| Pfizer Inc., the world's largest drug company, announced Monday it's cutting 10,000 jobs, or 10 percent of its workforce, and shuttering at least five plants in the U.S. and abroad. Following big cutbacks by other industry players, it is the latest sign the golden age for pharmaceutical development that began more than a decade ago may be ending.
Analysts believe Pfizer's larger-than-anticipated cost-cutting may accelerate the downsizing trend among competitors.
Although big rounds of job cuts typically boost a company's stock prize, shares of Pfizer fell 27 cents, or 1 percent, to close Monday at $26.95.
The result could be a double-edged sword for consumers. They can expect lower overall drug costs as fewer new, high-priced name-brand medicines come on the market, but they aren't likely to see as many breakthrough treatments.
The drastic measures by the world's largest drug maker highlight the recent challenges faced by many pharmaceutical companies.
Four of the 10 best-selling U.S. prescription medicines are due to lose patent protection by 2010. Never have so many branded drugs, with annual sales of as much as $75 billion, lost their patents in so short a time, experts say. In addition, big drug companies are facing a business climate in which insurers and other large purchasers of medicines are demanding lower prices and more evidence of products' worth.
Meanwhile, drug companies can't come up with enough new name-brand medications to make up losses. One reason: Many drug companies have poured heavily into research for a handful of potential blockbuster drugs rather than many smaller bets. As several of those have faltered, companies have been left with little to fall back on.
Monday's announcement marks 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 revenues from 2005 to 2007 due to expiring patents. Pfizer 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 come on top of a previously announced plan to slash costs by $4 billion a year by 2008. On Monday, Pfizer said it would cut an additional $500 million to $1 billion in costs. However, it said some of the savings would be redeployed into the company so the total savings would be between $1.5 billion and $2 billion a year
The 10,000 layoffs 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 manufacturing plants in New York and Nebraska. It may also sell another manufacturing site in Germany and close research sites in Japan and France.
Pfizer also detailed how it would restructure its business in an effort to become more nimble and flexible. The U.S. commercial business will be divided into five distinct units, each with a general manager responsible for that group's performance.
A year ago, Merck & Co., the world's second biggest drug maker, sliced about 11 percent of its staff worldwide and shed five manufacturing plants. Smaller drug makers such as Wyeth Pharmaceuticals and Sanofi-Aventis have also made cutbacks.
Yet no one is feeling the heat more than Pfizer. The company has an anemic pipeline of promising new drugs and is racking up drug development failures.
Most disappointing was the failure in December of the company's once-promising torcetrapib, a drug that helps boost the production of so-called good cholesterol but was shown in clinical trials to increase blood pressure. It was slated to replace Lipitor as it loses patent protection as early as 2010.
Viagra, which accounted for $1.66 billion in sales last year, has come under pressure from Cialis, made by Eli Lilly and Co. and ICOS Corp., and Levitra, marketed by Schering-Plough Corp. and GlaxoSmithKline PLC.
Antidepressant Zoloft lost patent protection last year, and its sales sank 79 percent to $166 million during the fourth quarter. This year, Pfizer will face generic competition on blood-pressure medicine Norvasc, which brought in $4.9 billion in sales last year, and allergy treatment Zyrtec, with $1.6 billion in revenue in 2006.
Other troubles include worries around the company's long-awaited inhaled insulin product Exubera, which the company is currently rolling out. |
