Pfizer Inc. Strategic Analysis: Governance, SWOT, and Growth

Current Situation

Pfizer Inc. is reported to be "one of the biggest players in what is widely considered the most influential industry in Washington: pharmaceutical manufacturers" (Center for Responsive Politics, 2009). Pfizer is one of the five largest pharmaceutical companies worldwide and produces several of the best-selling prescription drugs on the market, including Viagra. The company has maintained continuous growth and purchased Warner-Lambert in 2000, then announced it would purchase Pharmacia in 2002 (Center for Responsive Politics, 2009).

Pfizer has undergone "a period of extremely rapid growth resulting from the commercial success of products including Viagra, Lipitor, and Celebrex. This aggressive growth strategy, enabled through mergers and acquisitions, was designed to achieve the scale required to gain synergies, invest in costly technologies, and spread the enormous risk of the drug development process. Yet size can itself become an impediment to the agility and flexibility which are critical to lasting business success. Retaining these characteristics can be a serious challenge for successful companies" (Tradeline, 2004).

The Global Operations within the R&D division of Pfizer Inc. has responded to this challenge by "building a foundation for the future based on best practices from the companies of which it is now comprised" (Tradeline, 2004). The company is now "the world's largest research-based pharmaceutical company" and is organized into three primary business units:

1) Human health care (developing, manufacturing, and marketing prescription drugs);
2) Animal health care; and
3) Consumer health care (over-the-counter drugs). (Tradeline, 2004)

Pfizer Global Research and Development (PGRD) is part of the human health care business unit, which has major Research & Development sites in the U.S., Europe, and Asia producing "leading products in 14 therapeutic categories" with a Research and Development budget of more than $7 billion (Tradeline, 2004).

Corporate headquarters for Pfizer Inc. are located in New York, NY. Research and Development divisions are located in Connecticut, England, California, Missouri, and Massachusetts. Pfizer is listed on the New York Stock Exchange as PFE and on the London Stock Exchange as PFZ. 2008 revenues for Pfizer Inc. are stated at $48.3 billion.

Products manufactured by Pfizer Inc. include the following:

Key Pharmaceutical Products: Aricept®, Aromasin®, Caduet®, Camptosar®, Celebrex®, Chantix™, Detrol/Detrol LA®, Eraxis®, Genotropin®, Geodon/Zeldox®, Lipitor®, Lyrica®, Norvasc®, Rebif®, Relpax®, Revatio®, Spiriva®, Sutent®, Vfend®, Viagra®, Xalatan/Xalacom®, Zmax®, Zoloft®, and Zyvox®.

Corporate Governance

Key Animal Health Products: Draxxin®, Excede®, Naxcel/Excenel®, RespiSure/Stellamune®, Dectomax®, Rimadyl®, Revolution/Stronghold®, Clavamox/Synulox®, BoviShield®, Lutalyse®, Slentrol®, Cerenia®, Convenia®, and Improvac®.

There are presently 14 individuals on the Board of Directors for Pfizer Inc., with an average director age of 65 years. There are 12 independent directors on the Board, and the board includes a Lead Independent Director, an Independent Audit Committee, and an Independent Compensation Committee. The Board meets more than 13 times per year and holds annual board elections. Corporate Governance Guidelines are approved by the Board of Directors, and outside directors hold meetings without management present. The Board conducts an annual self-evaluation and an annual review of its independence, and requires key committee self-evaluations. The Board maintains board orientation and education programs, a corporate compliance program, a disclosure committee for financial reporting, and is governed by a Code of Ethics.

The Executive Leadership Team (ELT) is Pfizer's senior-most leadership, management, and decision-making body. This team brings together the top leaders at Pfizer Inc. "to focus on major financial, strategic, and operational decisions for the company." According to Pfizer Inc., "to best position our business for continued success, the ELT is focused on working with agility, speed, and collaboration to ensure that opportunities are rapidly seized and challenges immediately perceived and addressed" (Pfizer Inc., 2009).

Pfizer states that it has "created an integrated, streamlined, 'one company' organizational structure in which line management, functional experts, and a few centers of excellence work in close collaboration to advance our business objectives. With this structure, we are aligned to meet the needs of our markets and customers, and rapidly capitalize on opportunities to advance our business by increasing support for successful new medicines, forging partnerships with key customers, entering into co-promotion and licensing agreements, investing in new technologies to add value to our core product offerings, and acquiring new products and services from outside the company" (Pfizer Inc., 2009).

The market opportunity has been stated by Pfizer Inc. to be shifting over the next ten years. Pfizer Inc. states that it will expand into areas of unmet need, including anti-virals and vaccines (Pfizer Inc., 2007). Pfizer's plan for addressing infectious diseases includes the following objectives:

External Environment: Opportunities and Threats

1) Deliver targeted anti-fungals and anti-bacterials;
2) Discover and develop differentiated anti-virals for HIV and HCV therapies; and
3) Address prevention through a novel and differentiated vaccine platform. (Pfizer Inc., 2007)

Pfizer Inc. additionally reports that its Fungal Portfolio is "well-positioned to address needs in the hospital setting" (2007). The Bacterial MRSA market is stated to be growing globally. Pfizer reports a breakthrough pharmaceutical medication in HIV therapy — specifically "Selzentry" — which received FDA approval and was expected to receive European approval shortly thereafter. Pfizer is stated to be well-positioned to compete in the future infectious disease market and identifies a significant unmet need persisting due to escalating resistance. Pfizer's disease development portfolio is described as: (1) aligned with environmental influences; (2) containing a diverse suite of opportunities; and (3) invested in near-, mid-, and long-term deliverables (Pfizer Inc., 2007).

It is reported that Pfizer's PowerMed DNA Vaccine Company features a unique technology platform in which DNA vaccines offer advantages over traditional and cell-based vaccines, with proprietary technology providing additional benefits. PowerMed has the potential for significant revenue and attractive margins, as the vaccine market is projected for significant growth due to increased consumer awareness and demand for preventive vaccines. Specialty vaccines also command premium pricing, and this represents a unique entry point for Pfizer's broader vaccine strategy (Pfizer Inc., 2007).

Threats identified in this analysis include the release of Pfizer's pharmaceuticals for generic duplication by other companies, with some generic versions already on the market. Pfizer Inc. states that one of the primary limitations in some countries outside the United States "is the lack of effective intellectual property protection" for its products. Pfizer's primary businesses are conducted in "intensely competitive and often highly regulated markets," and "most of Pfizer Inc.'s human pharmaceutical products face competition in the form of branded drugs or generic drugs that treat similar diseases or indications" (Pfizer Inc. Report to the United States Securities and Exchange Commission, 2008).

The principal forms of competition are stated to be "efficacy, safety, ease of use, and cost effectiveness" (Pfizer Inc. Report to the United States Securities and Exchange Commission, 2008). Competitors are identified as other companies that manufacture and sell products treating similar diseases and indications, which affects Pfizer's "core product business, which is focused on applying innovative science to discover and market products that satisfy unmet medical needs and provide therapeutic improvements" (Pfizer Inc. Report to the United States Securities and Exchange Commission, 2008).

Generic pharmaceuticals are identified as "one of the biggest competitive challenges" faced by Pfizer Inc. Several such competitors "make a regular practice of challenging our product patents before their expiry." The rise in crude oil prices is also cited as a potential threat, as it has "resulted in pricing pressures on raw materials that are derived from petroleum" and used in the pharmaceutical business (Pfizer Inc. Report to the United States Securities and Exchange Commission, 2008).

Regulatory and legislative issues both inside and outside the United States are cited as additional threats. The cost of complying with environmental law is also noted; in 2008, Pfizer Inc. spent $64 million on environment-related capital expenditures and another $156 million on other environment-related expenses. Additional threats include: (1) product manufacturing and marketing risks; (2) cost and expense control or unusual events; and (3) changes in laws and accounting standards (Pfizer Inc. Report to the United States Securities and Exchange Commission, 2008).

Stated strengths of Pfizer Inc. include the following organizational components:

1) Written policies and procedures;
2) A compliance officer and compliance committee;
3) Effective training and education;
4) Effective lines of communication;
5) Internal monitoring and auditing;
6) Enforcement through discipline pursuant to established guidelines; and
7) Prompt response and corrective action for detected problems. (Pfizer Inc., 2009)