Case 25: Pfizer

Porsha Erwin
Angel Harvey
Curtis Hubbard
DeMontrez Johnson
Michael Kitchens
China Thomas

1

Table of Contents

History……………………………………………………………………………..Page 3
Summary…………………………………………………………………………..Page 3
General Environment Analysis……………………………..……………………Page 5
Industry Environment Analysis………………………………………………….Page 6
EFE Matrix………………………………………………………………………..Page 9
Internal Competencies …………………………………………………………...Page 10
IFE Matrix………………………………………………………………………...Page 12

2

History of Pfizer
Pfizer Inc. is a research pharmaceutical company. Charles Pfizer started the company in Williamsburg, Brooklyn in 1849. During World War II, Pfizer became concretely established as one of the United State’s top drug companies by producing the antibiotic penicillin for soldiers out at war aboard. By the 1950's, Pfizer began to establish headquarters in Belgium, Brazil, Canada, Cuba, Mexico, and England. This gave Pfizer a platform to be able to compete globally. Expanding aboard is a powerful concept that most companies during this time did not consider.
In 2000, Pfizer merged with Warner-Lambert in order to acquire full rights to
Liptor. Lipitor is a popular drug used to lower cholesterol levels in the body. In 2002,
Pfizer decided to participate in another merger with Pharmacia. This strategic action lead
Pfizer to become the world's largest pharmaceutical devoted solely to healthcare. Of course we all know that this was not the only reason why Pfizer wanted to merge with
Pharmacia. Pfizer’s underlying reason for merging with Pharmacia was to gain the rights to the drug Celebrex. Celebrex is used to treat osteoarthritis, rheumatoid arthritis, acute pain, painful menstruation and menstrual symptoms
Pfizer Inc. is currently made up of three major core business segments. These segments are pharmaceutical, consumer healthcare and animal health. Pfizer's pharmaceutical segment provides treatments for cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, cancer, and eye disease. Pfizer's
Consumer Healthcare segment includes many over the counter health care products. The medications provided by this segment include self-medications for oral care, respiratory

3

health, skin care, hair growth, and tobacco dependence. Pfizer's Animal Health segment is mainly responsible for treatments for disease in livestock and domesticated animals.

Summary
Pfizer is caught in a business dilemma. Should they terminate the long-standing partnership with Eisai? Is it a wise move to acquire Wyeth? Pfizer decides to sell Eisai’s
Aricept, the world’s leading pharmaceutical for Alzheimer’s disease. In 2008, the sell from Aricept generated $482 billion alone. This was a twenty percent increase from
2007. Wyeth’s company does not boast of profound sells but the acquisition would be great for the diversity of products and further inroads to emerging markets.
Unfortunately, Wyeth has pending legal issues and a negative outlook in their finance department. Wyeth has a great deal of debt that they are currently carrying. Even though the Aricept sells carry a nice revenue stream, Pfizer’s pharmaceuticals division does an awesome job standing on its own. The pharmaceuticals division carries ninety percent of Pfizer’s revenue by itself.
There are some concerns with the company’s income flows as an entirety. The U
S pharmaceutical sells are lagging behind the international sells by a small margin that is rising at a steady pace. The Animal Health and Corporate/Other divisions’ revenue have very little significance on the company’s balance sheet. While on the topic of the balance sheet, there are some other areas that need to be further investigated. In the area of stockholder’s equity, it has fell 19.34 percent in two years. Also, Pfizer is considered to be the world leader in this arena, even though their earnings per share are the lowest in the industry. On another note, Pfizer is handling some pressing legal litigations. Some of

4

Pfizer’s patents have expired and others are not far behind. They are currently battling a case in Jamaica over patent rights.
In conclusion, Pfizer has many factors to consider concerning their partnership with Eisai. The same can be said about the decision making that needs to go into the possible acquisition of Wyeth. On a positive note, Pfizer is creating more revenue by continuing to venture into emerging markets and by entering into partnerships to assist in aide to those in poverty.
General Environment Analysis: The Five Forces Model of Competition

Threat of New Entrants: Moderate to High- Companies such as Pfizer, Merck,
Novartis and Sanofi- Aventis have substantial engineering capabilities that are hard to replicate; their products are protected by patents and have larger marketing budget to protect their brand. New legislation such as 1984 Waxman-Hatch Act, have made it easier for generic drug companies to enter the market.
Threat of Substitute Products: Moderate to High -due to patents that protect alternatives to current products, how these products are manufactured and where these products may be used. Some types of substitutes may be herbal remedies and generic brands of existing products that perform the same function and could take away from the demand of existing. Substitute products may also prevent patients from participating in other trials.
Rivalry among Existing firms: High- There are many players in the pharmaceutical industry that have revenues of over $3 billion. The pharmaceutical industry is expected double from $194 billion to $375 billion in 2016 in emerging market. Companies are finding ways to differentiate their products from competitors.

5

Competition may also be intense due to limited patient numbers. Companies are in a race to get their patents approved so that their drug is the first to market. Competition may also be intense do to a limited number of patients.
Bargaining Power of Supplier: High- Suppliers have the power to supply other pharmaceutical companies. Suppliers have the power to suppress supply which may delay production. Suppliers are also patients who participate in trials. These patients have the power to ask for more compensation, demand supplement resources and not fully cooperate with the experiment.
Bargaining Power of Buyers: Moderate to high – Buyers can negotiate a price reduction or threaten to go to rival companies if their needs are not meet. Hospitals and health care buy in bulk and ensure that pharmaceutical companies keep prices in check.
Industry Environmental Analysis

1) Economic forces:


There are over 4 billion people worldwide with incomes of less than
$3,000 a year.



The loss of jobs. The unemployment rate is 7.8 percent in the U.S



There’s opportunity for growth in emerging markets. Prescription drug sales increased in developing or emerging markets to 152.7 billion in 2008 up from $67.2 billion in 2003.



Find ways to market lower class people in emerging countries.



Pfizer pharmaceutical representatives had decrease to 90,000 from a high of 106,000 in 2006.

6

2) Social, cultural, demographic, and environment forces


Pfizer is known for their appeal to middle and upper class people



Pfizer partnered with the Grammeen Foundation in Bangladesh
(Muhammad Yunus founder won Nobel Peace Prize in 2006).



Pfizer partnered with Grammeen Health to bring sustainable health-care delivery models to the needs of 4 billion people worldwide.



Pfizer is giving away more than 70 of their prescribed drugs (Lipitor,
Viagra etc.) for up to a year to people who have lost jobs and had been taking the drug for three or more months)

3) Political, governmental and legal forces


Expiration or termination of the waiting period under the Hart-ScottRodino Act (this decision proposed that the Pfizer and Wyeth merger was compatible to the European Market.



Need approval of the Pfizer and Wyeth merger in China under the China
Anti- Monopoly Law.



Merger with also needs approval in Canada and Australia



Facing Litigation on the U.S and internationally:
1. Had a court case in Jamaica to protect a patented medication called amlodipine (Norvasc) used for treating high blood pressure to avoid complications of severe congestive heart failure, stroke, renal failure, and other vascular operations due to hypertension.

7

2. Several of the Pfizer’s products have expired and are set to expire:
Aricept and Lipitor (2010). Xalatan (2011). Geodon, Viagra and
Detrol (2012). Celebrex (2014). Zyvox (2015). Lyrica (2018).
3. Spent $900 million in June 2008 to settle pending U.S consumer fraud related class action law suits and personal injury claims involving
Celebrex and Bextra.
4. In 2009, agreed to pay a record $2.3 billion to settle civil and criminal charges over marketing of their recalled Bextra arthritis drug and three other medicines. ( The charges involved representatives of Pfizer promoting drugs for conditions they had not been approved for and giving doctors kickbacks to encourage them to prescribe the medication to patients.)
5. Pfizer will assume all litigation all responsibilities for pending litigation with Wyeth.
4) Technological forces


Must stay on top of research for new diseases.



Create medicine and vaccines that meet the need of their consumers and treat new diseases.



Must create a more efficient operation to maintain global market share
(Pfizer has the lowest earnings per share).

5) Competitive forces

8



Pfizer has many top competitors in the pharmaceutical industry. They include Bayer AG, Merck & Co., Novartis AG and many other smaller firms in the industry.



Novartis AG is second to Pfizer in the pharmaceutical industry; however they are the leaders in revenues (47.32 billion), gross margins (85.68 percent), operating margins (36.13 percent) and net income of 7.6 billion. (Current top 3 are Pfizer,
Novartis and Sanofi-Aventis)

Industry Analysis: External Factor Evaluation (EFE) Matrix

Key External Factors

Weight

Rating Weighted
Score

.08

3

.24

Diversification of product offerings and make further
.08
inroads into emerging markets
Benefits of giving away Pfizer’s products to unemployed .15 citizens 1

.08

4

.60

Strategic placement: Bold and innovative alliances with natives of the emerging markets
Threats

.15

4

.60

The loss of jobs

.08

3

.24

Multiple and diverse regulatory environments to contend with from international and domestic.
Unexpected changes could yield unpredictable currency fluctuations High competition in all its business segments due to the presence of many players in the industry.
United State’s drug market is growing similar to developing markets i.e. Venezuela.

.06

2

.12

.10

4

.40

.10

4

.40

.06

3

.18

Opportunities
Varying benefits of merging with Wyeth

9

Termination of its long-standing partnership

.08

2

.16

Decline in revenue sales

.06

3

.18

Total

1.00

3.2

Internal Competencies:
Strengths and weaknesses are said to be internal, that is, controlled by the company. Opportunities and Threats are outside the company's control and are therefore said to be external influences. Pfizer Inc.’s extensive remediation and improvement of its compliance systems and internal controls has insured that Pfizer remain the world’s largest research-based pharmaceutical company. Concurrently, the strengths of the company have been within the company’s management, marketing, research and development and products.
Pfizer's Executive Leadership Team is the nucleus of the company, whose management operations has ensured the maximization of new opportunities in biomedical research. Pfizer has created two research organizations that propels there R&D department. The PharmaTherapeutics Research & Development Group focuses on the development of small molecules; and the BioTherapeutics Research & Development
Group focuses on large-molecule research. These departments are responsible for the development of Pfizer well known over-the-counter medical products as well as medicines for livestock and pets. By having two distinctive R&D groups, Pfizer are able to be more efficient in the development of products that they launch on the market.

10

Moreover, drugs such as Lipitor, Viagra, Lyrica, Zeldox, and Draxxin which is used for cattle all thrive on the market due their development. Viagra is the world’s most famous erectile dysfunction pill; Lipitor, which is used to lower blood cholesterol, is the world’s most lucrative pill. Pfizer products range from oral care, skin and eye care to hair growth. Pfizer focuses on three horizons Pharmaceuticals, Animal Health and Corporate
& Other, which increases the productivity of products. This results in having better products that thrive globally once it goes on the market. In addition, Pfizer’s management has implemented a program that assists patients with their retrieval of Pfizer’s products.
The patient and prescription assistance program provide Pfizer’s medication for free or at a savings to patients who qualify. This program creates loyalty amongst the consumers and the products.
Furthermore, the marketing of these extravagant products helps Pfizer captivate their target market and audience. Acquisitions such as the deal with Wyeth furthered diversified Pfizer products and pushed them into new markets. Their marketing approach is transparent to consumers and promotes responsibility on behalf of the company. By educating patients and providers about health care treatments, consumers are able to assume that Pfizer has their best interest in those using the products. To ensure these guidelines and uphold high marketing standards, Pfizer has mandatory, company-wide training on standards of communication and conduct. This buyout help create an abundance in cash flow for the Pfizer company. The distinctive edge Pfizer has over its competitors is satisfying to executives but is also a threat to the overthrow of the company in the future.

11

Becoming complacent is the normality for most when you’re the leader and the competition plays no major factor to your success. This often account for the overthrow of many of those who serve superior within a given division. Pfizer success serves as a weakness because the development of new products doesn’t occur when there isn’t anyone threatening your leading product. Pfizer has not produce a new blockbuster drug since Viagra, which is nearly a decade old drug, despite having an annual research budget nearing $7 billion dollars. Now that the patent protection on key drugs like the antidepressant Zoloft is gone, Pfizer are facing threats of generic brand medicines to take place of their top selling drugs. The reliance on past successful product is now detrimental because uprising competitors such as Novartis are developing new products that can possibly captivate the market. With generic drugs as an option and less expensive, consumers may look to purchase these items due to economically hardship.
The lack of producing a new innovative drug has brought Pfizer to a crossroad of making critical decisions. Competitors and new drugs are rising and Pfizer must take advantage of its opportunities to counteract its weaknesses.
Internal Factor Evaluation (IFE) Matrix
Key Internal
Factors

Weight

Rating

Weighted Score

Increase in size and cash flow

0.05

3

0.15

Product distinctive competencies 0.06

3

0.18

Strengths

12

Distinct Research organizations 0.09

3

Company structure

0.20

4

0.8

Patient and prescription assistance program

0.10

4

0.4

Increase in size

0.05

2

0.10

U.S. vs. International sales 0.20

1

0.20

Lacks Biologistics

0.10

2

0.20

Overreliance on single product
(lipitor)

0.15

1

0.15

Total

1.00

Weaknesses

1.98

13