Pfizer Inc., struggling with fierce competition from makers of generic drugs, announced Monday it will cut 10,000 jobs and close at least five facilities as part of an effort to slash its annual costs by up to $2 billion by the end of next year.
The drastic measures by the world's largest drug maker highlight the challenges faced by many pharmaceutical companies recently. In addition to patent expirations, big drug companies are facing a business climate where insurers and other large purchasers of medicines are demanding lower prices and more evidence of products' worth.
Although big rounds of job cuts typically boost a company's stock prize, shares of Pfizer fell 27 cents, or 1 percent, to close Monday at $26.95 on the New York Stock Exchange.
It's the second time in two years the maker of Viagra and Lipitor has announced a major cost-reduction plan to combat the loss of about $14 billion in revenues from 2005 to 2007 due to expiring patents. The company is at risk of losing 41 percent of its sales to generic competition between 2010 and 2012, including the revenue from its top seller Lipitor, according to Prudential analyst Tim Anderson.
The latest cuts come on top of a previously announced plan to slash costs by $4 billion a year by 2008. On Monday, Pfizer said it would cut an additional $500 million to $1 billion in costs. However, it said some of the savings would be redeployed into the company so the total savings would be between $1.5 billion and $2 billion a year
The 10,000 layoffs amount to about 10 percent of the company's global work force and include the elimination of 2,200 jobs from the U.S. sales force, which Pfizer announced late last year. The company said Monday it would cut 20 percent of its European sales force but didn't say how many jobs that will be, the AP reports.
Alice Hunt, a spokeswoman for London-based Glaxo, and Steve Brown, a spokesman for London-based AstraZeneca Plc, declined to comment on how Pfizer's plan would affect their need for sales staff. Jean-Marc Podvin, spokesman for Paris-based Sanofi, declined to comment before the company's Feb. 13 earnings release and press conference.
At Pfizer, fourth-quarter revenue rose less than a percent to $12.6 billion as generic competition weighed on sales of the antidepressant Zoloft, Pfizer's third-biggest drug. The company repeated a forecast that revenue won't grow in 2007 and 2008 above last year's $48.4 billion.
Pfizer's sales will plummet after 2011 when it loses patent protection for its Lipitor cholesterol pill, which accounts for almost half of profit, analysts predicted. In the fourth quarter, revenue from the drug declined to $3.34 billion from $3.36 billion a year earlier. The product's sales for 2006 rose 6 percent to $12.9 billion, missing the company's goal of $13 billion.
Pfizer shares declined 7 cents to 20.68 euros ($26.84) in Frankfurt after closing at $26.95 yesterday in New York Stock Exchange composite trading. The U.S. shares have gained 9 percent in the past 12 months, underperforming a 13 percent rise in the 14-member Standard & Poor's 500 Pharmaceutical Index.
Shares of Glaxo fell 2 pence, or 0.1 percent, to 1,404 pence at 8:23 a.m. in London , while AstraZeneca shares declined 12 pence, or 0.4 percent, to 2,838 pence. Sanofi's stock gained 10 cents, or 0.1 percent, to 70.50 euros in Paris.
Analysts estimate Pfizer will lose patent protection through 2011 on five other drugs with $8.69 billion in 2005 sales, Bloomberg reports.
Prepared by Alexander Timoshik
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