George Barnes Christophe Chirol Dan Cooper Katelyn Griffasi
Presentation Overview
Company Overview
Business Segments Geographic Reach Goals and Objectives Mission Statement/ Values Relevant History Strategy Diamond
External Environment
Industry defined and Life Cycle Macro environmental Factors Porters 5 Forces External Weighted Avg. Table
2
Overview (continued)
Internal Environment
Current Financial Performance vs. Rivals Building Blocks Value Chain Analysis
Recommendations NPV Analysis Question and Answer
Company Overview
Three Business Segments:
Pharmaceutical Animal Health Corporate/Other
Pfizer Inc. is the worlds largest research based pharmaceutical company through the:
Discovery/development/manufacturing and marketing of prescription medicines for humans and animals External Internal Recommendations
Overview
NPV
4
Business Segments
Pharmaceutical
Provide treatment for:
Overview
Cardiovascular and metabolic diseases CNS disorders Arthritis and pain Infectious and respiratory diseases Urogenital conditions Cancer Endocrine disorders Allergies
External Internal Recommendations NPV
5
Business Segments (continued)
Animal Healthcare
Treat and prevent diseases associated with livestock and companion animals Parasticides/antiinflammatories/vaccines/antibiotics
Corporate/Other
Manufacturing of empty soft gelatin capsules Contract manufacturing Bulk pharmaceutical chemicals
Overview
External
Internal
Recommendations
NPV
6
Geographic Reach
Operates and markets its products in over 150 countries worldwide About 98,000 employees in over 115 countries
Overview
External
Internal
Recommendations
NPV 7
Company Goals and Objectives
Grow in Emerging Markets Find new opportunities for established products Refocus and optimize patent protected portfolio Instill culture of innovation and continuous improvement
External Internal Recommendations NPV
8
Overview
Invest in complimentary businesses
Mission Statement
We will become the world's most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live.
Charles Pfizer
Overview External Internal
Charles Erhart
Recommendations NPV
9
Vision Statement
We dedicate ourselves to humanity's quest for longer, healthier, happier lives through innovation in pharmaceutical, consumer, and animal health products.
-Jeffrey B. Kindler Chairman of the Board and CEO
Overview
External
Internal
Recommendations
NPV
10
Pfizers Core Values
Integrity Respect for People Customer/Community Focus Innovation Teamwork Performance Leadership Quality
External Internal Recommendations NPV
11
Overview
Pfizer Inc. History
1849- Founded by Charles Pfizer and Charles Erhart in Brooklyn, NY 1900- Incorporated in New Jersey 1971- Companys Central Research Division created 1995- Animal health care segment acquired from SmithKline Beecham 2000- Pfizer and Warner Lambert merge 2003- Acquired Pharmacia Corporation, creating worlds largest research based pharmaceutical company 2005- Acquired Vicuron Pharmaceuticals to improve antiviral development program 2006- Sold consumer healthcare business to J&J
External Internal Recommendations NPV
12
Overview
Competition
GlaxoSmithKline PLC Novartis AG Sanofi-Aventis
Offer similar types of products Large in size (established distribution channels) Close in sales margins Close in terms of Market Share Good Benchmark
Overview External Internal Recommendations NPV
13
Strategy Diamond
What businesses will we be in?
Products/Services, Regions, Customers
Arenas What will be our speed and sequence of moves?
How will we get there?
Internal Development?
Staging
Economic Logic
Vehicles
How will achieve our competitive position?
How are cost advantages generated (scope economies)? How are unique attributes created & delivered?
Differentiators
How will we compete?
On Cost? Via Differentiation (what unique features are included)?
Overview
External
Internal
Recommendations
NPV
14
Arenas What businesses will we be in?
Pharmaceuticals
Prescription Medication
Animal Health Care
Vaccines/ Antibiotics/ Anti-Inflammatories
Corporate/Other
Contract Manufacturing Bulk pharmaceutical chemicals
Overview External Internal Recommendations NPV
15
Vehicles to Growth Strategies How will we get there?
Merger and Acquisition Activity (M&A)
2006 TransTech Pharma agreement
RAGE Modulators
2007 Animal Health division acquired Embrex
Vaccine delivery system
Acquired BioRexis Pharmaceutical
Diabetes candidates and technology for protein drug candidates
Overview External Internal Recommendations NPV
16
Vehicles (continued)
Enters world-wide collaboration with Bristol Myers Squibb and Adolor
Apixadan & pain relieving medications
Acquired Coley Pharmaceutical Group
Specialized in treating cancers, allergy and asthma disorders, and autoimmune diseases
Acquired CovX biotherapeutics
Treating diabetes and cancers
External Internal Recommendations NPV
17
Overview
Differentiators How will we compete?
Economies of Scale
Taking advantage of cost efficiency
Sales Force (2nd Largest)
Enhancements of productivity and effectiveness of sales force interactions
Adjust to the needs of customers
Brand loyalty
External Internal Recommendations NPV
18
Overview
Differentiators (continued)
Marketing Capabilities
(Lipitor- Warner Lambert and Viagra)
Research and Development Blockbuster Drug Portfolio
Zoloft Celebrex Lipitor
Overview
External
Internal
Recommendations
NPV
19
Economic Logic
How will we achieve our competitive position?
Adjusting to a projected Negative sales growth out to 2012 Declining unit costs with increased volume Reducing Operating Costs
COGS, Sales, & Marketing Sales Force
Altering sales approach Reduce sales force 20% in order to increase profits
Overview External Internal Recommendations NPV
20
Long Term Strategy
Where do we want to go in the future?
Mergers and Acquisitions/ Alliances with Non-Pharma firms
Biotechnology Small molecule cancer therapies Generic
Emerging markets
Moving into other geographic areas
Overview
External
Internal
Recommendations
NPV
21
External Environment
Industry Definition and Industry Life Cycle Macro Environmental Factors
Socio Demographic Technological Political/Regulatory actions
Michael Porters Five Forces
Overview
Risk of Entry from Potential Competitors Threat of Substitute Products Bargaining Power of Suppliers Bargaining Power of Buyers Intensity of Competition among Rival Firms
External Internal Recommendations NPV
22
Industry Definition
Definition: The pharmaceutical industry develops and manufactures medications that treat diseases and illnesses in a variety of therapeutic areas.
Overview
External
Internal
Recommendations
NPV
23
Industry Life Cycle
Shakeout Phase- growth rates, intense rivalry, margins fall, inferior
products with increasing costs and processes cause a decline Goal: sustain and strengthen position within specific business segments, Increase customer loyalty and cash flows
Overview External Internal Recommendations NPV
Socio-Demographic Factor Aging Population (Baby Boom)
Opportunity
450 million are over the age of 65 (7% of global population)(17% by 2020)
Healthcare spending highest among over 65 age range (Social Security and Defense only higher Federal Spending)
Baby Boomers dependant on use of prescription medication to treat health problems Overview External Internal Recommendations NPV 25 (opportunity)
Continued..
Threat
In America, 77 million people will be enrolled in Medicare by 2031 Health care and Medicare programs will not be able to finance this many people Possible increase in bulk buying/ price controls placed on medicines produced
Overview
External
Internal
Recommendations
NPV
26
Technological: Biotechnology
Opportunity
Young Industry- Developed Insulin/ Cancer Drugs Uses living organisms (cells) or products to improve the health of a human (medicines and remedies) Develops molecular procedures that finds a target patient population for a drug (DNA/Genetics)
External Internal Recommendations NPV
27
Overview
Medicines are created faster and cheaper than
Socio-Demographic: Chronic Illnesses/ Cancer
Opportunity
Alzheimers/ Dementia/ Cancer have replaced infectious diseases as number one cause of death in adults over 65
Studies show people over the age of 65 are 17% more likely to get cancer
Progress in medicine and disease prevention will take on larger role in near future (rising demand for elderly)
External Internal Recommendations NPV
28
Overview
Political/Regulatory: Government Regulations
Threat
FDA (USA) lengthy process (up to 15 years) and strict Unpredictable clinical trials (less than 2% approval rate) Constant pressure from governments to lower prescription drug prices and yield to generics Outside the U.S- Canada and Europe have national healthcare coverage (bargaining power increased) Medicare Prescription Drug, Improvement and Modernization act of 2006 broad coverage/more Overview External Internal Recommendations NPV power 29
Threat of New Entrants into Market LOW
Barriers to Entry HIGH
Economies of scale Manufacturing R&D Marketing/Sales Distribution product differentiation Established products Brands Relationships Regulatory policy Patents Government influence Switching costs Employee retraining New equipment Technical assistance Access to distribution channels Preferred arrangements
Recommendations NPV
30
Overview
External
Internal
Threat of Substitute Products RELATIVELY LOW
Very little substitutes Main substitutes
Medical devices Alternative therapies
Homeopathic remedies Acupuncture Herbal medicines
Hospitalization
Surgery Chemotherapy
Overview External Internal Recommendations NPV
31
Rivalry Among Established Firms HIGH
High revenue growth within the industry Rivalry is intense because fragmented industry
No company holds more than six to ten percent of the market share
Differentiation
Companies use tactics such as price competition, advertising battles and new product introductions
Maximizes position in market
External Internal Recommendations NPV
32
Overview
Bargaining Power of Buyers MODERATE to HIGH
Hospitals and Managed Care organizations High bargaining power Patients - low bargaining power for prescription drugs Insurance Companies
Private insurance companies may negotiate drug prices, use rebates, and drug-volume discounts with pharmaceutical manufacturers to alter prices
Governmental Influence
National Healthcare outside of U.S
Overview
External
Internal
Recommendations
NPV
33
Bargaining Power of Suppliers
LOW to MODERATE
Effects Profitability normal in a competitive market Switching costs are low (pharmacies) allows companies to consistently change suppliers to find the most efficient supply chain possible Biotechnology Firms Capacity to create their own drugs/products Provide chemicals and compounds
External Internal Recommendations
Overview
NPV
34
External Weighted Avg. Table
Pharmaceutical
Strategic Factors
Airline
Rating Weight Rating
Specialty Retail
Rating Weight Rating
Weight
Rating
Weight Rating
Opportunities & Threats
Competition Industry Growth Substitutes Barriers to Entry Total:
Overview
.2 .3 .2 .3 1.00
External
6 7 4 9
1.2 2.1 .8 2.7 6.80
Internal
5 3 3 8
1.0 .9 .8 2.4 5.10
5 5 6 6
1.0 1.5 1.2 1.8 5.50
NPV
35
Recommendations
Internal Environment
Current Financial Performance vs. Rivals Building Blocks
Quality Innovation
Value Chain Analysis Internal Weighted Avg. Table
Overview
External
Internal
Recommendations
NPV
36
Current Financial Performance: Revenues by Business Segment
Overview
External
Internal
Recommendations
NPV
37
Revenue Breakdown Graph
Revenue Breakdown 2007
2.84%
Pharmaceuticals
5.36%
Animal Health Care
91.80%
Corporate/Other
Overview
External
Internal
Recommendations
NPV
38
Current Financial Performance vs. Rivals
Revenues (millions)
Overview
External
Internal
Recommendations
NPV
39
Pfizer Revenues vs. Rivals
Overview
External
Internal
Recommendations
NPV
40
Cost of Goods Sold (millions)
Overview
External
Internal
Recommendations
NPV
41
Pfizer COGS vs. Rivals
Overview
External
Internal
Recommendations
NPV
42
Net Income (millions)
Overview
External
Internal
Recommendations
NPV
43
Pfizer Net Income vs. Rivals
Overview
External
Internal
Recommendations
44
Profitability Ratios
Return on Assets Net Income/ Total Assets
2007 2006 2005 ROA Pfizer
Industry Average = 11.2
2004
2003
5 Year Growth
7.39
GlaxoSmithKline
17.01
7.01
9.67
5.03
46.92%
21.27
Novartis
23.59
21.88
21.97
23.74
-10.40%
17.95
Sanofi-Aventis 7.67
12.59
5.55
12.19
3.25
12.07
-7.71
11.55
24.10
55.41%
-68.17%
Overview
External
Internal
Recommendations
NPV
45
Pfizer ROA vs. Rivals
Overview
External
Internal
Recommendations
NPV
46
Profitability Ratios
Return on Equity
23.2 Industry Average =
Net Income/ Shareholder Equity 2007 2006 2005 2004
ROE
2003
5 Year Growth
Pfizer
11.95 55.95 26.57 11.60
28.26 64.74 19.52 8.85
12.10 72.21 19.04 5.45
17.07 78.32 17.96 -16.52
9.18 99.19 16.96 36.84
30.17% -43.59% 56.66% -68.51%
GlaxoSmithKline Novartis Sanofi-Aventis
Overview
External
Internal
Recommendations
NPV
47
Pfizer ROE vs. Rivals
Overview
External
Internal
Recommendations
NPV
48
Stock Price
Company Name 2007 27.73 22.24 2006 2005 29.21 20.27 2004 38.89 21.99 2003 36.92 27.90 5 Year Growth -26.25%
Pfizer
High
Low
28.60
22.16
GlaxoSmithKline High Low
58.40 50.03
53.80 44.17
47.53 38.80
47.64 31.85
51.07 31.35
14.35%
Novartis
High Low
60.36 51.19
61.60 51.72
54.71 45.63
50.77 41.30
46.00 33.85
31.22%
Sanofi-Aventis
High Low
50.05 41.65
45.87 36.60 Internal
40.48 29.22
37.92 22.53
32.80 24.90
52.59%
Overview
External
Recommendations
NPV
49
Pfizer Stock Price vs. Rivals
Overview
External
Internal
Recommendations
NPV
50
Building Blocks
Quality Quality is ingrained in the work of our colleagues and all our Values. We are dedicated to the delivery of quality healthcare around the world
Collaborations with academic and other research institutions
Overview
External
Internal
Recommendations
NPV
51
Building Blocks (continued)
Innovation The pursuit of innovation is basic to Pfizer's culture. It shapes our strategy, defines our purpose, and governs every facet of our operations
Research and Development Value for the customer
Overview External Internal Recommendations NPV
52
Value Chain Analysis
http://www.themanager.org/models/ValueChain.htm
Overview
External
Internal
Recommendations
NPV
53
Marketing & Sales
Channels:
Television (commercials) Print ads Online ads
Performance:
Identifies trends
Lipitor Viagra
http://youtube.com/watch?v=rE0up432ohY
Sales reps receive the best training in the business Spread all over the world, working every day with doctors, hospitals, managedcare organizations and drug distributors Knowledge of Pfizers product and competitors
Overview
External
Internal
Recommendations
NPV
54
Human Resource Management
Different People Environment
Challenging Open Diverse
Different Perspectives One common commitment
University Relations
Recommendations
http://www.pfizer.com/careers/faq/faqs.jsp#comp anies
Various areas of Overview study External Internal
NPV
55
Technology Development
Outsourcing 10 therapeutic areas of interest Diabetes, Cancers, Schizophrenia, Alzheimer's Disease and Immunology
http://www.pfizer.com/research/licensing/wwbd.jsp
Overview
External
Internal
Recommendations
NPV 56
Technology Development
Physician-directed and patient-directed enabling technologies Finally, Pfizer seeks to forge partnerships with companies that can help them integrate technologies with therapeutics and informatics
Feb 2007, Pfizer acquired BioRexis Pharmaceutical Corporation (develop protein therapeutic agents)
Recently, Pfizer entered into a research agreement with Genstruct, which is a Biotechnology firm
(Focus on underlying mechanisms of drug-induced liver injury)
Acquired Schering Ploughs animal health care Overview External Internal Recommendations segment
NPV
57
Internal Weighted Avg. Table
Pfizer
Strategic Factors
GlaxoSmithKline
Weight Rating Rating Weight Rating
Novartis
Rating Weight Rating
Weight
Rating
Strengths & Weaknesses
Marketing & Sales Innovation Aging Portfolio Costs (total) Total:
.25 .25 .25 .25 1.00
External
8.5 6 6 7
2.125 1.50 1.50 1.75 6.875
Internal
8 5 5 6.5
2.00 1.25 1.25 1.625 6.125
6 5 5 6.5
1.50 1.25 1.25 1.625 5.625
NPV
58
Overview
Recommendations
Recommendation #1
Emerging Markets:
Asia Japan grew 5.5% in 2007 and their GDP 4.3 trillion (3rd largest in purchasing power) Main health problem Obesity China grew 6.5% in 2007 and their GDP 10.7 trillion (2nd largest in purchasing power) Main health problems insomnia, anxiety and depression India - grew 6% in 2007 and their GDP 1.3 trillion (4th largest in purchasing power) Main health problems infant mortality, increasing usage of tobacco, and diabetes
Overview External Internal Recommendations NPV 59
Recommendation #1 (continued)
Overview
External
Internal
Recommendations
NPV
60
Recommendation #2
Acquire Mylan Laboratories
Patent Expires Offset pressure from government and insurance companies Penetrate the market of Pfizers competitors Follow Novartis acquisition of Sandoz generics Potential risks
Overview
External
Internal
Recommendations
NPV
61
Recommendation #3
Acquire Biotechnology firm Biogen Idec
Create drugs for unmet medical needs Oncology (cancer treatment) Neurological disorders (Multiple Sclerosis) Immunology (arthritis) Already established presence in emerging markets such as Brazil, India and China Over15 products in 2008 in Phase 2 or better
Overview
External
Internal
Recommendations
NPV
62
NPV Analysis
Initial Investment = $21 billion COGS = 25% of sales Other Expenses = 50% of sales Additional Investment = 1.5% per quarter (6% per year) Sales Growth Rate = 1.2% per quarter (4.8% per year) Discount Rate = 5% per year (Target ROA/4) Overview External Internal Recommendations Target ROA = 20
NPV
63
NPV (continued)
Biogen Revenue 2007 $3.2 billion 2-3 years before FDA approval/ Filing phase Help Pfizer recover lost profits from Lipitor loss 10 year span- more realistic for drug development
Year 1 = (12,920,411) Year 2 = (5,944,836) Year 3 = (294,152) Year 4 = 5,864,430 Year 5 = 11,483,248 Year 8 = 24,820,527 Year 10 = 31,360,258
Overview
External
Internal
Recommendations
NPV
64
