Pfizer unveils $4bn cost cutting effort

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The world's number one drug company, Pfizer, yesterday announced
cost-cutting measures aimed at saving $4 billion (€3.1bn) by 2008,
as it faces a raft of patent expirations on its top drugs and
continued pressure on its painkiller Celebrex (celecoxib),
writes Phil Taylor.

The move, widely anticipated by industry observers, sparked a 4 per cent hike in the company's share price as investors responded to the action plan, which will include staffing reductions, a realignment of sales force priorities and, potentially, plant closures.

Several of Pfizer's major product lines will lose patent protection and face competition between now and 2007, while the market share of the company's COX-2 inhibitors - Celebrex and Bextra (valdecoxib) - is being affected by the withdrawal of Merck & Co's similar drug Vioxx (rofecoxib) on safety grounds last year.

Pfizer chief executive, Hank McKinnell, told an analysts' meeting in New York yesterday that "2005 will be a transition year. In addition to the loss of exclusivity on several important products, we are facing a number of uncertainties. These include the outlook for our COX-2 franchise, continued pricing pressures, and market acceptance of new products."

But there was a positive message from chief financial officer David Shedlarz. He said that revenues would be around the same in 2005 as last year, when the company pulled in $52.5 billion, while earnings per share would come in at around $2.00, some 6 per cent below the 2004 figure. However, restructuring and cost-cutting would prompt a return to double-digit earnings growth in 2006 and 2007.

Staff reductions will come mainly from attrition rather than redundancies, according to Pfizer, which is planning a reorganisation of its sales force around states to bring it into alignment with Medicaid and Medicare customers. But the company was reticent on the details of where the savings will come from; Pfizer has already shaved $6 billion a year of its costs in the wake of its recent acdqusitions of Pharmacia and …. Pfizer has already revealed plans to cut the number of plants it operates to 73 by the end of the year, from 93 two years ago.

The $4 billion in annual savings from 2008, accounting for some 12 per cent of Pfizer's annual costs, will come at a cost of $5-$6 billion, Shedlarz told the meeting.

Meanwhile, speculation ahead of the meeting that Pfizer may rein in its spending on R&D proved unfounded, and the company said that it had earmarked $8 billion for this purpose in 2005, up from $7.7 billion last year.

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