Pharmaceutical Executive Digest Europe - January 28, 2009 - (Page 11) How will Pfizer fight failure? Jacky Law speculates on the increasingly beleaguered Pfizer’s next corporate move. P fizer is no normal company. As recently as 2007 it was still the industry’s largest player with $47.5 billion coming in from pharma sales alone. And its rise to the top had been nothing short of spectacular, betting so confidently on Lipitor when it bought the drug’s marketing partner WarnerLambert in 2000 for a price most people at the time thought was way over the odds. That confidence, which enabled Pfizer to trump all rival bids for WarnerLambert by $20 billion, seems now to have evaporated as it undergoes an equally spectacular and welldocumented decline. Despite spending around $7 billion a year on R&D for years, the highest in the industry, the last major product to have emanated from its own research effort was Viagra in 1999. Shares, which were trading at around $26 when CEO Jeff Kindler took over from Hank McKinnell in 2006, were worth $17.45 in January 2009 — and that’s after the company had spent billions buying back stock (at prices far higher than $17.45) to stem the fall. Meanwhile, employee numbers, which stood at 122,000 in 2003. have steadily fallen to around 86,000 today and the cull continues beyond the sales reps to managers and scientists. Pfizer’s rise and fall simply exemplifies the weakness of Big Pharma’s traditional business model based on big drugs, big sales forces and big profits. In one sense, Pfizer’s rise and fall simply exemplifies the weakness of Big Pharma’s traditional business model based on big drugs, big sales forces and big profits. But because its experience has been more extreme than its rivals it attracts more attention. Indeed, the mere mention in a recent interview with the Financial Times that it wasn’t ruling out the possibility of a major deal, was enough to put the rumour mill into overdrive. Goldman Sachs even upgraded the stock from ‘sell’ to ‘hold’ regardless of what it might acquire. A major deal is certainly possible. An analysis by EvaluatePharma back in August 2008, when Pfizer was still resisting the idea of a mega-merger, showed the company to be the only one of the global majors to have a decent cash position and no serious financing commitments (see Table 1). Analysts, realising this possibility, have responded to the prospect of a mega merger with all the enthusiasm of gossip columnists speculating over the marriage prospects of A-list celebrities. They forget that all the evidence suggests megamergers tend to erode rather than create value. They forget that all the industry dynamics suggest downsizing is the order Table 1: Global majors with the strongest net cash positions. Net Debt Total & Cash debt Roche 9834 (5435) Cash 15,268 Enterprise Comment value 147,517 Ongoing bid to acquire remaining 44% of Genentech for $43.7 billion, likely to rise to around $56 billion. Pfizer Takeda Novartis Daiichi Sankyo 9485 5792 5467 4874 (16 ,694) (737) (10,731) (0) 26,179 6529 16,198 4874 120,481 37,215 116,298 16,853 Already used cash for $8.8 billion acquisition of Millennium Pharmaceuticals. Ongoing bid to acquire a 77% stake in Alcon for $39 billion. Ongoing bid to acquire a controlling stake in Ranbaxy Laboratories for $4.6 billion. 13 CALENDAR Upcoming pharma industry events 2 NEWS Teva and Lonza join forces 3 FROM THE EDITOR Crises of confidence 5 2009 FORECAST Why US pharma experts are still optimistic
Table of Contents Feed for the Digital Edition of Pharmaceutical Executive Digest Europe - January 28, 2009 Pharmaceutical Executive Digest Europe - January 28, 2009 Contents News From the Editor 2009 Forecast Strategy Jacky Law Calendar Pharmaceutical Executive Digest Europe - January 28, 2009 Pharmaceutical Executive Digest Europe - January 28, 2009 - Contents (Page 1) Pharmaceutical Executive Digest Europe - January 28, 2009 - News (Page 2) Pharmaceutical Executive Digest Europe - January 28, 2009 - From the Editor (Page 3) Pharmaceutical Executive Digest Europe - January 28, 2009 - From the Editor (Page 4) Pharmaceutical Executive Digest Europe - January 28, 2009 - 2009 Forecast (Page 5) Pharmaceutical Executive Digest Europe - January 28, 2009 - 2009 Forecast (Page 6) Pharmaceutical Executive Digest Europe - January 28, 2009 - 2009 Forecast (Page 7) Pharmaceutical Executive Digest Europe - January 28, 2009 - Strategy (Page 8) Pharmaceutical Executive Digest Europe - January 28, 2009 - Strategy (Page 9) Pharmaceutical Executive Digest Europe - January 28, 2009 - Strategy (Page 10) Pharmaceutical Executive Digest Europe - January 28, 2009 - Jacky Law (Page 11) Pharmaceutical Executive Digest Europe - January 28, 2009 - Jacky Law (Page 12) Pharmaceutical Executive Digest Europe - January 28, 2009 - Calendar (Page 13)
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