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No salesforce purge in Pfizer's $4 billion cuts

Published on 07/04/05 at 01:55pm

Pfizer has set out a $4 billion cost cutting programme for the next three years in an attempt to return to double digit earnings growth for shareholders.

The company's chief executive Hank McKinnell has admitted that 2005 will be a 'transition year' in which earnings per share would fall below Wall Street forecasts.

Many pharmaceutical industry observers had expected Pfizer to announce large-scale cutbacks to its global salesforces, especially in the US, a vital part of the business but one in which costs continue to grow.

In March, GSK chief executive Jean-Pierre Garnier said he believed Pfizer might lay off thousands from its salesforces, and indicated that this would trigger similar moves in his own company and across the industry.

But Pfizer has instead found cost savings across its business, from streamlining procurement, administration and manufacturing as well as re-organising its salesforce and squeezing greater efficiency from its R&D operations.

Karen Katen, head of the human medicines business said Pfizer's US field force had been recognised as the industry's best for the last 10 years, but now needed to be re-designed around changing market dynamics, including diminishing sales rep access to doctors.

"We are re-organising our sales regions around states to better align with our increasingly important Medicare and Medicaid customers," she said, but left the company's long-term plans for the size of the field force open to interpretation.

"We intend that the field force will remain at a scale that is consistent with meeting current customer needs, and with the capacity required to support the launches of the 20 products that we expect to file in the 2001-2006 period."

The $4 billion savings it wants to make by 2008 represents around 12% of Pfizer's current cost base.

The company says this new efficiency drive will help it return to double digit earnings growth as early as 2006, with an even stronger 2007 forecast.

Pfizer's business is coming under pressure from a number of sources, including patent expiries on brands worth $14 billion. Further concerns centre around the future of its Cox-II franchise and continuing pricing pressures and market acceptance of new products.

"We have reinvented ourselves many times and it's clearly time to do it again," McKinnell told analysts at the business review.

Dr John LaMattina, Pfizer's head of R&D reported that the company's pipeline has grown to 149 new molecular entities, 102 in early development, 33 in mid-stage, eight in the late-stages and another six which had already been filed. 

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