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Autor: anton • April 20, 2011 • 3,452 Words (14 Pages) • 1,699 Views
OVERVIEW OF THE COMPANY
Pfizer Inc. is a global pharmaceutical company that creates and manufactures products for both humans and animals. Pfizer is headquartered in New York City and employs about 115,000 people.
PRINCIPAL PRODUCTS AND SERVICES
Pfizer currently has ten different divisions and promotes thirty-one different major products. The divisions and largest major products within each group are: Cardiovascular and Metabolic Diseases (Lipitor, Caduet, Norvasc), Central Nervous System Disorders (Aricept, Geodon, Lyrica, Zoloft), Diabetes (Exubera), Arthritis and Pain (Celebrex), Infectious and Respiratory Diseases (Diflucan, Zithromax), Urology (Detrol, Viagra), Oncology (Sutent), Opthalmology (Macugen), Endocrine Disorders (Genotropin), All Other (Chantix, Zyrtec). In addition, Pfizer has six products that are in the late stage of the R&D pipeline: UK-427,857 for HIV treatment, Parecoxib for acute pain, Edotecarin for colorectal cancer, Torcetrapib/Lipitor for heart disease, Asenapine for bipolar disorder, and Zithromax-chloroquine for malaria.
PRESENT FINANCIAL CONDITION
Pfizer's overall present financial condition is not secure, but is trending positively for 2006 compared to the previous year. The positive trends are related to the major products the company has in its pipeline. "Pfizer is poised to introduce six new medicines in 2006, including three (Chantix (smoking cessation), Stutent (cancer), and Exubera (diabetes)) that have billion dollar-plus potential." An analysis of Pfizer's finances will include: revenues and growth, stock price, net income, budget for R&D, cash flow, and EPS.
First, Pfizer has seen a major decline in revenue growth over the past few years. Pfizer recorded revenues of $51,298 million during 2005, which was a decrease of 2.4% over 2004. The second quarter for 2006 showed more promising results than 2005. The revenues for the second quarter of 2006 for the human health division were $11 billion, which is an increase of 3% compared to the second quarter of 2005 (but were still lower than previous years.) Second, although the second quarter revenues are increasing, Pfizer's stock price is currently at an eight year low at $25.98. Third, Pfizer's net income in 2005 was $8,085 million, which was a decrease of 29% over 2004. Fourth, Pfizer has the largest budget for R&D spending in the industry (2004 budget was $7.7 billion). Fifth, Pfizer has a strong projected cash flow over the next 30 months and expected to amount to approximately $34 billion (after capital expenditures and dividends). Lastly, Pfizer's EPS growth has been relatively stable, but has dropped off a bit in the last year or so, due to expired exclusivity on drugs. However, the most recent quarterly results have shown a 15.2% increase.
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Pfizer's company objectives for the year 2006 that take into consideration the fact that the company is very large, that it has several lucrative drugs going off patent, that the generic competition is increasing, and also that addresses the fact that it has light product pipelines, are as follows. The first objective and the highest priority for Pfizer is to acquire products and technologies that will drive long-term growth for the business. Pfizer has allocated over $17 billion dollars over the next 30 months for acquisitions. As a second objective, Pfizer is committed to discovering and developing new technologies. Specifically, Pfizer is interested in growth of key in-line medicines, contributions from new medicines, and R&D productivity. Pfizer's third company objective is to provide treatment solutions and support opportunities for both physicians and patients. For example, Pfizer will help provide training for enhanced diagnosis for physicians and behavioral support programs for patients. Fourth, Pfizer must streamline the business processes in order to reduce costs and improve shareholder returns. The Economist Magazine mentions that all 110,000 Pfizer employees were recently sent a memo, written by the newly named CEO named Jeffrey Kindler, informing them that they all must "focus make good and strong decisions in order to reduce costs".
Porter's five forces model of competitive pressure can be used to analyze the global pharmaceutical industry. Three forces are sources of "horizontal" competition: product substitutes, established rivals, and new industry entrants. Two forces are sources of "vertical" competition: bargaining power of suppliers and buyers.
COMPETITION FROM PRODUCT SUBSTITUTES
The threat of substitution of new products can be high or low depending on the type of product offered. If there are two similar products in the market then there is a high threat of substitution of new products. Pfizer's Zyrtec allergy medicine faces high threat from substitute products because of the availability of over-the-counter and generic allergy products that are available. If a product is unique to the industry, then there is low threat of substitution. Pfizer takes a pro-active approach against the threat from product substitutes by making and marketing generic versions of their drugs through the generic subsidiary named Greenstone. Most recently, as of July 1, 2006, Greenstone is making the generic version of Pfizer's Zoloft drug.
COMPETITION FROM ESTABLISHED RIVALS
Rivalry among competitors is high because of three main factors: number of firms currently in the industry, exit barriers, and product differentiation. First, it is very challenging for a firm to enter the pharmaceutical industry because there are currently over 500 firms specializing in biotechnology and drug manufacturing. The large number of firms in the industry means that they must compete for the same customers, resources, and market leadership. Second, the pharmaceutical industry has high exit barriers because of large costs on a company to get rid of a product, service, or subsidiary. Finally, the pharmaceutical industry's product