As big pharma gets bigger, many large drug developers are finding that it makes sense to discover new development compounds by using small research groups.

Although recent deals, like Pfizer Inc.'s (PFE) $68 billion purchase of Wyeth (WYE), seek to increase efficiency, many companies are using smaller research groups in order to emulate the innovation seen at much smaller biotech companies.

"We believe that the big research organization model really doesn't work particularly well," said Rod MacKenzie, head of worldwide research at Pfizer.

The comments came from a panel discussion at the Windhover Pharmaceutical Strategic Outlook conference in New York on Wednesday.

MacKenzie said the old model was too unwieldy, lacking accountability, and overly bureaucratic. It wasn't uncommon to have multiple groups working on similar programs in multiple locations throughout the world, he said.

The newer model, which uses drug discovery units of 100 to 150 researchers, seeks to counteract those issues.

"We try to marry the strength of biotech spirit and entrepreneurship with big pharma's resources," said Zhi Hong, head of GlaxoSmithKline PLC's (GSK) infectious diseases drug-discovery division.

Glaxo is using a similar program to Pfizer in using smaller groups of researchers to become "biotech-like" in their flexibility and interactions.

Bristol-Myers Squibb Inc.'s (BMY) head of discovery Francis Cuss noted the mid-sized company isn't as worried about "being too big," but that it is also making similar moves.

The company has about 1,200 people in its discovery division, the same number as it did back in 1991, which is a stark contrast with Pfizer's 3,300 people working in its discovery programs.

Cuss tried to compare Bristol's structure with biotech giant Amgen Inc. (AMGN), rather than other more traditional pharmaceutical companies.

"What we are trying to do is completely change the culture, or at least more in the direction of that looser biotech culture," he said.

Amgen's research head, David Lacey, noted that its organization is similar in size to Bristol's, but stressed the importance of keeping researchers in smaller groups. As a biotech that looks more like a mid-size pharmaceutical company, Amgen has tried to ensure researchers feel like they have a "stake in the game."

But as these companies get larger and attempt to find innovative drugs, some also are becoming more dependent on external sources of finding new compounds to develop.

MacKenzie notes that Pfizer currently derives 20% of its discovery research from biotech and academic collaborations, but he estimates that figure will rise to 30% by the end of the year.

In contrast, Amgen estimated its external discovery research remains at about 10% to 20% of its total.

-Thomas Gryta; Dow Jones Newswires; 201-938-2053; thomas.gryta@dowjones.com