Focused on the bottom line
New Pfizer ($PFE) CEO Ian Read took the top spot in late 2010 with a mandate to make the sluggish drug giant more nimble, if it ever was.
Read is enormously important to the industry because his initial solution amounted to a sea change--a $1.5 billion reduction in spending on research and development. That, so far, has translated into about 4,220 job cuts announced over the previous year as of Jan. 4, including 1,100 in Connecticut, and most of the 2,400 jobs at Pfizer's Sandwich, U.K., lab, as reported by The Guardian and others. Observers will be tracking those changes closely, wondering if drastically reducing in-house R&D in favor of later-stage drug development can be more successful.
Wall Street analysts loved the greater focus on the bottom line, and now Pfizer's competitors--including Eli Lilly, AstraZeneca and others--now face profound pressures to do the same unless they can improve the performance of their similarly struggling R&D operations.
The other part of the equation: Read swore off large acquisitions in favor of licensing deals and companies with mid-to-late-stage drug candidates, a potentially cost-effective way to outsource development and fill the gaps created by gutting the company's in-house R&D. Partnerships, however, remain a mixed bag for Pfizer. Earlier this year, Pfizer wrote off its $725 million partnership deal with Medivation after that company's Alzheimer's drug Dimebon disappointed in Phase III trials.
Still, the job's not over yet. Read committed to an ongoing review of all of the company's operations, with some big changes. He's streamlined some global management functions and Pfizer announced plans to shed its $3.6 billion animal health business and its $1.9 billion nutritionals business and focus on its late-stage pipeline. But some observers want the company to commit to far more aggressive downsizing and streamlining.
Read, meanwhile, is trying to keep Pfizer in play with generic competition through discounts and co-pay assistance programs, a unique solution also likely to be closely watched by industry.