May Day was Pfizer Day in San Diego, as the pharmaceutical giant officially opened an expanded research center in La Jolla. Gov. Gray Davis and other dignitaries praised Pfizer’s commitment to San Diego as marking the growth of local biotech from a research powerhouse into a massive engine of jobs and profits. Local dignitaries, such as Mayor Murphy and officials from UCSD and Science Applications International Corp. were on hand to celebrate the occasion.

When Pfizer bought Agouron Pharmaceuticals two years ago, it not only bought Agouron’s successful HIV drug Viracept, it acquired a firm foothold on Biotech Beach. Under its global research and development unit, Pfizer has turned that foothold into a massive local presence. Instead of sending the operation to its East Coast research hub in Groton, Conn., Pfizer made San Diego its West Coast research capital.

The Pfizer research unit employs 12,000 people worldwide; 1,500 in San Diego. It is pumping $165 million into the local economy to construct eight buildings that will total 800,000 square feet. Three of these buildings are already occupied and the others will be completed by 2004.

However, the arrival of such a huge concern — Pfizer says it has the world’s largest privately funded research division — is a potential problem as well as a benefit to local biotech companies. These companies often operate on tight budgets, and can’t match the money a big pharmaceutical company like Pfizer can throw around.

Jerry Yakatan, CEO of Avanir Pharmaceuticals, says he can’t compete monetarily with Pfizer if the big pharma wants to hire away one of his scientists. Pfizer’s profit was $2 billion for the quarter ended Dec. 31 and $8.3 billion for all of 2001. Avanir has just 50 employees and as of Dec. 31, $11.7 million in cash and a profit $2.7 million for its most recent quarter. By their respective financial numbers, then, Pfizer is roughly 1,000 times as big as Avanir.

“Given the perks and fringe benefits they offer, it’s very difficult to compete with them,” Yakatan says. However, more often employees of big pharmaceutical companies jump over to smaller biotech companies, says Karl Thiel, a Portland, Ore.-based biotech analyst at Murphy Investment Management.

Biotechs offer a more creative environment without the bureaucracy of larger organizations, Thiel says. Sometimes, these employees found their own companies. This is how Isis itself was formed. Stanley T. Crooke, Isis’ chief executive, was president of research and development for SmithKline Beckman Corp. when he decided to co-found Isis.

Yakatan is telling his employees they can make a much more meaningful contribution at Avanir than at a huge pharmaceutical company. “When you’ve got just 50 people, everyone is important,” he says. “That’s not the case at a company with thousands of people.”

Dave Matthews, the scientific founder of Agouron and head of X-ray crystallography for Pfizer’s San Diego research, says Pfizer’s resources help him work more closely with local biotech companies.

“Being part of a large organization like Pfizer gives us the monetary capacity to go out and look for new technologies, something we didn’t really have at Agouron,” says Matthews.

“Pfizer will help tip the balance from what is largely a research-oriented biotechnology community into one that has an ongoing, functioning, profitable wing to it,” says Thomas R. Scott, dean of the college of sciences at SDSU. “It brings a maturity, a size, a scale and a credibility to the community.”

— Bradley J. Fikes