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Pfizer sheds jobs, facilities to cut costs

By ASSOCIATED PRESS
Published January 23, 2007

NEW YORK - Pfizer Inc., struggling with fierce competition from makers of generic drugs, announced Monday that it will cut 10,000 jobs and close at least five facilities to slash its annual costs by up to $2-billion by next year.

The drastic measures by the world's largest drugmaker highlight the challenges faced by many pharmaceutical companies recently. Besides patent expirations, big drug companies are facing a business climate where insurers and other large purchasers of medicines are demanding lower prices and more evidence of products' worth.

Although big rounds of job cuts typically boost a company's stock price, shares of Pfizer fell 27 cents, or 1 percent, to close Monday at $26.95 on the New York Stock Exchange.

It's the second time in two years the maker of Viagra and Lipitor has announced a major cost-reduction plan to combat the loss of about $14-billion in revenue this year due to expiring patents. The company is at risk of losing 41 percent of its sales to generic competition between 2010 and 2012, according to Prudential analyst Tim Anderson.

The latest cuts, forecast to save $1.5-billion to $2-billion, come on top of a previously announced plan to cut costs by $4-billion a year by 2008. The 10,000 layoffs amount to about 10 percent of the company's global work force and include the elimination of 2,200 jobs from the U.S. sales force, which Pfizer announced late last year. The company said Monday it would cut 20 percent of its European sales force but didn't say how many jobs that will be.

Pfizer will close three research sites in Michigan and two manufacturing plants in New York and Nebraska. It may also sell another manufacturing site in Germany and close research sites in Japan and France.

U.S. restructuring

Pfizer also 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.

"I believe we must transform the way we've done business in the past in order to be more successful in the future," said Jeffrey Kindler, who became Pfizer's chief executive last summer and chairman last month. "Incremental evolution is not enough. Fundamental change is imperative - and it must happen now."

Analysts are skeptical Pfizer's current and pipeline drugs can generate enough sales to compensate for revenue it stands to lose. Still, Pfizer reiterated it will introduce six new products a year beginning in 2011, four from its own research and two from collaborations or acquisitions.

Pressure on Pfizer has intensified since safety issues forced it to halt development of the star drug in its pipeline, which was slated to replace the bestselling Lipitor as it loses patent protection as early as 2010.

Pfizer's fourth-quarter earnings report, issued earlier Monday, illustrated the company's woes. For the quarter, Pfizer's net income soared to $9.45-billion, or $1.32 per share, from $2.73-billion, or 37 cents per share, a year ago. However, excluding the gain from the $16.6-billion sale of the consumer division, earnings totaled $3.05-billion, or 43 cents per share, down from an adjusted $3.59-billion, or 49 cents a share, a year ago. Revenue was essentially flat at $12.6-billion, compared with $12.55-billion a year ago.

[Last modified January 23, 2007, 00:04:53]