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Spotlight on Pfizer

The US pharmaceutical giant announces its cost-cutting measures and unveals its financial forecasts.

All eyes are on Pfizer today with the US powerhouse expected to announce a strategic restructuring and cost-cutting plan in front of investors and analysts. Forecasts of earnings will also be unveiled.

The company's stock price has fallen by about a third this year after concerns over the safety of key Cox-2 pain-killer Celebrex, which is now suffering from sagging sales. However, analysts are not expecting a huge shift in strategy, with some believing Pfizer will announce at least $2bn in cost cutting.

Moreover, the company is expected to lose around $9bn in revenue over the next four years as some of its more lucrative products, such as anti-depressant Zoloft, allergy medicine Zyrtec and blood pressure medicine Norvasc, come off-patent.

Analyst Scott Henry of Oppenheimer & Co said that while on the face of it $2bn seemed impressive, such cuts would mean little to the bottom line of a company that made $53bn in revenue last year.

ìPfizer is still very profitable,î he said. ìThey don't regard this with the same urgency as the investment community.î

While there has been speculation that Pfizer could cut up to 30 per cent of its 38,000 worldwide sales force, analysts said that such a move was extremely unlikely and that redeployment would be more likely.

ìI don't think the restructuring is aimed at cutting people,î said Barbara Ryan at Deutsche bank. ìAnd I personally don't think that there will be big cuts in the sales force - Pfizer regard it as their strategic weapon.î

Unlike other drug companies, Pfizer often has more than one sales rep targeting the same doctor. Henry said the Pfizer sales model was still ìheavily dependentî on being a GP sales force: ìEveryone else is getting out of GP, but sometimes going against the grain is better business.î

Pfizer, which spent about $17bn in sales and general administration last year, is also expected to announce some cuts in its information technology and research departments.

The investment community is expecting Pfizer to post a 2005 profit of $2.13 earnings per share - just one cent over its 2004 figure. Unlike other large US pharma companies, Pfizer has yet to give a 2005 earnings forecast.

 

30th September 2008

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