Issue Date: January 29, 2007
Pfizer Unveils Big Revamping, Job Cuts
PFIZER CEO Jeffrey B. Kindler unveiled an extensive restructuring plan last week that includes the elimination of 10,000 jobs and the closure of manufacturing and research facilities around the world. The moves target annual after-tax cost savings of $1.5 billion to $2 billion by the end of 2008.
At a meeting with financial analysts, Kindler, who became CEO last August, outlined a plan to create business units that are smaller and more entrepreneurial. Three or four layers of management will be cut in many divisions, he said.
Research teams that now are scattered around the globe will focus on specific therapeutic areas at one of four major research centers. At the same time, Kindler said, the company will step up its program to obtain outside drug candidates, claiming that Pfizer plans to launch two new externally sourced products each year beginning in 2010.
The job cuts, which include the elimination of 2,200 U.S. sales positions announced last month (C&EN, Dec. 4, 2006, page 14), represent a 10% reduction in Pfizer's worldwide workforce.
Pfizer will close manufacturing sites in Brooklyn, N.Y., and Omaha, Neb., and is in labor negotiations over the proposed sale of its Feucht, Germany, site. The company plans to close three U.S. research sites, all in Michigan—two in Ann Arbor and one in Kalamazoo, where it will maintain manufacturing for its animal health business. Pfizer is negotiating the closure of research centers in Nagoya, Japan, and Amboise, France.
As part of the reorganization, Kindler said, Pfizer will step up research efforts in vaccines and antibodies. He also announced plans to exit discovery research in gastroenterology and dermatology. No cut in the firm's $7 billion annual R&D budget was announced.
Kindler's presentation followed Pfizer's announcement earlier in the week that it achieved 2% sales growth in 2006 to $48.4 billion and 4% earnings growth to $15.0 billion, for a profit margin of 31.0%. The company said it achieved sales targets for key products, nine of which logged sales above the blockbuster threshold of $1 billion.
Although Pfizer is financially strong, Kindler said, the restructuring measures are a response to a "profoundly changing business environment" in which several of the company's most profitable drugs, including top-selling Lipitor, are scheduled to go off patent in the next five years. The company has a deep pipeline holding more than 200 drug candidates, but the drug for which it had the highest expectations, the cholesterol treatment torcetrapib, was dropped last month due to safety concerns in clinical trials (C&EN, Dec. 11, 2006, page 11).
According to Michael Krensavage, a stock analyst with Raymond James & Associates, Kindler's arrival presaged big changes. "They cast an outsider to run the company, because the old way wasn't working," he said. "When your pipeline is producing significant new drugs, management is less important."
Bruce Paul DeMaine, chair of the American Chemical Society's Huron Valley Section, in Michigan, noted that the impact on the local labor market will be similar to the impact of auto industry downsizing, which saturated the region with white-collar professionals. "Now, with Pfizer, the same thing will happen in the chemistry and technical fields. It will probably dilute salaries," he said. About 2,400 positions will be eliminated in Michigan, most of them research-oriented.
The section met last Wednesday to discuss assistance for affected chemists and plans to hold a job fair at Eastern Michigan University in February or March.
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