Case 25: Pfizer

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

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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

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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

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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

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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.

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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.

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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-Scott-

Rodino 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.

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 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

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  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

Opportunities

Varying benefits of merging with Wyeth .08 3 .24

Diversification of product offerings and make further .08 1 .08

inroads into emerging markets
Benefits of giving away Pfizer’s products to unemployed .15 4 .60
citizens

Strategic placement: Bold and innovative alliances with .15 4 .60

natives of the emerging markets
Threats

The loss of jobs .08 3 .24

Multiple and diverse regulatory environments to contend .06 2 .12

with from international and domestic.
Unexpected changes could yield unpredictable currency .10 4 .40
fluctuations
High competition in all its business segments due to the .10 4 .40
presence of many players in the industry.
United State’s drug market is growing similar to .06 3 .18
developing markets i.e. Venezuela.

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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.

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 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.

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 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 Weight Rating Weighted Score

Factors

Strengths

Increase in size and 0.05 3 0.15

cash flow

Product distinctive 0.06 3 0.18

competencies

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Distinct Research 0.09 3
organizations

Company structure 0.20 4 0.8

Patient and 0.10 4 0.4

prescription
assistance program

Weaknesses

Increase in size 0.05 2 0.10

U.S. vs. International 0.20 1 0.20

sales

Lacks Biologistics 0.10 2 0.20

Overreliance on 0.15 1 0.15

single product
(lipitor)

Total 1.00 1.98

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