Pfizer Case Study

Pfi zer, lnc.Vijaya Narapareddy University of Denver - 2009 On May 9,2009, Japanese pharmaceutical manufacturer Eisai threatened Pfizer to terminate its long-standing partnership on the news of Pflzer's proposed acquisition of Wyeth. Eisai's venture with Pflzer dates back to the mid-1990s when Pfizer entered into an alliance to sell Eisai's Aricept, the world's leading medicine fur the treatment of Alzheimer's disease. Headquartered in New York City, Pfizer generated about $482 million in 2008 from the sale of Aricept, an increase of 20 percent fiom 2007, as shown in Exhibit l. Pflzer vows to fight back, claiming that Eisai lacks any legal basis for termination of their alliance. Pfizer engages in the discovery, development, manufacture, and marketing of prescription medicines for humans and animals worldwide. Some of its well-known drugs are Lipitor, Viagra, Lyrica, Zeldox, and Aricept used for people, as well as Draxxin used fbr cattle. The proposed Ptizer acquisition of Wyeth, a company based in Madison, New Jersey, for a cash and stock purchase of $68 billion would enable Pflzer to diversity its product offerings and make further inroads into emerging markets. Exhibit 2 provides details of the benefits of the proposed Wyeth acquisition. Pfizer operates from three business segments, Pharmaceuticals, Animal Health, and a third one that contains "Corporate & Other." The Pharmaceuticals business offers human health products for the treatment of cardiovascular diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye disease, endocrine disorders, and allergies, among others. Pfizer is well known fbr its prescription medicines and the many over-the-counter medical products it offers. The overthe-counter self-medications range from oral care, upper respiratory health to tobacco dependence, skin and eye care, and hair growth. The Animal Health division offers medicines for livestock and pets. The company also manufactures empty gelatin capsules and engages in producing contract and bulk pharmaceuticals/chemicals, which it classifies under "Corporate/other" business. The company's revenues by segment are provided in Exhibit 3 and reveal that the Pharmaceuticals business dorninates the portfolio with over 90 percent of the revenues generated each year, whereas the Animal Health division accounts for only 5 percent each year. The "Corporate/other" segment is the smallest of all, with less than 3 percent of total sales. Pfizer's international operations contributed $27.9 billion in revenues in 2008 as opposed to the $20.4 billion generated in the United States. Exhibit 4 provides detailed statistics of revenues by business segment and geographic region. This exhibit indicates that the double-digit declines in U.S. sales of Pharmaceuticals have been off'set by double-digit growth in international sales. From Case 25 of Strategic Management: Concepts and Cases.l3le. Fred R. David. Copyright O 201 I by Pearson Edr.rcation. Published by Prentice Hall. All rights reserved. ZY 59 billion in 2006 to $14.34 billion. multiple sclerosrs (Rebil) and chronic obstructive pulmonary disease (Spiriva) (a) Represents direct sales under license agrcement with Eisai Co.8Vo 2006 93. Bio Therapeutics Research Group . 129 2007 2006 1. General. . neovascuiar (wet) age-related macular degeneration (Macugen).com Total Revenues by Business Segment 2008 Pharmaceuticals 91. Pfizer's income statement is provided in Exhibit 5. ls Primary care Soecialtv Care .42 billion.14 billion.189 Parkinson's disease (Mirapex).6 billion in 2006 to $7.314 /o?\ .OVa TOTAL REVENUES l00.3 billion. respectively.PFtZER. Ltd. Therapeutics Research Group .\A (2) JU 2. arnrntnav - Bioloqics 7. Significant in Emerging lvlarkets . - 2009 Revenues by Key Products ($ in PRODUCT millions)-continued YEAR ENDED DECEMBER 31 PRIMARY INDICATIONS % CHANGE 08/07 07to6 2008 All other: ZyfieclzyfiecD Alliance revenues Allergies Alzheimer's disease (Aricept).8Vo Animal Health Corporate Other 5.10 billion. .. global companies like Pfizer are subject to unexpected changes in revenues and profits resulting from unpredictable cunency fluctuations. Enhanced in Emerging Markets Market presence Soirrce. Market presence . Note that Pfizer's sales in 2006. and $48.54 billion in 2008. tr b . whereas Selling.9 billion in 2008.87o 2007 91.. Pfizer's net income was $19.trce: Pfrzer AnnuaL Report (2008'1.251 r.57c 5.j7o Sor. www.47o 2.2Vo 4.37 billion. .070 100. 21 . During the same time period. Certain amounts and percentages may reflect rounding adjustments Sottrce: Pfrzer's2008 Fctnn 10k. In addition to multiple and diverse regulatory environments to contend with.phzer.569 1. hypertension (Exforge and Olmetec). respec- tively.jVc 2. 118.N Diversified businesses Research Pf lizer Global R&D . Primary care Specialty Care Oncology Established Products F F O .. 200'7. Note that Pfizer's Research & Development expenditures rose $7. The Proposed Wyeth Merger Benefits to Pfizer Wyeth diversifies offering and expands presence in EMS Biopha rmaceutica Pharmaceuticals .7% 100.87o 2.afi 2008 were approximately $48.. . rNC. .541 1. and Administrative (SG&A) expenses declined from $15.Vaccines . Operating a global business is associated with complex challenges.'. and $8.. ' . $48. Animal Health Lapsugel Consumer Health Nutritional Health Racorrrh E . 15 billion in 2008. and Novartis AG are Pfizer's direct competitors in the pharmaceutical industry. the recipient of the Nobel Peace Prize in 2006 for his efforts in alleviating poverty through microfinancing. consumers.13 percent). and net income of $7. commercial.59 billion in 2008. However. Pfizer spent about $900 million in June 2008 to settle pending U.S.13 billion in market capitalization. Of the four maior players in the pharmaceutical industry.PFTZER.250 employees. It has 80. Pfizer is in a contentious battle in a Jamaican court to protect its patented medication amlodipine (Norvasc) used for treating high biood pressure to avoid complications of severe congestive healt failure. The Wyeth acquisition is fraught with potential risks. gross margins (85. but also overseas. a decision to be issued by the European Commission under the EC Merger Regulation declaring that the proposed merger is compatible with the Common Market. Pfizer recently entered into a partnership with Grammeen Health. and other vascular complications due to hypertension.. Pfizer is the largest company in this strategic group. large and small.84 billion in 2006 ro $111. Bayer AG. Merck & Co. and the approval of the proposed acquisition under the China AntiMonopoly Law and by regulators in Canada and Australia as well' The acquisition would also increase Pfizer's debt because it is set to take on about $i22. and Novartis is Swiss. renal failure. The company is fighting the Jamaican court's decision that Pfizer's patent on its drug expired in Jamaica as it had expired in other countries. tNC. Outcomes of these pending claims can overburden Pfizer and mitigate potential benefits fiom the Wyeth acquisition. Note that total stockholders' equity iell 19. as indicared in Exhibit 8. Pfizer will assume all responsibilities for pending litigation facing Wyeth. stroke.3 billion in 2008. Some of these approvals include the expiration or termination of the waiting period under the Hart-Scott-Rodino Act. in the industry. consumer fraud-related class action lawsuits and personal injury claims involving Celebrex and Bextra. with Novarlis trailing closely behind. Pfizer faces high competition in all its business segments due to the presence of many players. For example. securities.56 billion in 2008. alliances. Wyeth is currently facing various iawsuits and litigation claims related to patents. - 2009 Pfizer's consolidated Balance Sheet in Exhibit 6 reveals that total assets shrunk fiom $114.34 percenr. A comparison of key indicators included in Exhibit 7 shows that Pfizer leads the pack. second to Novarlis. environmental and tax laws. to bring sustainable health-care delivery models that address . and total liabilities increased lrom $43. there are severai regulatory hurdles to overcome not only from regulators in the United States.96 billion. whose founder is Mohammad Yunus. note that Pfizer has the lowest earnings per share ($1.32 biilion). operating margins (36. which experienced a decline of revenues from $48. With $97.86 percent). Several ofPfizer's key products are slated to expire in the near future. Like other companies in the industry. As shown in Exhibit 9.42 billion tn2007 to $48. Assuming the merger agreement moves forward unencumbered. Servicing this much additional debt is a risky move for Pfizer. Pfrzer is determined to become the leading biopharmaceutical company in emerging markets through bold and innovative parlnerships. First and foremost. mergers and acquisitions. from $71 . product liability.5 billion of debt in addition to assuming Wyeth's debt.23) and price-earnings (PlE) ratio among its direct competitors. and government investigations.48 billion in 2006 to $53.36 billion in 2006 to Xi57. but it is the leader in revenues ($1'7. In addition to traditional partnerships. Pfizer also faces iitigation in several courts around the world. At home. Pfizer recently partnered with world-c1ass foundations and nonprofit organizations like the Grammeen Foundation in Bangladesh. Ptizer and Merck are American companies Bayer is German. an affiliate of Grammeen Foundation. 185 NiA N/A Source: Cornpany Form l0kReports Pfizer's Product Patent Expiration lnformation Drug U. Margins 91.89V0 36.of patrents In Emerging lvlarkeis --l { rround the r. socially resFansibie and c*mtnercialiy _ irnr We w!11.l37a 2l. ..2009 Pfizer's Mission and Vision in Emerging Markets ffi 1.5.60Vo Net Income EPS 7968 1.99l0rl 33s Market Cap Employees Revenue Gross Margin Operat..107o 253.8670 23.. - 2009 Overview of Direct Competitors Pf izer Merck 52..000 41.+J 2.31B 54.pftzelcom ?6 . iI:vt:ii..93B 1.lin$ trlnrka:i:.PFTZER.328 85.". ffi]H n*"0* ..418 76..:d lor lrirrnrq it'! bgsr talent areiilthcare 1*.193 5.trr::c a leading biopharmaceuliEal conrpary ir F!!r..00Vo 5..1vr.53V0 42.i bolcl shl innovalive r!:i{rh O:rtirnis r...1 00 Novartis 86. Basic Product Patent Expiration Year Aricept Lipitor Xalatan Geodon 20lo 20 t0 2011 2012 Viagra Detrol Celebrex 20t2 2012 20r4 2015 2018 Zyvox Lyrica Chantix Seizentry Sutent Source: SEC Form 2020 2021 202r l0K.r t']rr:i1i!s qEver feaeheal llefor€ In lfavldB n. rNC.'798 J. .138 80...vorld in i i ffi$ on innovative.298 73.250 98.:il[ili9.. S o u rc e : ww w.]!rd:tlliigi 6f affcrdable nlrnoi rrr li! ttc)qil:z..49M 7l.. ffiil"o'" *nn''.03Vo 25.r l... February 21.79B Industry 13..rri. zet7 'erpu1 'eurq3 olur flprder Surpuedxe sI rezlJd'€lonzeue1 ol uonlppe uI'senssl qcns srolruoru qcrq.nq '.^Aou eJe stuJg l€^rJ stl puu rezg6 'eldoed sselc-.LL 'Jezlld roJ uBId cl8eluJls Jee.uo1 uo 8ut -snroJ oslu .(-eorql Jualc u eJuderd 'serrunoc SurSrerue ut eldoad sselc-re.^d 'qli€eH SIAU ol Sutproccu 'EI1Z q uollllq S9Z$ qtuor plnoqs reqlunu 5002 - )Nr 'uSzlld .{e>pn.erue IuoU senueler s(Jezgd '6002 Jo relrenb lsrg eq] 3ur. pu€ 'eISSnd '{Ir.reddn pu€ -elpplul uo Sutsnco3 u€ql reqled 'reuenb t€t{t sonue^er rozgd lelol uollllq 8'0I$ Jo 1no 'uot11tq ?'lg ore^\ sle>l -reu SurS. 100 219 Advanced and/or metastatic renal cell carcinoma (mRCC) and refractory gastrointestinal stromal tumors (GiST) 847 581 166 Camptosar Metastatic colorectal cancer Breast cancer 563 465 969 401 903 (42) 16 7 Aromasin 320 25 Ophthalmology: Xalatan Claucoma and ocular hypertension Replacement of human growth hormone 1. _ 2OO9 Revenues by Key Products ($ in millions) PRODUCT PRIMARY INDICATIONS YEAR ENDED DECEMBER 31 % CHANGE 2008 Cardiovascular & metabolic diseases: 2007 q 1' 675 3.764 1.244 846 589 499 $ r2.886 4.190 l.745 t.573 I R?q I .604 1.214 4t5 1.866 101 (2) (38) 173 Chantix/Champix Caduet Cardura An aid to smoking cessation Reduction of LDL cholesterol and hypertension 568 506 370 538 Hypertension/Benign prostatic hyperplasia (6) Central nervous system disorders: Lyrica Epilepsy.110 358 Alzheimer's disease Epilepsy and post-herpetic neuralgia 482 387 350 401 431 2 20 ( (.1 15 182 515 638 743 429 Bacterial infections Fungal infections Diflucan Urology: 373 1.401 2. INC.007 854 7s8 i8 with bipolar disorder Zoloft Aricept(a) Neurontin Xanax/Xanax XR Relpax Depression and certain anxiety disorders 539 531 2.489 t ton 944 632 438 .7 s) 12 496 316 t0) 8 (13) Anxiety/Panic disorders Migraine headaches 325 -tlf 321 286 z 10 Arthritis and pain: Celebrex Arthntis pain and inflammation.657 18 18 (2) (10) 106 28 46 21 23 (31) (5) Vagra Detrol/Detrol LA Oncology: Sutent Erectile dysfunction Overactive bladder 1. acute pain 2.453 q 10 Endocrine disorders: Genotropin 898 843 '795 66 continued CU . post-herpetic neuralgia and diabetic peripheral neuropathy fi bromyalgia Schizophrenia and acute manic or mixed episodes associated 2. o?q t2 Infectious & respiratory diseases: Zyvox Bacterial infections Vfend Zithromax/Zmax Fungal infections 1.156 58 Geodon/Zeldox 1.PFIZER.001 883 2006 08t07 (2) (2s) (4) 454 (t ) 41 07t06 Lipitor Norvasc Reduction of LDL cholesterol Hypertension $ 12.934 1. 156.210.s48 ?{ ?r1 r.000 9.000 (69.503 q 2007 2006 $ 20.12) 10 2008t07 11 2007106 11 (l) 14 13) 3 Animal Health Corporate/Other l0 10 18 12 (12) (10) Source: Pfrzer Annual.000 29.000 8.000 3.104.000 8.144.000 14.153 1.184. INTERNATIONAL 2006 $ 24.000 1 (12.000 31-Dec-07 31-Dec-06 48.400 2.112.607.278.265 ANNUAL PERCENTAGE CHANGES WORLDWIDE TOTALS U5 INTERNATIONAL % CHANGE Pharmaceuticals 2008t07 (1) 7 2007to6 2008t07 ( 2007t06 (. Report (2O08).000 1.296.000 (42.000 397.261.000 Income Before Tax Income Tax Expense 9.694.000 8.000 13.589.PFtZER.657 881 $22.000 78.000 Selling General and Administrative Non Recurring Others 2.000 37.371.239.726.000 7.144.000 11.660.5.000 Gross Profit Operating Expenses Research Development 40.132 473 $ 23.000 28.000 516.000 488.000 7.645.000 28.000 15.000 8.000 1 .024.822 $ 27.5 16.000) 2. Pharmaceuticals 2008 $ 18.435 882 TOTAL $25.1s8.028.945.308.816 1.168 2007 $ 21.000) Net Income Preferred Stock and Other Adjustments 8. $ 8.313. Pfizer's Income Statement (in thousands) PERIOD ENDING 31-Dec-08 $48.000 ( Total Operating Expenses Operating Income or Loss Income from Continuing Operations Total Other Income/Expenses Net Earnings Before Interest and Taxes Interest Expense t2r124.000 $ 8.023.000 Net Income Applicable to Common Shares Source: Pfrzer's2008 Form l0k.s80 Year ended Dec.549 416 $ 20.640.516.000 40.000 3.537.992.000 1.000 19.000 1.599.026.000 1.032 281 | 1'70 690 $ 22.179.31.507 Animal Health Corporate/Other 1.000 9.675. tNC.392.000 1r.4s8. - 2009 Revenues by Business and Geographical Segment (ln millions of $) u.000) 8.000 3.817.000 Minority Interest Net Income from Continuing Ops Non-recurring Events Discontinued Operations Extraordinary Items Effect of Accounting Changes Other Items (23.861 $25.000) 8.000 7.000 7.000 10.104.337.851 1.668.000 Total Revenue Cost of Revenue 48.626.731.000) 1.000 15.337.213.000 32 .418.519.089.128.000 $ 19.000 13.000 2. 844.000 4.000 114.837.000 3.835.000) 69.000 3.283.000 21.000 1.000 l'.004 (s7.299.000) 57.000 22.849.320.856.000 4.105..000 (s6.512.443.000 49.148.000 49.498.000 8.546.000 49.000 13.000 43.433.000) 70.740.000 114.632.749.233.000 Minority Interest Negative Goodwill Total Liabilities Stockholderso EquitY Misc.1 1 1 .000 24.2s7.000 9.994.400.000 114.122p00 3.000 7.122.000 4.686.000 Net Receivables Inventory Other Current Assets 9.350.00O ) 4\40.000 13.556.000 2l.000 141.416.000 65.000) 69.000 Total Assets Liabilities Curent Liabilities Accounts PaYable Short/Current Long Term Debt Other Current Liabilities 6.000 5.843.000 93.391.837.000 s.000 8.000 1.010.t.000 1.000 53.268.076.7.000 73.913.000 8.000 Total Current Assets Long Term Investments Property Plant and EquiPment 46.000 115.'72r.000) 71.000 441.498.142.909.000 (1.000 15.223.000 20.478.000 t2.847.0 6.464.000 50.219.000 115.669.000 22.949. 443.959.000 5.696.000 7.PFTZER.148.406.104.992.009.392.000 $ 111.268.000 8.825.000 2.000 Total Stockholders' EquitY Total Liabilities and SE $ 111.389.000 6.000 11.000 46.827.382.000 11.660.314.000 442.876.000 13.592.892.138. rNC.000 4.78'.258.000 26.000 20.000 9.000 Capital Surplus Other Stockholders' EquitY (4.0.000 Total Current Liabilities Long Term Debt Other Liabilities Def'erred Long Term Liability Charges 21.000 184. - 2009 Pfizer's Balance Sheet (all numbers in thousands) PERIOD ENDING 31-Dec-08 31-Dec-O7 31-Dec-06 Assets Current Assets Cash and Cash Equivalents Short Term Investments $ 2.734.000 5.000 2.287.015.4s6.000 Common Stock Retained Earnings Treasury Stock (46.529.479.000 14. Stocks Options Warrants Redeemable Preferred Stock Preferred Stock 43.000 16.000 Goodwill Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges 2r.358.000 27.529.000 7.53 r .000 34 . The United States has historically been the industry's largest and most profitable area. In early 2009. drug pricing. The company lobbied on legislation on numerous health refbrm provisions. but now drug companies are looking more and more to developing countries such as Venezuela. a relative who has lost their job and is losing their insurance." according to the U. government in the second quarter of 2009 on health-care reform.1 million in the year-ago period. including health insurance. from cholesterol fighter Lipitor to painkiller Celebrex. In May 2009. Cheaper generic versions are available for most of the drugs. Amylin Pharmaceuticals cut 35 percent of its sales force." The 70-plus drugs covered in the new Pfizer program include several diabetes drugs as well as some of Pflzer's top money makers. "Everybody knows now a neighbor. Pfizer spent nearly $5. and requiring research comparing the effectiveness of medications and other types of treatment as well as on U. Many analysts contend that the giveaway is a brilliant marketing move that will generate low-cost publicity.000 a year. according to a recent disclosure report. People are definitely hurting out there. information technology.000 from a high of about i 06. up fiom $67. Also included are fibromyalgia treatment Lyrica and also Viagra. antidepressants.S. told the Associated Press in an exclusive interview. allowing generic versions of expensive biologic drugs. tbr up to a year to people who have lost jobs in calendar 2009 and had been taking the drug for three months or more.000 in 2006. a record $2.Pfizer announced it was giving away more than 70 of its most widely prescribed drugs.Pftzer agreed to pay Drug firms are reducing. The settlement also involves pain management pill Lyrica. which will begin competing wlth generic versions in 2010. and regulatory issues involving at least 20 countries. Moreover. For the tlrst time in fifty years.6 million lobbying the U. Department of Justice.PFtZER. the number of pharmaceutical sales representatives in the United States had decreased to 90. tNC. topping the $ I .3 billion criminal penalty related only to Bextra is "the largest criminal fine ever imposed in the United States for any matter. the schizophrenia treatment Geodon. and the anti-infection drug Zyvox. The charges involved representatives ofPfizer promoting dlugs for conditions that they had not been approved for and giving doctors kickbacks to encourage them to prescribe the medications. as well as nine other medicines.7 billion in 2008. market access. used lbr male erectile dysfunction.2 billion in 2003. patent reform and on international patent. By the end of 2008. or 200 representatives. sales of prescription drugs in the United States declined in 2009 fbr a variety of reasons. which is examining ways in which health-care access mav be exoanded in China.3 billion to settle civil and criminal charges over marketing of its recalled Bextra arthritis drug and three other medicines. electronic prescriptions.42 billion Eli Lilly (LLY) agreed to pay earlier in 2009 for offlable sales of its Zyprexa schizophrenia drug. contraceptives. and smokin-e cessation products.S." Dr. In September 2009. Another innovative partnership involves Pflzer and PlaNet Finance. not adding. heart medications.S. Pfizer's head of pharmaceuticals outside the United States and Europe. government spending on medication. This JO . build consumer loyalty. including Lipitor and Viagra. the $1. Pfizer nearly doubled its lobbying spending from the $3. to their sales forces. - 2009 the needs o1'4 billion people worldwide with incomes of less than $3. Jorge Puente. The new program will likely help prevent patients from switching to cheaper brands or generics through the worst of the recession and could help retain those taking top-seller Lipitor. and keep inventory from piling up. This is the largest such settlement in the United States for claims o1'off-label drug promotion. The new Pfizer program includes some antibiotics. "Our aim is to help people bridge this point. The world's biggest drugmaker. and patent and trade issues. Sales of prescription drugs in developing or emerging markets increased to $152. 8e . Documents Similar To Pfizer Case StudySkip carouselcarousel previouscarousel nextPfizer Wyeth Case StudyPfizerPfizer FinalMarketing Strategies adopted by MSD & PfizerPfizer Case Analysis09 PfizerEdwards. 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