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The pharmaceutical industry has a drug problem: it can’t find enough new ones. Companies are under pressure to invent the next Prozac or Viagra, but without more efficient and cost-effective ways to develop new drugs, those kinds of blockbuster medications will remain once-in-a-decade discoveries. “It costs too much, it takes too long and it produces too little,” says Rod MacKenzie, a vice president in Pfizer’s Global Research and Development division, of the industry’s traditional method of drug discovery. “The problem is, how do you change the engine while the vehicle is still moving?”

One solution to the problem of retooling Pfizer’s $4.4 billion R&D engine is its Discovery Technology Center, a gleaming two-and-a-half-year-old facility in Cambridge, MA, where the company’s scientists team up with academic researchers and small biotech firms to develop computerized methods for screening thousands of potential drug molecules per day. Key to the lab’s strategy are its small size (just 70 researchers out of the 3,000 involved in drug discovery across Pfizer) and its location, at the center of the Boston-area biotech hothouse and a healthy distance from Pfizer’s main R&D facility in New London, CT. “We’re small and we’re offline in the sense that we don’t have the same day-to-day pressures of productivity that the other sites do,” says MacKenzie, who directs the center. “And what happens here in Cambridge is that people beat a path to our door,” including researchers from some of the area’s top academic institutions.

The pharmaceuticals industry is hardly the only sector where researchers are under increasing pressure to find new ways of zeroing in on high-growth products and technologies. MacKenzie’s critique of conventional research methods in the drug industry could be applied equally well to the chemical, aerospace, transportation, telecommunications and information technology sectors. And in each of these sectors, leading companies are looking for new ways to make their research groups nimble enough to react to ever changing technologies-and market opportunities.

For many, that means getting their researchers more connected-with each other, with their firms’ customers and, as at the Discovery Technology Center, with their peers in academia. It can also mean looking more closely than ever before at their portfolios of research projects, personnel and capabilities, and loading this information into so-called knowledge management databases that guide decisions about which potential products and technologies to pursue. These approaches and other new strategies are gaining urgency as growing economic uncertainty-coming after years of good times and loose wallets-reminds chief technology officers of the need to prove the value of their companies’ R&D spending.

Technology Review’s second annual Corporate Research and Development Scorecard shows respectable increases in R&D spending in the 2001 fiscal year at the majority of companies. But the scorecard does hint at stormy financial days ahead. Spending is flat or declining at some of the United States’ most notable technology firms, including Exxon Mobil and computer and telecommunications giants such as Compaq Computer, Silicon Graphics, Computer Associates, 3Com, Qualcomm and AT&T. And while most firms’ R&D spending has remained steady this year when measured as a percentage of revenues, forecasts for plummeting revenues as the economy heads into a recession are likely to translate into less money for research next year. “We have seen over the last several years a tremendous increase in the rate of growth of industry R&D spending, but you can’t sustain that rate of growth economically,” says Jules Duga of Battelle, a nonprofit research institute in Columbus, OH. What’s more, he says, “The cost of doing R&D keeps going up, so you have to spend more and more to gain less.”

What the scorecard data don’t show is the growing collection of industry R&D collaborations and new management approaches designed to counter just these challenges. Technology companies, in essence, are looking for ways to get a bigger bang for their R&D buck.

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