Global Company Strategy - Pfizer

United States - Pharmaceuticals & Healthcare - 12 Aug 2011 - Pfizer Company Overview Founded in 1849, New York City-bas ed Pfizer dis covers , develops , manufactures and markets pres cription drugs , cons umer medicines and animal health products . The company employs approximately 110,000 people and is pres ent in over 100 countries . SWOT Analysis Strengths The world's larges t drugmaker in terms of revenue.

A focus on R&D to drive growth.

Weakness Los s of patent protection for Lipitor (atorvas tatin) in the US during November 2011.

Still integrating large acquis itions .

Opportunities Greater involvement in pers onalis ed medicine.

Increas ing penetration of emerging markets .

Threats Increas ed contribution to US healthcare reform.

Further medicine price cuts in Europe.

Company Strategy Following a change of CEO in late 2010, Pfizer has re-focus ed on original R&D, which is a s ound long-term change of s trategic direction. The company faces numerous near-term challenges , notably the los s of patent protection for the mega-blockbus ter Lipitor in developed s tates later this year. Pfizer is als o de-divers ifying is bus ines s operations and is s eeking to dives t its Animal Health and Nutrition divis ions . Thes e potential deals will follow the s ale of its Caps ugel bus ines s to an affiliate of the private equity firm KKR for US$2.375bn in Augus t 2011. BMI is particularly impres s ed by Pfizer's increas ing involvement in what it terms 'Precis ion Medicine'. Scientis ts s eek to dis cover pharmaceuticals that target patient s egments , res ulting in an optimal res pons e to therapy. The company s tres s es that 'precis ion medicine' is not pers onalis ed medicine, but will addres s patient s ubgroups that compris e 5-20% of the total population. BMI believes Pfizer will be able to charge more for thes e medicines becaus e they will be more efficacious and s afer than 'one-s ize-fits -all' pharmaceuticals . Ris ks to outlook include: R&D failures ; advers e regulatory decis ions ; further price cuts in Europe; increas ed contributions to US healthcare reform cos ts ; mandatory generic drug s ubs titution in

developed markets ; under-achieving external bus ines s development activities ; fas ter than expected competitor development; inability to addres s generic drug eros ion; increas ing us e of comparative effectivenes s methodologies ; and the inefficient integration of acquis itions . Financial Performance Pfizer releas ed above-cons ens us financial res ults for Q311. Compared with Q310, s ales increas ed by 7% to US$17,193mn. Due to the weak dollar, underlying growth was 1%, while the favourable impact of foreign exchange contributed 6%. Net income jumped from US$866mn to US$3,738mn, which was primarily due to a gain of US$1.3bn from the s ale of Capsugel in Q311, as well as charges of US$1.5bn and US$701mn in Q310 related to the Wyeth acquis ition and the Quigley as bes tos litigation res pectively.

Boosted By Weak Dollar

Source: Pfizer
Emerging Markets Performance Improving on an underwhelming Q211 in emerging markets , Pfizer achieved 18% growth (6% due to foreign exchange) in non-traditional markets during the third quarter. Double-digit expans ion was recorded in Rus s ia and India. Although there were medicine price cuts in Turkey, Pfizer's volume s ales increas ed cons equentially. China was the clear outperformer, with underlying s ales increas ing by 26%. As res ult, Pfizer has retained the number one pos ition among local and multinational companies in the mos t attractive emerging pharmaceutical market.

Almost All Up
Pfizer Q311 Sales According To Division (US$mn)

Source: Pfizer
Uncertainty In Europe Pfizer's s ales in Europe increas ed by 8% to US$4,074mn, equating to nearly a quarter of total revenue. However, excluding the s trength of the euro vers us the US dollar, s ales in the region contracted by 4%. CEO Ian Read s aid pricing pres s ure in the mid-s ingle digits remained cons is tent compared with the previous quarter. He s aid in terms of balance s heet as s ets , Pfizer has minimal expos ure to Portugal, Italy, Greece and Ireland - the countries with the mos t concerning s overeign debts . The pres ident and general manager of primary care, Olivier Brandicourt, s aid that in January 2011 Pfizer had experienced 20% and 35% price cuts in Italy and Ireland res pectively. Share Price Performance Since October 2010, Pfizer's s hare price on the New York Stock Exchange has increas ed by 16%, outperforming BMI's Pharma 20 Index (+4%), which is a dollaris ed s hare index of the leading 20 pharmaceutical companies , weighted according to market capitalis ation. Although Pfizer's s hare price was harder hit compared with the index during the general equities s ell-off in Augus t 2011, the company has outperformed s ince October 2011.

Recent Outperformance
The Relative Share Price Performance Of Pfizer And BMI's Pharma 20 Index

Source: Bloomberg

However, during the third quarter of 2011, which ran from the beginning of July to the end of September, Pfizer underperformed BMI's Pharma 20 Index. This is s ugges ts that Pfizer, which is a component of the Dow Jones Indus trial Average, is a les s defens ive inves tment compared with other large-cap drugmakers . Des pite to the uncertainty in Europe and the global macroeconomic malais e, we expect Pfizer s hare price outperformance compared with the Pharma 20 Index in Q411.

A Less Defensive Entity

Source: Bloomberg
Recent Developments November 2011 Pfizer s ecured extended approval for its 13-valent pneumococcal conjugate vaccine Prevenar 13 from the European Commis s ion. The vaccine will be us ed as a s ingle dos e for the prevention of invas ive pneumococcal dis eas e in adults aged 50 and over. October 2011 Pfizer and the Pharmacy Guild of Aus tralia (PGA) were as ked by the Therapeutic Goods Adminis tration (TGA) to explain the details of a patient s upport programme. The company entered a deal with the PGA under which it agreed to pay pharmacies a AUD7.0 (US$7.3) adminis tration fee for each patient s igned up to the s upport programmes that involve the drug company giving information directly to patients about its products . Pfizer s igned a five-year partners hip with US health ins urance company Humana to res earch different ways to make improvements to healthcare for the elderly. The companies highlighted to figures that s ugges t that over the next 10 years , the Medicare-eligible population will grow by 65mn, a 36% increas e from 2010. Pfizer was s uing Merck & Co over the latter's new choles terol pill, which would combine Pfizer's Lipitor and Merck & Co's high choles terol treatment Zetia (ezetimibe). The drug would complement Merck & Co's Vytorin (ezetimibe + s imvas tatin), which compris es its own s tatin drug Zocor (s imvas tatin) and Zetia. Pfizer s igned an agreement with deCODE genetics, an Icelandic biopharmaceutical company. Over 18 months , the companies will try to dis cover 's equence variants as s ociated with s pecific clinical phenotypes ', with the aim of dis covering novel treatments for lupus , by us ing deCODE's expertis e in gene dis covery. Pfizer s igned a licence agreement with GlycoMimetics, a US pharmaceutical company focus ed on rare or orphan dis eas es , for the inves tigational compound GMI-1070. GMI-1070, which has gained Orphan Drug and Fas t Track s tatus from the US Food and Drug Adminis tration, is a pans electin antagonis t undergoing phas e II as s es s ment as a treatment for vas o-occlus ive cris is as s ociated with s ickle cell dis eas e. Pfizer s ettled a legal dis pute in the UK with Is raeli pharmaceutical company Teva over generic vers ions of its choles terol-lowering drug Lipitor. The s ettlement ens ures that generic vers ions of Lipitor will be kept off the UK market until May 2012 and includes a commitment from s everal

pharmacies and wholes alers that they will retain s upplies of Teva's vers ion until that date. Pfizer announced that it will build a pharmaceutical manufacturing and packaging facility in Saudi Arabia's King Abdullah Economic City in Rabigh. The company s aid the facility will occupy a 65,000m2 plot of land and initially produce around 100mn units a year of well-known, orally inges ted, pres cription pharmaceuticals , including Viagra (s ildenafil), Lipitor and Celebrex (celecoxib). Pfizer s igned an agreement with Puma Biotechnology, a US biopharmaceutical company, under which Puma will gain the exclus ive rights for the global development and commercialis ation of neratinib. Neratinib is an inves tigational oral, multi-targeted inhibitor which s uppres s es the ErbB1 (EGFR), ErbB2 (HER2) and ErbB4 (HER4) kinas es and is being evaluated as a treatment for cancer. Pfizer filed a patent infringement laws uit in Mos cow as an attempt to prevent Teva from s elling a generic vers ion of Viagra in Rus s ia. Viagra, a treatment for erectile dys function, made Pfizer US$2bn globally and US$117mn in Rus s ia in 2010, when it was the third bes t-s elling drug in the country. September 2011 Pfizer planned to lay off 220 employees in Spain, equivalent to 11% of its workforce in the country. The company's plan is driven by regulatory moves to cut healthcare s pending in the country, along with the financial cris is in Europe. Pfizer s aid it will s pend US$200mn at its Grange Cas tle biotechnology manufacturing facility in Clondalkin, Ireland, according to Taois each Enda Kenny. The company will launch two new proces s ing s uites at the facility and enhance its production and product tes ting abilities . Pfizer and Chines e private drug dis tributor Jointown Pharmaceutical Group s igned an agreement for the dis tribution of Pfizer's products in China. Under the deal, Jointown will help Pfizer enter its network of over-the-counter outlets , provincial hos pitals and other rural markets , while Pfizer will clos e its own drug dis tribution network for pharmacies . Pfizer will s et to develop an animal health joint venture (JV) with Chines e animal vaccine s tart-up company Jilin Guoyuan Animal Health Company. The JV, Jilin Pfizer Guoyuan Animal Health Co, will initially focus on the development of a vaccine to prevent res piratory illnes s es common in pigs , while in the longer term other vaccines for pigs , poultry and cattle will be developed. Pfizer and Dr Reddy's Laboratories, an Indian healthcare company, s ettled their patent infringement laws uit regarding Lipitor. Pfizer s ued Dr Reddy's in December 2009 as an attempt to prevent generic vers ions of Lipitor being manufactured before the expiry of relevant patents in 2016 and 2017. August 2011 Bristol-Myers Squibb and Pfizer reported the res ults of a phas e III clinical trial, named ARISTOTLE, which as s es s ed Eliquis in comparis on with warfarin for the prevention of s troke or s ys temic embolis m. The trial involved 18,201 patients with atrial fibrillation and a minimum of one ris k factor for s troke and found that, compared with warfarin, Eliquis reduced the ris k of s troke or s ys temic embolis m by 21%, major bleeding by 31% and mortality by 11%. Pfizer and Dutch biopharmaceutical company Qiagen collaborated on the development of a companion diagnos tic tes t to be us ed with Pfizer's inves tigational compound, dacomitinib (PF00299804). Under the terms of the alliance, Qiagen will give acces s to its proprietary KRAS as s ay technology for the tes t. The UK government des ignated Dis covery Park, the res earch s ite of US pharmaceutical company Pfizer in Sandwich, as an enterpris e zone. The zone will allow dis counted bus ines s rates and eas ier planning controls , along with acces s to s uperfas t broadband for bus ines s es . A US dis trict judge in Norfolk, Virginia, ruled that Pfizer's patent for Viagra is valid, protecting the patent that generates US$1bn a year in the US until 2019. Teva had attempted to claim that Pfizer's Viagra patent was invalid and that Pfizer had deliberately withheld documents from the US Patent and Trademark Office. Pfizer voluntarily handed over information regarding its involvement in uns pecified s ales activities to the US Department of Jus tice and the Securities and Exchange Commis s ion. The information includes the involvement of Pfizer and its s ubs idiary Wyeth in making potentially illegal payments to overs eas officials as bribes . Pfizer s tarted paying compens ation to Nigerian families who were affected by the clinical trial of its antibiotic Trovan (trovafloxacin) in 1996. Authorities in the northern Nigerian s tate of Kano s aid treatment with Trovan caus ed the deaths of 11 people and caus ed many more to become dis abled. Geography: United States Companies : Pfizer Channels : Pharmaceuticals & Healthcare Source PDF: Americas Pharma & Healthcare Ins ight This material is protected by international copyright laws , and us e of this is s ubject to our Terms

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