop a biotechnology park with GlaxoSmithKline. What do you guys think of those science parks and whether or not you could create your own biotechnology park in Sandwich?

Dr McKernan: We would really aspire to having that-to having the site changed to something that has many different companies and technologies, so that there would be many employers. We think that would be really the best that we could do for our colleagues as we leave the site. So I think that as pharma changes in the future we should see more technology parks and we should see a much more diverse industry.

Q93 Stephen McPartland: So is that an option that Pfizer’s actually pursuing-to leave a technology park behind?

Dr McKernan: Absolutely.

Q94 Chair: As a partnership in the same way GSK has?

Dr McKernan: It won’t be in the same way as GSK, because we have 3 million square feet. It’s a very large space with many different buildings in it, and I think to find one company that would be prepared to take on the entire park would be a real challenge, so I think the best chance we have is to look at re-zoning it, to make it into different units, and to really work hard to bring other companies in. Now, we have no guarantees yet; this is very early days. But that’s where we’re putting our efforts.

Q95 Gavin Barwell: My last set of questions really picks up where Graham left off. He asked you a question about what the UK Government could do to make the environment more attractive for you. In your initial answers you didn’t mention anything about the tax environment, although Mr Blackburn, when he came back the second time, did talk about fiscal incentives for innovation. So can I start with a general question? Did the UK’s corporate taxation rates have any bearing on the decision that you took, at all, or was it just about the five areas that you wanted to specialise in-and Sandwich didn’t look after those five areas?

Dr Brandicourt: The answer is no.

Q96 Gavin Barwell: The Association of the British Pharmaceutical Industry in its evidence to us said that the UK does not have a globally competitive corporate tax regime. Is that a sentiment that you would agree with, and, looking more generally to the operations that you’ll continue to have in the UK, perhaps Mr Blackburn could expand a little bit about fiscal policy and what the Government might do in that regard.

Richard Blackburn: It’s important to reiterate that this particular decision, relating to Sandwich, as we tried to make very clear, was an output of the global project that we have tried to describe in detail, and it wasn’t affected by any specifics of UK policy, fiscal or otherwise. The Government are sending positive signals to the industry with some of the things that they have announced-a desire to reduce corporation tax, the introduction of the patent box, and the R and D tax credit system are all considerations for companies looking to place R and D here. Given that this discussion is about our decision about Sandwich, it is important to say that, in our particular case with this particular plant, those weren’t considerations.

Q97 Gavin Barwell: I will end by asking about a particular thing that the Government did to try to help the company on that particular site. In 2009, a report on Kentonline said: "Traffic congestion outside one of Kent's biggest employers should be a thing of the past after an £87m road scheme was given the green light…with completion expected in 2012." Did the company lobby the Government to invest in that road scheme? There is a direct benefit to the company in improving the road infrastructure right outside your facility.

Richard Blackburn: I don’t know. We’ll have to come back to the Committee on that one.

Q98 Gavin Barwell: Well, if you don’t know, it would be good to have some clarification about whether that was something that you lobbied for. Let me ask you a hypothetical question to end with. If the company had lobbied for that road scheme, which is due for completion at just about the time that you are going to leave the site, what would you say to taxpayers in my constituency who would take the view that their money wasn’t very well spent in that regard?

Dr Brandicourt: I am not entirely sure. If it is infrastructure in the local area, you can see that as a potential benefit for what we are trying to do now, and all of the different things-contract, research and organisation-we are trying to bring to the site. So any investment in the past that has improved the site will, I think, ultimately benefit the site itself and the community around it.

Q99 Graham Stringer: You have been kind enough to write to us to say that there are certain areas about which you would be prepared to answer questions but, because they are commercially sensitive, you would prefer to do it in private.

Chair: Can we put the questions on the record and you can deal with them if you want to?

Graham Stringer: When are you going to make an announcement about the future of the site?

Dr McKernan: As soon as we have signed agreements and we know that there are companies that will take staff. We will, first of all, tell the staff-it is a very strong principle in Pfizer that staff hear about changes from their managers-and then we will obviously want to share the information with the local MPs and the taskforce. As soon as we have concrete information to share about partners and companies that come on to the site, we will make that available to people in the right order.

Q100 Graham Stringer: Can you give us an order of magnitude in weeks and months?

Dr McKernan: I wish I could.

Graham Stringer: So no, you can’t.

Dr McKernan: No, we are 28 days into the process and I can’t tell you when that will happen.

Q101 Graham Stringer: Have you done an estimate of how many jobs will be lost in the local community and the local area with contractors and local suppliers?

Dr McKernan: We have not put effort into making those calculations. We know the impact is substantial-we all know that. We have put our effort into mitigation and into attracting companies, talking to people, having companies visit, and supporting our staff in what they choose to do-that’s where we’ve chosen to put our effort.

Q102 Graham Stringer: You partially touched on this previously, but all the staff are on a 90-day notice. You have been keen to say-I think Richard would agree with you-that their skills are very important, so why not extend the 90 days?

Dr McKernan: We are in a 90-day collective consultation period. The notice period for staff depends on various factors. The decision on when work will stop is based on business continuity, so there are some people on site who will be there for many months-well into or towards the end of 2012. So what happens to each individual person depends on their notice period, the part of the business that they work in, the business continuity requirements for that part of the business, and other specific factors-if they have individual factors like their visa. There are many different components to when any one individual will be leaving the organisation.

Q103 Graham Stringer: We have touched on one potential use for the site. Are you looking at other uses for the site, and have you got proposals for the individual buildings on the site?

Dr McKernan: Well, it is a bit early to have many proposals for individual buildings. We do have the Government taskforce, which we welcome, and we have had a lot of support and suggestions from people in the local area. We have put together a brochure for the site to help the taskforce market it. We can show that to companies that might be interested in particular buildings. It has the information about the different types of buildings, the real estate and the site in general. In the time we’ve had, we have worked very closely with our colleagues in the local area-with Kent county council-to try to start marketing the site and to maintain business continuity and jobs.

Q104 Graham Stringer: Can you tell the Committee who Pfizer is in negotiations with?

Dr McKernan: I can’t tell you that. We are in negotiations under confidentiality. That is something we obviously can’t breach.

Q105 Graham Stringer: Can you tell us in private?

Dr McKernan: Only after we have asked the company if we can tell you, because within our confidentiality agreement we do not disclose our discussions unless the parties that we are in negotiation with accept that. I would be perfectly happy to go and ask them if they would be prepared to speak about that and have it made public to you.

Q106 Chair: We would have thought it obvious that this area of questioning would be put to you. I am disappointed you have not consulted the potential partner or purchaser. I would be grateful if you did just that and let us know, with the necessary degree of confidentiality, as soon as possible.

Dr McKernan: I will ask them if they are happy to have that confidential information shared.

Q107 Graham Stringer: Particularly as you had obviously thought about it, you should have written to us and said that you might tell us some things in private. That is hardly surprising. Do you intend to realise the capital receipt from the site or would you be prepared to put it down as a down payment to keep the site as a sector for employment?

Richard Blackburn: As we have said, it is very early days, and we are exploring a wide number of options.

Q108 Graham Stringer: There is a big principle involved there, isn’t there? When you go into negotiations, a big company like Pfizer will think, "Do we want to realise the full capital receipt or are we going to put down a subsidy-as a legacy or a dowry-to what’s happening?" You must have discussed that.

Richard Blackburn: Our view at the moment is that the single most important thing we can do is to try to attract partners to sustain as many jobs as possible for the longest possible time at the site.

Q109 Graham Stringer: The first questions I would ask if I were a potential partner are: "Are you going to donate the science?", "On what basis do you want to sell it?", and "Is it market value?" I simply find it very difficult to accept that you can start negotiations without having dealt with that for your own internal policy matters.

Richard Blackburn: I don’t think that that decision is taken at this point.

Dr McKernan: This is a site of 3 million square feet. If you know of a party that would be interested in taking on a site of 3 million square feet and the cost to run that site, I would be delighted to speak to them.

Q110 Graham Stringer: I don’t, but I was hoping that you would tell us who you were talking to.

Dr McKernan: We are not talking to anybody at the moment who would want to take on the site in its entirety because it is so big.

Q111 Chair: It is a big site and I am familiar with it, but if you split it up in the way that has been suggested-it does lend itself to that with the right bit of imagination-parts of it could be dealt with by one individual potential partner and parts by others. Is there no in-principle position that the company has adopted on how it will deal with anyone who, as a result of the publicity that this hearing is getting tonight, might have a good idea, along with several million pounds in the bank, and want to do something useful in Kent?

Dr McKernan: I would be happy to talk to them.

Q112 Chair: But with no corporate position having been adopted on whether you would donate the land, some of the land, or some of the buildings, or whether you would expect a full market valuation, that is a fairly open discussion, isn’t it?

Dr McKernan: It is a very open discussion, and I would like to see proposals. As I said, we are discussing with many parties what they are interested in, and they all have different views about what they would want and what would be a good proposition for them. If there are more companies that are interested in buildings or particular spaces, or in managing the site or parts of it as a biotech park, I would be happy to talk to them. The taskforce would be delighted to hear from them.

Q113 Graham Stringer: You cannot answer the question about a discount for the land value or including the land value, but would you be prepared to offer lower-than-market rentals or, initially, non-commercial contracts with businesses setting up on the site, and support them in that way?

Dr McKernan: These are some of the things that people have proposed, and we are discussing them.

Q114 Graham Stringer: You are discussing them. There is no policy prohibition to those proposals.

Dr MacKenzie: It is fair to say that it is very difficult for us to deal with a series of hypothetical business negotiation decisions, but it is also fair to say that we will listen to every serious proposal and nothing is ruled out.

Q115 Chair: Will decisions on such hypothetical propositions be made by you people or somebody else?

Dr MacKenzie: We will certainly be part of that discussion. In the end, once you look at the fully negotiated proposal, these are all business decisions that Pfizer needs to-

Q116 Chair: So you haven’t got the freedom to openly negotiate all the potential options, including, for example, being able to donate land to a partner if one came along?

Dr MacKenzie: I think we are very empowered to negotiate everything to the point where it becomes-

Q117 Chair: But you haven’t got the power to make the decision.

Dr MacKenzie: We have lots of decision-making authority, but again, it is a theoretical, hypothetical situation. What we need to do is welcome as many proposals as we-

Q118 Chair: Dr MacKenzie, you are used to dealing with lots of hypothetical things: that is the nature of the R and D activities in which you are involved. What is your best guess?

Dr MacKenzie: I have no best guess in terms of the nature of the relationship that we will have with people who come on to the site. It is very early in the process-I cannot emphasise that enough. We are wide open to all kinds of proposals and we welcome them all. If I have a message here tonight it would be that this is something that we welcome, so please come to us with your ideas.

Q119 Gavin Barwell: When you answered questions about the rationale for the decision, you gave clear criteria that were used to discuss the five areas that you were going to focus on. They were about where the best prospects were for medical advance and for commercial success. Has the board or anyone else taken a decision about the criteria that will determine what happens at that site? Are you primarily looking into the financial implications to the company, the implications to the local community, or what is best for the staff whom you will be losing there, and who you have expressed your regard for? Is there clarity about the criteria that you will judge the options on?

Dr MacKenzie: It’s going to be all those criteria. It’s going to be the job mitigation, the sustainability of those positions and the right business negotiations. It is far too early for us to say anything specific about those things, except to say that we welcome all ideas.

Chair: Thank you for your attendance.