Pfizer 2011 Annual Review | Pfizer: the world's largest research-based pharmaceutical company

Engine for Sustainable Innovation

We have launched a multiyear effort to accelerate Pfizer's R&D strategy and create an Engine for Sustainable Innovation (ESI).

Pfizer has responded to today's biopharmaceutical R&D challenges with a rigorous strategy to drive steady progress towards three horizons centered on delivering the portfolio, innovating new capabilities, and creating the R&D ecosystem of the future.

In 2011, Pfizer made significant changes in our R&D model to accelerate the implementation of this strategy, create an ongoing flow of important medicines and vaccines, and improve return on invested capital. These changes reflect our commitment to:

• Greater Focus
  Strengthening our scientific core and focusing on areas of greatest medical and commercial potential
• Strategic Externalization
  Forging novel partnerships to access the best science and focus internal activities on those driving competitive advantage for Pfizer
• Differentiated Innovation
  Positioning ourselves for breakthrough innovation by developing the approach and the culture to deliver the most important medicines and vaccines, with a special focus on Precision Medicine R&D—an approach to discovering and developing medicines and vaccines that deliver superior outcomes for patients, by integrating clinical and molecular information to understand the biological basis of disease

To initiate this acceleration effort, in February 2011 we selected the research areas in which we believe we can deliver the greatest medical and commercial impact. Based on these choices, we honed and prioritized our programs and portfolio. We also shifted our site network to more closely align with key hubs for science and technology, putting us in closer contact with leading biomedical research institutions and providing access to a deep talent base in the life sciences. We established new models to access the best external science and technology, and we created novel and flexible partnerships to externalize R&D services that can be done by specialized service providers enabling Pfizer to focus internal resources on the highest value activities. In making these changes, we reduced both our research site footprint and the number of vendors who provide services. Taken together, these and other changes are helping us improve Pfizer's performance as an innovator, while reducing the cost base from which we develop and deliver differentiated medicines and vaccines.

In summary, our ESI efforts reset our R&D investments in a careful manner, to create a higher return platform from which we can grow. Improving R&D return is a priority for the entire industry to sustain an innovative biopharmaceutical R&D model. It requires that we shift from a "high volume" R&D approach that was the industry paradigm for several decades to a more selective approach in which we strive to increase the value of every activity we undertake, reduce the cost of failures and increase our probability of success. That's a shift from pursuing high volume, to seeking to deliver high value. And it requires us to work differently. In the last year, Pfizer has addressed this challenge head-on.

With biomedical innovation at our core, everything we do is centered on inventing and delivering the novel medicines and vaccines that people need. That is our purpose, and it is well worth our efforts.

As referenced above, our R&D strategy spans three horizons, which are described below.

Horizon 1: Deliver the Portfolio

In 2011, a number of new medicines and indications emerged from our reinvigorated pipeline and were approved, underscoring our ability to translate science into patient benefit. Key regulatory authorizations included Xalkori in the U.S.; Xiapex, Vyndaqel and Eliquis in the EU; and Prevnar 13/Prevenar 13 for the prevention of pneumococcal pneumonia in adults over 50, in the U.S. and EU. As of February 2012, we had 90 new medicines and vaccine programs in development. These include treatments for diabetes, hypercholesterolemia, lupus, hematological and solid tumors, acute pain, Alzheimer's and other neuropsychiatric diseases, and a Staphylococcus aureus vaccine, as well as multiple indications for tofacitinib, our novel JAK-3 inhibitor already under review in Europe, the U.S. and Japan for rheumatoid arthritis (Click here for an overview of our pipeline). We continue to work to more effectively integrate scientific, business and financial parameters, so that we can deliver on the promise of our mid-stage pipeline of highly differentiated molecules and vaccines—and bring to market the next wave of important medicines and vaccines.

Horizon 2: Innovate New Capabilities

Several emerging science and technology platforms are driving important new R&D capabilities and the progress of our pipeline. Examples include ion channel technology that offers the potential for a new approach to treating pain and other disorders associated with this mechanism. Our recent acquisition of Icagen further strengthens our leading capability in this area. Our growing portfolio of antibody drug conjugates could yield powerful treatments for cancer, including inotuzumab, which is currently in Phase 3 studies for Non-Hodgkin's Lymphoma. Our vaccine technology platforms are making it possible for Pfizer to expand into vaccines for all ages and geographies, with an important program in prevention of meningococcal B disease in adolescents. We also are investing in the next generation of sophisticated small molecules, including tissue-selective drugs, such as liver-selective glucokinase activators against type 2 diabetes.

A new, more expansive approach to external collaboration is essential to our R&D strategy—forging partnerships that connect the assets and capabilities of different sectors to speed the development of new medicines. Our Centers for Therapeutic Innovation, or CTI, blends the research expertise of academics in disease, targets and patient populations with Pfizer's R&D knowledge, resources and development capabilities. CTI's innovative business model is based on partnerships to accelerate the translation of science into novel antibody-based treatments, and positions Pfizer to broaden and diversify its R&D pipeline with additional next generation therapeutics.

Horizon 3: R&D Ecosystem of the Future

In our third horizon, we will move to a much more networked R&D model—shaping the innovation ecosystem of the future and optimizing the promise of Precision Medicine. The R&D ecosystem of the future will scale and expand the emerging collaborations getting underway today, drawing on the total capabilities in the biomedical research community, reducing silos and increasing productivity. Precision Medicine R&D will be a major focus of our efforts. This approach should lead to better selection of disease pathways and identification of patient sub-populations that demonstrate better clinical outcomes. Ultimately, Precision Medicine R&D is intended to result in treatments that deliver bigger treatment effects, with acceptable or favorable safety profiles. As the recently fast-tracked and approved Xalkori (for ALK-positive Non Small Cell Lung Cancer patients) attests, Precision Medicine holds considerable promise for patients and our business.

We are driving a Precision Medicine strategy across Pfizer, with the following goals in mind:

• By 2012, half of proof-of-concept study starts will have a Precision Medicine approach.
• By 2015, two out of every three drugs entering Phase III will have a Precision Medicine approach.
• By 2020, four out of every five drugs launched will be Precision Medicine drugs.