PFIZER 1

Pfizer and challenges of the

Global pharmaceutical industry

MGMT 4605:11
Business Competitive Strategies
Instructor: Dannie Brown

Omar Abdellatif (20057575)

Michel Marticotte (20110377)
January-28-14

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Identification:
Pfizers new CEO (Jeffrey Kindler) undertook a new strategy followed by
actions in response to the companys current disappointing decline as well
as the worldwide changing market for the pharmaceutical industry. R&D
costs since the year 2000 were up to 870 Million Euros and growing with
only 1/3 of medicines covering the actual development costs. With the
increasingly fast growing generic market resulting in 20% growth over the
expected 5-8%, led and helped by governments encouraging the practice
due to their low profit margins and costs as well as efficiency; this poses
an incredibly dangerous threat to the large firms of the pharmaceutical
market with more and more forgone profits expected to arise. This all
came into effect after German government demanded price reductions
across the board of all types of drugs in 2005 as well as the
Pharmaceutical Price Regulation Scheme (PPPS) coming into effect on
the 1st of Jan 2005 with goal to set profit boundaries on all categories of
medicine. Mainly Pfizer R&D, in 15 years, failed to deliver new molecules
in the pipeline for development and the ones that were delivered showed
tragic side effects and were immediately disregarded. Pfizer lost Patents

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for Zoloft and Norvasc in 2006 and 2007 respectively, and showed a
growth rate of -0.7 from the year 2005-2006 due to the weakness of their
pipeline; however they remain the top pharmaceutical company due to
their marketing and sales power. But Pfizer was still the biggest spender
on R&D with no return on investment, therefore; competitors are getting
ahead in their pipelines which would ultimately lead to the fall of Pfizer to
another.

We need to put in consideration that Pfizers vision and mission is all

around Research, safety and development. Theyre not a company to
stand on status quo, they lead the research field with the highest
expenditure rates per company.

Analysis and Evaluation:

Pfizers new CEOs decisions seem to have been successful with the
decision to make a Pfizer branded generic of Zithromax after it lost the
patent. It allowed them to gain 49% of the market share for this drug
alongside numerous companies that started making a generic for it as
well. Kindlers attempt to integrate GMs fast falling policy is needed in
this situation concerning Pfizers current standing. While Lipitor is losing
momentum and contributed 40% of the company profit, all revenue

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margins are steadily declining worldwide due to pricing regulations, and

there seem to be no new approved molecules on their pipeline to secure a
profit continuing operations and development of new drugs.

In attempt to salvage the situation, Pfizer acquired Pharmacia in 2004, a

generic drug manufacturing company to secure a position in the generic
market. The decision made to lay off 10,000 employees and close down
Research centres seem to be adequate for the situation even if the stock
market reacted differently, the R&D was continually failing and soon
enough the sales force layoffs will be justifiable in the future when there
are no new products to market. The decision was merely an attempt to
balance the Profit and Loss ratio of the company (PNL). Kindlers actions
towards salvaging the situation and working on the effectiveness on
selling minor profit drugs to major profit drugs is well in place.
Broadcasting the pipeline however is an amazing decision with 2 opposing
possible outcomes, it allowed competitors to see what they are trying to
develop but it also gave a chance, to small research labs and
biotechnology firms to jump in and save them money and time if they
already achieved something Pfizers R&D were still manoeuvring around.

More Information for Analysis and Evaluation:

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Product development phase takes around 10 to 15 years and 1/3 of all

medicine actually generated revenue due to high R&D cost.

In 2004, 51.6 Billion was spend in Research and development.

46.1$ Billion revenue for Pfizer in2006

Pfizer Growth was (-.07) from 2005 to 2006 and an average annual
growth of 4.8% from 2001 to 2005.

Alternatives:
1. With the Pipeline broadcast in effect, Pfizer can further develop the
idea to foster an environment of collaborative research by inviting in
Biotechnology and Research labs as well as University Research
centres who have attained molecules that are ready for drug
development, no matter what therapeutic area it might be in, to
present them to Pfizer, with its outstanding and highly effective
sales and marketing force this can be highly beneficial to further
assist in their pipeline development and drug portfolio. Similar to
the Viagra development case (Not mentioned in Text), Pfizer had no
intention in sexology and was researching the molecule for
antianginal use, however it failed but showed effects of sustained

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erectile in tests; which led to the development of Viagra for erectile

dysfunction and before it could even be patented it proved to be a
blockbuster.
2. Another alternative is to repeat the success it had with Zithromax
generic manufacturing. Pfizer using its brand name to foster and
develop generic drugs of their own or other blockbuster drugs
should gain them revenue in the market while forgoing all the R&D
costs. It proved successful with Zithromax with 49% of market share
after losing the patent, while competing with large number of
generic manufacturers who copied the drug; this is a big
achievement and should be repeated. Although this strategy seem
to imply that Pfizer is giving in to the status quo and failure in its
R&D department, Kindlers comment saying there are no more
sacred cows can be understood in this context as well. Its a
feasible and profitable opportunity, using the brand name and
marketing power for their advantage in this situation is an option to
be considered.

Recommendation and Implement ability:

In our opinion since Pfizers shares are plunging and the market place
is sceptical, in order for Pfizer to keep their strong figure and maintain

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track with their vision and mission, they should go with the first
alternative and start advertising their willingness to take on under their
wing successfully developed molecules from research, biotechnology
and university labs and start using them under their own pipeline. Such
a strategy is achievable using their market force and their well
educated R&D through experience. Since GSK started doing so led by
the statistics of continually improving innovative success of
biotechnology and Research labs, Pfizer should follow and, would have
an advantage over GSK due to their market power and branding.
Theres no doubt that Pfizers pipeline is suffering and that a youthful
new innovative front is whats needed to get them back on track. As
well as developing and attacking new indications for drugs currently on
their portfolio; Astrazeneca developed Seroquel for Schizophrenia (not
mentioned in Text) and soon after its launch other uses arose and later
on got approval for use in indication for OCD, Anxiety and Personality
disorders, which gave them more market share in other therapeutic
areas than expected. Continuous development is needed under low
cost, and decentralization is the way to go with the emergence and
development of independent biotechnology and University research

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labs. Pfizer should learn from its R&D experience and start
accommodating the developing research market.