Pfizer to cut 10,000 positions
It also will close up to five facilities to reduce costs as patent protection expires for some of its key products.
NEW YORK - Pfizer Inc., struggling with fierce competition from makers of generic drugs, said yesterday that it would cut 10,000 jobs and close at least five facilities to slash its annual costs as much as $2 billion by next year.
The drastic measures by the world's largest pharmaceutical company highlight the challenges the industry faces. Besides losing protection for many drugs when their patents expire, big drug companies are struggling with a business climate in which insurers and other large purchasers of medicines demand lower prices and more evidence of products' worth.
Although big rounds of job cuts typically boost a company's stock prize, shares of Pfizer fell 27 cents, or 1 percent, yesterday to close at $26.95 on the New York Stock Exchange.
This is the second time in two years that the maker of the impotence drug Viagra and the cholesterol medication Lipitor has had a major cost-reduction plan to combat the loss of about $14 billion in revenue a year due to expiring patents.
When the patent on a name-brand drug expires, competitors can sell low-cost generic versions. Pfizer is at risk of losing 41 percent of its sales to generic competition between 2010 and 2012, Prudential analyst Tim Anderson said.
The latest cuts come on top of a previously announced plan to reduce costs $4 billion a year by 2008. The 10,000 layoffs amount to about 10 percent of Pfizer's global workforce and include the elimination of 2,200 jobs from the U.S. sales force, which Pfizer announced late last year.
The company said yesterday that it would cut 20 percent of its European sales force, but did not give a number.
Pfizer will close three research sites in Michigan, a manufacturing plant in New York and another in Nebraska. It also may sell a manufacturing site in Germany and close research sites in Japan and France.
In addition, Pfizer will restructure its U.S. commercial business into five units, each with a general manager responsible for that group's performance. It will also drop two areas of research and consolidate its development efforts.
"We must transform the way we've done business," said Jeffrey Kindler, who became chief executive officer last summer and chairman last month. "Incremental evolution is not enough. Fundamental change is imperative - and it must happen now."
Pfizer reiterated that its revenue would be flat this year and next, but said that it expected profit to jump between 6 percent and 9 percent in 2007 and 2008.
Analysts are skeptical that Pfizer's current and "pipeline" drugs - those in development - can generate enough sales to compensate for revenue it stands to lose. Pressure on Pfizer has intensified since safety issues forced it to halt development of the star drug in its pipeline, which was set to replace the best-selling Lipitor as it loses patent protection as early as 2010.
The antidepressant Zoloft lost patent protection last year, and sales of the drug sank 79 percent to $166 million.
This year, Pfizer will face generic competition on the blood-pressure medicine Norvasc, which brought in $4.9 billion in sales last year, and the allergy treatment Zyrtec, with $1.6 billion in revenue in 2006.
Pfizer's fourth-quarter earnings report, issued earlier yesterday, illustrated the company's woes.
Net income for the period rose sharply because of the $16.6 billion sale of its consumer health-care business last month, resulting in an after-tax gain of $7.9 billion. However, after adjusting for that gain and other items, Pfizer's earnings fell 15 percent on flat sales.
U.S. sales of Lipitor, Pfizer's top-selling drug, slipped 6 percent to $1.95 billion.