Belt-Tightening at Pfizer?


By Amy Barrett The street is buzzing that changes are coming at Pfizer (PFE). Banc of America Securities analyst CJ Sylvester expects the drugmaker to announce a restructuring ahead of its Apr. 5 analyst meeting. Among the telltale signs says Sylvester: Pfizer's recent 10Q filing contained new language about how the company would account for items such as "a major non-acquisition-related restructuring charge."

Why the possible overhaul? Pfizer is facing big pressure as a number of drugs go off patent in the next few years. From 2005 to 2007 drugs generating $14 billion in revenue are likely to see generic competition. At the same time, Pfizer's big painkiller Celebrex, which racked up $3.3 billion in sales last year, is under pressure. The Food & Drug Administration will hold three days of hearings beginning Feb. 16 to evaluate the safety issues surrounding drugs like Celebrex.

Those painkillers, known as Cox-2 inhibitors, have come under tough scrutiny in the wake of Merck's (MRK) withdrawal of its Cox-2 drug Vioxx last fall. And a study recently linked Celebrex to cardiovascular problems. Analysts warn even if the FDA allows Celebrex to remain on the market, Pfizer is likely to experience a huge drop-off in sales.

SLASHED HEADCOUNT. And that isn't the only blockbuster at risk. Indian drug company Ranbaxy Laboratories has challenged two key patents on Lipitor, Pfizer's $10 billion cholesterol-lowering drug. A decision is expected later this year. A loss on one or both of these patents could allow Ranbaxy to launch a generic Lipitor years ahead of the expected 2011 timeframe Wall Street now expects.

Even without that major hit, analysts figure Pfizer is ready to tighten the belt. Banc of America's Sylvester expects the restructuring could include headcount reductions of 8,000 to 10,000 people, generating cost savings of up to $1.5 billion annually. But he doesn't expect a big cut in Pfizer's sales force.

Sanford Bernstein analyst Richard T. Evans agrees. He thinks Pfizer Chairman and CEO Henry A. McKinnell Jr. is betting he'll need that army of sales reps when Pfizer gets ready to launch a potential blockbuster drug for raising HDL cholesterol, the good kind, in 2008.

McKinnell says Pfizer is reviewing its operations and looking for ways to improve efficiency and streamline operations. But he adds that Wall Street will have to wait until the April analyst meeting to find out whether that culminates in a restructuring. Barrett is BusinessWeek's Philadelphia bureau chief


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