Pfizer and Wyeth Begin Operations as a Combined Company

Following the completion of its $68-billion acquisition of Wyeth (Madison, NJ), Pfizer (New York) began joint operations of the combined company last week. Pfizer said in a company press release that integration teams at Pfizer and Wyeth have been working since the announcement of the acquisition agreement in January to ensure that the combined company would be fully operational at the time of closing. In achieving that objective, Pfizer outlined its executive leadership team and organizational structures for its commercial operations and research and development (R&D).

Pfizer will operate through what it calls “patient-centric” business units in two major areas: biopharmaceuticals and diversified businesses. Its biopharmaceutical business units are emerging markets, established products, oncology, primary care, and specialty care, which includes vaccines. The units in its diversified businesses are animal health, Capsugel, consumer healthcare, and nutrition.

Pfizer now has two R&D groups in biopharmaceuticals, one focused on small molecules and related modalities (the PharmaTherapeutics Research Group) and one on larger molecules and vaccines (the BioTherapeutics Research Group). The individual units within these two research organizations are led by chief scientific officers, who will act as single points of accountability for delivering proofs-of-concept for development, according to the company.

Pfizer’s executive leadership team consists of senior management from both Pfizer and Wyeth as follows:

• Jeffrey B. Kindler, chairman and chief executive officer

• Frank D’Amelio, chief financial officer and senior vice-president of business operations

• Mikael Dolsten, president of BioTherapeutics Research & Development

• Freda Lewis-Hall, senior vice-president and chief medical officer

• Martin Mackay, president of PharmaTherapeutics Research & Development

• Mary McLeod, senior vice-president of human resources

• Ian Read, group president of worldwide biopharmaceutical businesses

• Cavan Redmond, group president of diversified businesses

• Nat Ricciardi, president of manufacturing

• Bill Ringo, senior vice-president of business development, strategy and innovation

• Amy Schulman, senior vice-president and general counsel

• Sally Susman, senior vice-president and chief communications officer

In addition to the executive leadership team, Kindler has established the executive compliance committee, which he will chair. It will include Doug Lankler, who as chief compliance officer reports directly to Kindler, and chief internal auditor Hugh Donnelly, who reports both to the audit committee of the board of directors and to the chief financial officer Frank D’Amelio. Also on the executive compliance committee will be D’Amelio, Freda Lewis-Hall, Ian Read, Cavan Redmond, and Amy Schulman.

Further changes and cost synergies
Pfizer is now in the process of finalizing decisions relating to talent and site matters. The company says it “will work quickly to effectively implement those decisions,” adding that such decisions are subject to works councils and/or union consultations and other legal requirements as applicable.

Pfizer expects the Wyeth acquisition to be accretive to adjusted diluted earnings per share in the second full year after closing. Pfizer hopes to achieve synergies of $4 billion by the end of 2012 in selling, informational and administrative functions, R&D and manufacturing. The $4-billion in cost synergies is in addition to another $2 billion in cost savings that Pfizer plans to achieve by the end of 2011.

Financial performance
Pfizer announced this week its third-quarter and nine-month financial results for 2009. Global third-quarter 2009 revenues were $11.6 billion, down 3% from $12 billion in the third quarter of 2008. US revenues were $4.8 billion, a decrease of 2% compared with the same period last year. International revenues were $6.8 billion, a decrease of 4% year over year.

For the first nine months of 2009, global revenues were $33.5 billion, a decline of 7% from $36 billion in the same period in 2008. International revenues, which accounted for 57% of Pfizer’s total revenues, were $19.2 billion. This level was a decrease of 8% compared with the same period last year, reflecting 3% operational growth and an 11% unfavorable impact of foreign exchange. US revenues were $14.3 billion, a 6% decline from the year-ago period.

Effective January 1, 2009, Pfizer expanded its operating model within its pharmaceutical business to include the five customer-centric focused units (primary care, specialty care, oncology, established products, and emerging markets) that are now part of its new organizational structure post the integration with Wyeth. Primary-care revenues for the third quarter 2009 were $5.5 billion, a decline of 4% compared with the year-ago period, primarily due to declining sales of Lipitor (atorvastatin), Pfizer’s top-selling drug. Global sales of Lipitor were $2.85 billion in the third quarter of 2009, down 9% compared with sales in the third quarter of 2008. For the first nine months of 2009, Lipitor sales declined 11% year-over-year to $8.26 billion.

For the third quarter 2009, specialty-care revenues were up 3% from the year-ago period to $1.6 billion. Oncology revenues fell 5% to $371 million. Revenues in established products declined 12% to $1.6 billion, and revenues from its emerging markets unit declined 4% to $1.6 billion.

Pfizer is also continuing its cost-cutting efforts. At the end of the third-quarter 2009, the company had reduced its workforce to 75,400, a decline of 1100 positions compared with the second-quarter of 2009, and a decline of 11,200 since the beginning of 2008.

Pfizer expects stable short- and long-term earnings growth. The company expects that no single drug will account from more than 10% of the combined company’s revenue in 2012.