Pfizer Plans Staff Reductions, Rationalization of Manufacturing and R&D Operations

January 25, 2007
Patricia Van Arnum
ePT--the Electronic Newsletter of Pharmaceutical Technology

In an effort to improve its revenues in the short and long-term, Pfizer, Inc. announced plans to reduce its workforce by 10%, close three manufacturing facilities, rationalize research and development operations, and restructure its US pharmaceutical operations. The announcement comes as the company expects its 2007 and 2008 revenues to be comparable to 2006 levels.

New York, NY (Jan. 22)-In an effort to improve its revenues in the short and long-term, Pfizer, Inc. (www.pfizer.com) announced plans to reduce its workforce by 10%, close three manufacturing facilities, rationalize research and development (R&D) operations, and restructure its US pharmaceutical operations. The announcement comes as the company expects its 2007 and 2008 revenues to be comparable to 2006 levels.

“Pfizer is a great company with a great future,” said Pfizer Chairman and CEO Jeffrey B. Kindler, in a company release. “We are facing significant challenges, however, in a profoundly changing business environment. I believe we must fundamentally change the way we run our company to meet these challenges and to take advantage of the diverse and attractive opportunities that we see in the marketplace.”

Pfizer outlined several priorities: maximize revenues in the short and the long term; establish a smaller and more flexible cost base; create smaller, more focused, and entrepreneurial business units; reduce internal bureaucracy and management layers to increase productivity; and increase its engagement with customers, patients, physicians, and other collaborators.

Reduce staff and rationalize manufacturing and R&D operations
Pfizer plans to generate cost savings through site rationalization in research and manufacturing, streamlined organizational structures, staff-function reductions, increased outsourcing, and procurement savings. The company plans to achieve an absolute net reduction in the pretax total expense component of its adjusted income of between $1.5 billion and $2 billion by the end of 2008.

The company’s cost-reduction initiatives will eliminate about 10,000 positions or about 10% of Pfizer’s total worldwide workforce by the end of next year. This includes the US sales organization reductions announced earlier. In Europe, Pfizer will take steps to streamline its operations, with a proposed reduction to its European field force of more than 20%, subject to consultation with works councils and local labor law.

Pfizer will continue to consolidate its worldwide manufacturing operations with the closure of two additional manufacturing sites: Brooklyn, New York and Omaha, Nebraska. The company also will pursue the sale of a third site in Feucht, Germany, subject to consultation with works councils and local labor law. With these moves, Pfizer will have reduced its global network of manufacturing plants from 93 in 2003 to 48 by 2008.

Restructuring R&D
To increase its revenue potential, Pfizer will step up its R&D investments in promising areas, which include biotherapeutics. The company will strengthen its capabilities in vaccines and antibodies. It also plans to launch two new externally sourced products each year beginning in 2010.

“We recognize that business development is critical to our ability to drive revenue growth in the medium to long term, along with growing our core products, successfully launching new products, and developing and accelerating our internal R&D pipeline,” said David Shedlarz, vice-chairman of Pfizer, in a company statement. “We are making the changes needed to our strategy, approach, and capital allocation to best ensure our success in this area.”

In R&D, Pfizer is planning to close three research sites in the United States, all in Michigan: Ann Arbor, Esperion, and Kalamazoo. The company, however, will continue to maintain a large manufacturing and animal-health presence in Kalamazoo. Pfizer also is proposing to close research sites in Nagoya, Japan and Amboise, France, subject to consultation with works councils and local labor law.

Restructuring US pharmaceutical operations
Pfizer also is restructuring its US-based pharmaceutical operations into four distinct business units, each led by a general manager with profit-and-loss accountability, and a fifth business unit responsible for customer support and specifically focused on managed care and access. Each unit will have dedicated resources in medical, marketing, and sales support. There is no planned change in the field-force organization as the company says these units mirror the existing structure.

Pfizer says it will simplify its R&D organization and improve productivity by consolidating each of the research teams focused on given therapeutic areas (TAs), now distributed in multiple locations worldwide, to one of four major sites. Each TA will be run by a single leader with more responsibility, authority, accountability, and control over resource decisions, said the company.

Pfizer plans to exit discovery research in gastroenterology and dermatology, but will continue to develop compounds already in the pipeline and to seek external opportunities in these areas. The company has a goal of delivering four new internally generated products per year by 2011.

Reducing middle management
As part of an ongoing effort to cut down on bureaucracy and reduce management layers, Pfizer says it has eliminated many unnecessary committees and cross-functional teams and is in the process of cutting at least three to four layers of management in its pharmaceutical, R&D, and manufacturing divisions, as well as company-wide support functions.

“By reducing middle management and increasing spans of control, we’re getting leaders closer to colleagues and customers and giving colleagues a clearer line of sight to those aspects of the business for which they are accountable,” said Kindler. “As a result, our managers will delegate, empower, and focus on developing colleagues more than ever, and our colleagues will grow and take on more responsibility than ever.”

Engagement with external sources
Pfizer also said it will experiment with new approaches to bringing its products to market, seeking new and more effective ways of communicating with physicians and patients, inviting payers earlier into the development process, and enhancing its collaboration with academic and other research institutions. The company also says it plans to play a more significant role in the national dialogue on improving the delivery of care and patient access.