Online Exclusive: Pfizer Transitions Forward

Pfizer major restructuring plan will shutter facilities and eliminate 10% of its workforce

 

By Joanna Cosgrove

Despite posting 2006 revenues of more than $45 billion (+2%), Pfizer is countering a series of business reversals with a dramatic restructuring plan aimed to funnel more cash into the science that fills its new product pipeline.

In the last six months, Pfizer has installed a new leadership team and reduced its U.S. sales force by 20%. According to chairman and chief executive officer Jeffrey Kindler, those changes were but a sign of things to come. During the company’s 2007 analyst meeting held this week, Mr. Kindler said future success required fundamental changes. “We must transform the way we’ve done business in the past in order to be successful in the future,” he said. “Incremental evolution is not enough. Fundamental change is imperative and it must start happening now.”

Rather than relying on blockbuster primary care market medications to be the company’s bread and butter, Mr. Kindler said Pfizer’s future is hinged on a diversified portfolio of unique medicines aimed at specialty markets and complemented by value-added products and services.

Mr. Kindler also promised Pfizer’s bureaucratic reputation would be a thing of the past and that the company would no longer be closed off to ideas generated outside its walls. “In the future we must look for innovative ideas wherever we can find them,” he said.

To establish a more cost effective cost base, Pfizer anticipates generating cost savings through site rationalization in research and manufacturing, streamlined organizational structures, staff function reductions, increased outsourcing and procurement savings. The cuts amount to the elimination of 10,000 total positions (roughly 10% of Pfizer’s total global workforce) by the end of 2008.

There will be a reduction of the European field force by 20%, as well as the closure of three manufacturing sites: Brooklyn, NY, Omaha, NE, and Feucht, Germany. From 2003 to 2008, Pfizer will have reduced its network of manufacturing plants around the world from 93 to 48.

In additional, five R&D sites were also proposed to be shuttered: Ann Arbor, MI, Esperion (also in Ann Arbor) and Kalamazoo, MI (where the company will continue to maintain its manufacturing and Animal Health presence), Nagoya, Japan and Amboise, France. The company plans to consolidate its research team sites.

“These and other actions will allow us to reduce costs in support services and ‘bricks and mortar’ and to redeploy hundreds of millions of dollars into the discovery and development work of our scientists,” said Dr. John LaMattina, president of global R&D.

The impact that Pfizer’s internal and external restructuring plans will have on the company’s outsourcing relationships remains to be seen. In the company’s press statement, it indicated that establishing a smaller and more flexible cost base will involve increased outsourcing. The company also plans to in-license more compounds, which would create a defacto outsourcing setup for discovery.

There has been no official word of the impact of this reorganization on Pfizer’s outsourcing division, Pfizer CentreSource, but a statement is expected before the end of the month.