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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline

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November 3, 2008

Pfizer: Strategy, Layoffs, and Money

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Posted by Derek

I shouldn't pick on Jeff Kindler, because I wouldn't want to be CEO of Pfizer, not the least little bit. But he gave an interview recently to the Financial Times, who asked him (naturally) about the Lipitor patent expiration. His answer:

We're facing a very significant loss of exclusivity in Lipitor at the end of 2011. We have a clear plan for positioning the company for strong, profitable growth after that. That plan consists of pursuing significant new opportunities for increased revenues starting with our internal pipeline, getting further growth out of our existing products, growing in the emerging markets, growing our business on off-patent products. We sell billions of dollars of off-patent products and in many parts of the world that's the most important opportunity to meet unmet medical needs and looking for other potential sources of revenues.

I realize that this is the only sort of answer that he could have given, and the only sort that the FT could have expected. But, still. Distill it down, and you have, basically, "We're going to get around losing all that Lipitor revenue by making more money on all our other stuff". Good to hear that, but I'm still not running out to buy any Pfizer stock.

And while we're on the subject of Pfizer, the layoffs there continue to grind on, from what I'm hearing. I don't think that people have quite heard yet if they're staying or going, but I assume that that will happen in time to give everyone a festive Thanksgiving season. In general, it sounds like the company is heading even further down the path of higher associate/PhD ratio that they announced a couple of years ago, with a lot of outsourcing in the mix as well.

But here's a question: how many of the people who will be laid off are people that Pfizer, at great expense, paid to move to Groton from Ann Arbor? Surely there will be a good number in that category, and they've just barely settled down in Connecticut by now. Pfizer's relocation seems to have been pretty generous - picking up property value differences on house sales and the like - and all for this?

Comments (23) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Kay on November 3, 2008 10:12 AM writes...

I stumbled over a tag sale in the lower level of one of their San Diego buildings. Much of the equipment was new, never opened. I am astounded that they can't bother to warehouse the stuff and then ship it out when someone makes a PO for same. Instead, they take 10 cents on the dollar.

Maybe they should try the new GSK 3-50 model.

Permalink to Comment

2. LabRatUK on November 3, 2008 10:15 AM writes...

Derek you bring up an interesting point regarding relocation. If a company closes a site/group is it actually worth relocating? What's to stop you then getting moved/made redundant a year later? Frankly the lack of forethought and planning across the big players in the industry is worrying. Everything appears so knee-jerk

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3. Hap on November 3, 2008 11:24 AM writes...

The part of his statement about their internal research makes no sense. One might ask why exactly weren't they trying to make money (or rather, as much money as possible) from their internal pipeline before? I thought the problem they had was the paucity of an internal pipeline rather than their inability to make money from the pipeline they do have.

Cutting people makes sense in the short run, but if they don't know what parts of their research generate products and money (let alone why), the cuts aren't likely to help them in the long run unless they're really lucky. Or there is no long run.

Making money from generics/off-patent drugs (unpatented combinations of off-patent drugs?) isn't bad, but lots of people are doing it, and at least some can probably do it cheaper.

Why does this convince investors, exactly?

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4. Mike W on November 3, 2008 11:28 AM writes...

"Or there is no long run."

That's been the trouble with Pfizer management's thinking for a long time now.

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5. fred on November 3, 2008 11:33 AM writes...

Kindler is either stupid or only interested in his annual bonuses. I suspect both. He clearly has NO understanding of Pharma. He's the farmer who eats the seed corn instead of planting it.

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6. c on November 3, 2008 11:49 AM writes...

The question is the extent to which a generic & BRIC play comes at the expense of investment in new therapies.

A related issue is the extent to which this strategy further alienates management from those more intimately involved in actual discovery.

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7. Nick K on November 3, 2008 11:49 AM writes...

Kindler's comments are utter platitudes. Would any company NOT "pursue significant new opportunities for increased revenue from our internal pipeline" or try "getting further growth out of our existing products", etc. He's like the captain of a ship with engine failure, drifting towards the rocks.

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8. KC on November 3, 2008 12:57 PM writes...

We can't commit the Concord Fallacy. Even though they dumped money into relocating people from Ann Arbor to Groton, it still is a good thing, for Pfizer, to cut them loose. No matter what Pfizer thought before, Groton is a waste - very little (i.e., nearly nothing) has come from there. Nothing of consequence, for sure.

Yeah, this has the effect of saturating the market with laid off Ph.Ds, something I'm keenly aware of as some people I'm quite close to search for new jobs. However, in terms of getting Pfizer viable again, this is a good thing. Frankly, Groton should have been closed, and Ann Arbor kept open, but that damage is already done.

I'm cautiously optimistic. I'm told that they're sitting on large cash reserves at this point, which they can use to buy currently under-valued small-midsized bio-techs to profit from their work. What they need to do is watch that they don't wind up with too much capital again, lest they end up with the same bloating problems as before. The only thing keeping them from being in a good position 8 years from now is whether they learnt their lesson about acquisitions or not.

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9. Jose on November 3, 2008 2:06 PM writes...

Pfizer and strategy in the same sentence? That's a sweet oxymoron!

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10. an onyx mousse on November 3, 2008 4:08 PM writes...

Pfizer has done this lots of times. When they acquired Warner-Lambert and Pharmacia, they relocated many people from sites that got closed (Augusta, GA, Skokie, IL, others) to other sites, who were laid off when those sites closed (Lincoln, NE, Holland MI, Ann Arbor, MI). They are still digesting all the staff from many acquisitions.

At their peak Pfizer had over 100 manufacturing sites, not counting R&D or other functions. Now I work at a largish biotech, and our profits per employee are still way higher than Pfizer. An M&A strategy is directly at odds with running efficiently.

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11. Patrick on November 3, 2008 4:21 PM writes...

You are too generous, Derek. How can you not pick on CEO Kindler after his dim-witted, MBA-speak answer to an important but simple question? I'm glad that I don't own any Pfizer stock in my 401K.

Permalink to Comment

12. Anonymous on November 3, 2008 6:23 PM writes...

derek.... everyone I'm sure is dying to know... are you an Obama man or a McCain man?

Permalink to Comment

13. Anonymous on November 3, 2008 6:29 PM writes...

and for the love of god, don't chicken out here... you're not running for public office - you can actually express your opinion. after all, if nature magazine can do it you can too!

:)

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14. satan on November 3, 2008 6:31 PM writes...

Kindler could have just said-

"We have no f**king clue about this drug discovery thingy. Me and my cronies are going to bail out of here before the s**tstorm hits. So long suckers"

Permalink to Comment

15. satan on November 3, 2008 6:39 PM writes...

That question could be posed in another way.

How do you wish to get ruined:

1] Through a empty suit fabian socialist supported by misanthropic environmentalists.

or

2] A rich loser who believes in trickle down economics and crony capitalism.

Honestly, is this the best we can do? I think that the US never had a real president since LBJ (and that was way before I was born).

//derek.... everyone I'm sure is dying to know... are you an Obama man or a McCain man?//

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16. MTK on November 3, 2008 11:51 PM writes...

Kindler's comments are completely meaningless. Not because it's "dim-witted" nor because he's "stupid". It's empty talk just like coach-speak is in athletics. It's a non-answer. Another example is my favorite from President Nixon's press secretary, Ron Zielgler who once said, "The President is currently monitoring the ongoing situation as it occurs." It conveys nothing which was exactly it's intent.

The joke is on anyone who reads anything into Kindler's statement.

Permalink to Comment

17. McCain on November 4, 2008 7:44 AM writes...

GO OBAMA!

Permalink to Comment

18. Don B. on November 4, 2008 10:24 AM writes...

Kindler is a "hamburger lawyer" what can you expect?

Don B.

Permalink to Comment

19. Hap on November 4, 2008 11:16 AM writes...

MTK,

Then why say anything? Actually, I can see why he has to say something (like a mother trying to soothe baby), but why would investors actually care? He isn't saying anything, and that could be because he doesn't have anything, because he has something but doesn't want to disclose it (because it might compromise Pfizer's ability to use the strategy to grab market share, though it might be in his best interest in the short term), or because it might not work and he doesn't want to overhype something that won't work. The lack of information doesn't clarify anything for investors or competitors, so why does it make sense for them to pretend that it does?

Permalink to Comment

20. MTK on November 4, 2008 12:40 PM writes...

Hap,

Why say anything? Just like a football coach you're required to say something.

I'm just saying there's no sense in any of us getting all worked up about it. As a friend of mine once said, "You're talking to alot, but you're not saying much."

Permalink to Comment

21. bigpharma on November 22, 2008 5:57 AM writes...

Smart people don't work for Pfizer. You can quote that. :)

Permalink to Comment

22. NotYetPfired on January 16, 2009 11:29 PM writes...

I'm still on the Titanic, someone get me off!

Permalink to Comment

23. Anonymous on January 18, 2009 2:15 PM writes...

it seems D day is @ the end of Jan or as soon as this week,"good luck" to all!

Permalink to Comment

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