New Chief at Pfizer Will Reduce Sales Force
New Chief at Pfizer Will Reduce Sales Force
New Chief at Pfizer Will Reduce Sales Force
Pfizer, the world’s largest drug company, said yesterday that it would lay off almost 2,400 sales representatives and managers, which is a fifth of its
The move may indicate the beginning of a wider retrenchment by Pfizer and the rest of the drug industry.
Drug makers have sharply increased the size of their sales forces over the last decade as the research productivity of the companies has plunged and the pipeline of important new drugs has dwindled.
The bloated sales forces, analysts say, have alienated doctors and contributed to high drug prices.
Because Pfizer led the sales force expansion, other companies will probably follow its decision to cut back, said Michael Krensavage, a drug industry analyst at Raymond James.
“The other companies were reluctant to cut their sales forces while Pfizer was continuing to have people on the ground,” he said. “It seems like it’s the end of an arms race.”
Drug sales representatives promote medicines by visiting doctors’ offices to offer physicians promotional literature, journal articles and free samples for patients. But many doctors now complain that they are overrun by too many representatives who have little useful information.
Now, with revenue barely rising at most companies and Democratic leaders in Congress vowing to wring savings from the Medicare prescription drug program, drug makers are under pressure to bring their costs down.
In a statement about the layoffs, Pfizer said it would announce more “actions for transforming the company” in January.
The restructuring program comes on top of an earlier set of layoffs that trimmed Pfizer’s work force by 5,300 employees since early 2005, according to a Pfizer filing with the Securities and Exchange Commission.
The new cuts are one of the first moves by Jeffrey B. Kindler, the former General Electric executive who in July replaced Pfizer’s ousted chief executive, Hank McKinnell. Mr. Kindler has pledged to review every aspect of the company’s operations.
Pfizer has also promised to reduce its overall costs in 2007 compared with 2006, and further reduce them in 2008.
Paul Fitzhenry, a Pfizer spokesman, said the company expected to notify affected employees by mid- to late December. The layoffs should be complete by Jan. 1, he said.
The layoffs will be spread broadly across the
Pfizer did not disclose details of the severance packages employees would be offered.
Pfizer has 106,000 employees worldwide, including 42,000 in the
The company made the announcement after the close of trading yesterday, during which shares of Pfizer rose 8 cents, to $27.05. In after-hours trading shares were up an additional 20 cents. Pfizer shares have risen 16 percent this year but are still down by almost half from the highs they set six years ago.
“This is overdue,” said Les Funtleyder, an industry analyst at Miller Tabak. “Pfizer was probably the innovator in the ‘Mongol horde’ approach to the sales force, and that model served them well in the past. Now they simply don’t need as many.”
Like other big drug companies, Pfizer remains very profitable. Last year, the company had $14 billion in profits, excluding one-time charges, on $51 billion in sales.
But despite a $7 billion annual research budget, Pfizer has had deep difficulties bringing new drugs to market.
Earlier yesterday, Pfizer announced it had ended a research collaboration with a European company to develop asenapine, a treatment for schizophrenia that analysts had predicted could be a multibillion-dollar drug.
Pfizer has also run into unexpected problems with torcetrapib, a drug meant to raise so-called goodcholesterol. Torcetrapib appears to raise blood pressure slightly in patients, a serious side effect for a drug intended to reduce heart disease.
As a result, most analysts now believe that the Food and Drug Administration will not approve torcetrapib unless Pfizer can prove through studies that it reduces heart attacks and other cardiovascular problems. That data will probably not be available until at least 2010.
Tomorrow, Pfizer will play host to an all-day conference with analysts, investors, and the news media at its research campus in
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