06 Feb, 2009

Pfizer CEO: Wyeth merger will bring what’s needed

Eager to dispel doubts about the difficulties of executing Pfizer Inc.’s $68 billion tie-up with Wyeth, Pfizer’s CEO said it will be done more like microsurgery than just stitching two huge corporations together. Jeffrey Kindler has spent two years transforming Pfizer into smaller, entrepreneurial research and marketing business units, making the companies easier to combine, he said in his first in-depth interview since the deal was unveiled Jan. 26. “We could not have done a deal like this a year ago. The company wasn’t strong enough yet,” Kindler told The Associated Press. “We had to get our cost structure in line,” bring in the right leaders and reduce bureaucracy. Kindler, 53, a Harvard Law School graduate and former McDonald’s Corp. executive, said his team made changes faster than anticipated. The need for speed was obvious, with more than a quarter of revenue coming from cholesterol fighter Lipitor, the world’s best-selling drug. Generic competition will slash its $13 billion in annual sales soon after its patent expires in November 2011. With that looming, Pfizer had to undertake changes inside and out. Internally, Pfizer has set up research units in single locations, focused on one therapy area, each with its own chief scientific officer who decides which experimental compounds advance into risky and expensive human testing. It’s also cut the number of areas in which it does new research. Likewise, sales units focus on individual markets – primary care, specialty care and emerging markets. Like competitors, New York-based Pfizer has been eliminating jobs steadily; it just began another round of nearly 8,200 cuts. The knife will come out again after the Wyeth deal is completed late this year, but Kindler said “each of those units can conduct an integration that is much more manageable in size and scope than if you were just looking at the entire two companies.” He’s already working with Wyeth’s CEO, Bernard Poussot, who is staying on through the transition to help with decisions about which workers and research programs remain, and what happens to spl ecific facilities, including Wyeth’s posh campus in Madison, N.J. With many workers worried about getting pink slips in the worst economy of their careers, Kindler said he’s concerned about morale but that staffers know changes are unavoidable. All the recent changes give him “confidence that we’re going to be able to integrate this transaction much more effectively and much more quickly than was done in the past,” Kindler said. Two previous mega-acquisitions dragged out but helped Pfizer leapfrog to the world’s biggest drugmaker: buying Warner-Lambert Co. in 2001 and Pharmacia Inc. in 2003. “We certainly made some mistakes in the way we integrated those two large organizations,” said Martin Mackay, who as president of Pfizer Global Research & Development oversees its current 14,300 employees. He said Thursday Pfizer learned important lessons, particularly how to keep up productivity in research. “Programs that are in the late-stage development, essentially don’t touch them at all,” Mackay said. He noted that Pfizer shifted to its current business-unit model last year but still increased the number of drugs in late-stage human testing from 16 to 26. Mackay is eagerly eyeing Wyeth’s products, experimental compounds and even manufacturing technology in diseases Pfizer is targeting. He said that once he knew Pfizer was going to do a deal and started looking at companies, he knew Wyeth’s research organization was the one he wanted. Tops are Alzheimer’s disease and cancer drugs, infectious disease treatments and vaccines and other biologic drugs, which are medicines made in living cells. Pfizer’s and Wyeth’s programs are complementary, he said. In Alzheimer’s, Pfizer makes a popular symptom treatment called Aricept. Both companies are testing experimental drugs, both pills and injected drugs, so after the acquisition they will have more “shots on goal,” as Mackay puts it. In cancer, Pfizer has Sutent, approved for kidney and gastrointestinal tumors. “We are looking at blockbuster potential” for those two cancers, McKay said. Meanwhile, Sutent is being tested in more than 200 different studies, including for colon, lung, breast, liver and prostate cancer. Wyeth has its own cancer compounds in development. “We have a real chance to make inroads,” he said. Analysts are split on how the marriage will work out, but nearly all agree it will solve Pfizer’s short-term problem of revenue crashing in 2012. Adding Wyeth’s products, including blockbuster biologic arthritis treatment Enbrel and a host of consumer health products and veterinary medicines, will quickly boost Pfizer’s revenue about 50 percent, and profits could rise with cost cuts. About 15 percent of the combined workforce, nearly 20,000 jobs, will be eliminated, counting the 8,200 cuts just begun. It’s the longer term that concerns many analysts. Despite huge investments, Pfizer’s research organization has come up with few big drugs since impotence pill Viagra. Most major pharmaceutical companies have had similar droughts. Kindler argues the deal will give Pfizer financial flexibility to invest in the business and perhaps restore its dividend, which was halved to generate money for the deal. About one-third each of the $68 billion is coming from Pfizer’s cash, new Pfizer shares and $22.5 billion from bank loans. The credit crisis meant Pfizer had a tough fight to borrow so many billions, despite its solid credit rating and pile of cash. “It’s clearly a very, very difficult credit environment, and it required a great deal of constructive work between our treasury department and the banks,” Kindler conceded. Some analysts see the deal as proof Kindler’s predecessor, Hank McKinnell, erred in deciding to sell its profitable consumer health unit in 2006 to focus on prescription drugs. “Decisions that were made in the past were made for the right reasons, and I’m looking at the environment that we’re in today and … the foreseeable future,” Kindler said. “This is the right thing for us to do at this time.” (Credit: www.miamiherald.com)

Trackback URL: http://www.msc-headhunters.de/pfizer-ceo-wyeth-merger-will-bring-whats-needed/trackback/