Lack of new drugs spurs Pfizer cuts

January 23, 2007|By New York Times News Service

Drug giant Pfizer Inc. said yesterday that it would lay off 10,000 workers and close several manufacturing and research sites in an effort to bolster earnings hurt by the loss of patent protection on certain drugs and setbacks in developing new products.

The company said the employee reductions were equivalent to about 10 percent of its worldwide work force and would take place by the end of next year.

Among the cuts would be a 20 percent reduction in its European sales force. That move would follow a similar reduction announced two months ago in the company's American sales force and is included in the 10,000 figure.

The world's largest pharmaceutical company said it will cut manufacturing sites in Brooklyn, N.Y., and in Omaha, Neb., and would seek to sell a third site in Germany. It also will close three research sites in Michigan and said it might close one in Japan and another in France.

In addition, Pfizer intends to reorganize its U.S. sales operations and its research and development activities.

"Pfizer is a great company with a great future," said Jeffrey B. Kindler, Pfizer's chief executive. "We are facing significant challenges, however, in a profoundly changing business environment. I believe we must fundamentally change the way we run our company and meet these challenges and to take advantage of the diverse and attractive opportunities we see in the marketplace."

Pfizer said the moves would save $1.5 billion to $2 billion a year in pretax expenses.

Pharmaceutical industry analysts have generally been welcoming cutbacks by Pfizer but said that while cost-cutting is beneficial, the company needs to resume growth by bringing new products to market. Still, Pfizer's shares closed down about 1 percent to $26.95 yesterday.

The cuts are an effort by Kindler, a relative newcomer to the pharmaceutical industry, to revamp growth and bolster earnings of the world's largest drug company.

A lawyer by training, Kindler came to Pfizer five years ago and served as general counsel, after working at McDonald's Corp. and General Electric Co. He was named chief executive in July to replace Hank McKinnell, who was forced to retire early. Kindler had immediately pledged to review all aspects of Pfizer's sprawling operations.

Earlier yesterday, Pfizer reported that its earnings for the fourth quarter of 2006, excluding special items, fell to 43 cents a share from 49 cents in the comparable period a year earlier. That 12 percent drop exceeded some analysts' forecasts.

Pfizer said it expected its revenue for 2007 and 2008 to be roughly comparable to the $48.4 billion it reported for 2006.

Pfizer has been suffering from the loss of patent protection on key drugs including its antidepressant Zoloft and antibiotic Zithromax. Sales of both plummeted more than 70 percent in the fourth quarter of 2006, the company reported yesterday.

At the same time its laboratories have had difficulty coming up with new hits. The company suffered a huge blow in December when safety concerns prompted it to halt development of torcetrapib, a cardiovascular drug that it considered the most promising experimental drug in its pipeline.

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