Pfizer Analysis

PFIZER ANALYSIS

INTRODUCTION

Pfizer is the largest American pharmaceutical company and one of the largest pharmaceutical companies in the world. It competes with Merck and Glaxo, and markets such well-known medications as Celebrex and Viagra. However, the pharmaceutical industry as a whole has undergone changes in recent years with significant consolidation taking place and with increased scrutiny regarding the ways in which drugs are developed, tested and marketed. In addition, recent controversies have erupted regarding Merck's drug Vioxx, and Pfizer has been the target of unwanted publicity regarding its painkiller Celebrex. This research considers the strategic position of Pfizer, including its strengths and weaknesses as well as the opportunities and threats that it faces, its strategic priorities and the acquisition strategy that it might follow.

SWOT ANALYSIS

Pfizer's primary strength is its size and expertise in the industry. Its reputation has suffered somewhat in recent months as controversy has surrounded the industry as a whole due to the Vioxx issue, and Pfizer has suffered because of its own problems with Celebrex. In general, however, the company's size gives it the ability to invest in new development that is necessary to succeed in the long-term.

Pfizer's primary weakness is its lack of drugs in its pipeline and its inability to have new drugs approved for use. The company does not have significant drugs coming through the development process, at least not that will be ready for the market in the next few years. This puts the company in a weak position as it struggles with drugs that are already facing competition from generic alternatives. The highly successful epilepsy drug Neurontin lost patent protection in 2004 and its sales fell by 80 percent in 2005, for example (Berenson, 2005).

The company's size, which is one of its strengths, is also one of its primary weaknesses. The company is so large that no one drug can lift it from its current sales doldrums. In addition, the company was once highly attractive to investors, but its recent stock price fell to 1997 lows. This may put pressure on the company to attempt acquisitions at a time when the company is ill-equipped to integrate a new company into its organization, and it is engaged in a cost-cutting program at a time when it may need to invest even more in research and development (McTigue Pierce, 2005).

New opportunities always exist in the healthcare industry, and Pfizer can be well-positioned to take advantage of these opportunities. It recently acquired Vicuron Pharmaceuticals which gave it instant access to that company's two major antibiotics. In addition, the company's pipeline includes inhalable insulin--likely to be a popular alternative to the injectable form. The company also continues to actively support its over-the-counter mouthwash--Listerine--classified as a "drug" because of its antiseptic properties (McTigue Pierce, 2005).

Threats to Pfizer's competitive edge come primarily from the products that it offers. Celebrex faces challenges not from other competitors, but from challenges to its safety. Celebrex generates more than $3.3 billion for the company, and having the drug pulled from the market or restricted would have a significant effect on Pfizer's ability to compete. The company also faces challenges to its cholesterol-reducing drug Lipitor. Lipitor is estimated to be worth $10 billion to the company, but there are two patent cases against Lipitor which could affect the company's fortunes, as well. In addition, Pfizer has a number of drugs--including Diflucan and Zoloft--that will shortly face competition from generic manufacturers which will have a negative effect on the company's revenues (Barrett, 2005).

Possibly the largest threat to Pfizer is not competition, but the overall perceived loss of integrity that the pharmaceutical industry as a whole has faced in recent years. There is increased scrutiny regarding university research, for example, that occurs at institutions that receive financial support from pharmaceutical companies. The highly-publicized cases of Vioxx and even Celebrex have further eroded public confidence in pharmaceutical companies, and the consolidation in the pharmaceutical industry means that a single blockbuster drug is no longer enough to sustain companies for several years. Instead, companies must have several such drugs and a steady stream in the pipeline if they are to thrive (Jarvis, 2004).

STRATEGIC PRIORITIES

Pfizer is actively engaged in cost-cutting, and has set as its goal reducing pretax expenses by as much as $5 billion by 2008. The company has already begun using layoffs as one way to reduce costs; Pfizer currently employs more than 115,000 worldwide. In late 2005, the company announced that it laid off more than 900 workers in the previous three months, but Pfizer will not comment on where those layoffs took place until the layoff program is complete sometime in 2006 (Anderson, 2005). While cost-cutting can be a necessary process through which companies are able to maintain their ability to compete, pharmaceutical companies have a high reliance on research and development and reducing employment levels in these areas can be detrimental to a company's long-term success.

Pfizer has also undertaken a significant effort to educate the public about