New - and Useful - Buzzword: Transform
Copyright Jack Mixner. 714 449 1040 www.mixnerstrategy.com
Last week Pfizer laid off twenty percent of its sales force, once, and perhaps still, the largest in the industry.
This week Pfizer stopped development of its next block-buster drug, torcetrapib, after negative performance in human trials.
Most other companies would be looking for a new CEO. Not Pfizer. Instead, they're looking to transform the business to be less reliant on the next big blockbuster. Jeffrey Kindler, CEO for just the last four months, and an industry-outsider to boot, has had to make tough decisions early in his tenure. Expect the "transformation" to continue, company-wide (Murray, page A3).
Strategic Implications
CEOs might look closely at Pfizer's actions to reduce expenses and expedite new products in the pipeline, while making the company more transparent to investors. Finally, Big Pharma companies need realistic projections for analysts. Pfizer has promised too much for too long. This week, the company has taken big hits on its stock. Next steps will include realistic public assessments of what is in the pipeline (Simons). Smaller projects with smaller ultimate pay-outs will be necessary. This will add up to a smaller, more balanced, company. The balance should yield less volatility.
One last comment. The Economist, in its commentary on Big Pharma, points to the challenges of generic drugs as well as a pipeline "filled" with blockbusters. It remains to be seen whether investors will give management the time it needs to put the house in order (Pharmaceuticals Pfaltering).
Orange County wants more bioscience companies to grow - and stay - here.
Hubbard says successful companies focus on management by hiring professional talent earlier in the process and training them continually. Murray points out that experienced outsiders are useful in times of transformation.
Hire professionals as early in the growth of your company as possible. Outsiders may work better than you might imagine. Then be realistic about projections.
References
Murray, Alan. Drug's Demise Demonstrates Why CEO Is Pushing to 'Transform' Pfizer. Wall Street Journal. 6 December 2006. Page A3.
Hubbard, Glenn. The Productivity Riddle. strategy+business. Winter 2006. http://www.strategy-business.com/press/article/06402?gko=e1377-1876-20605692
Pharmaceuticals Pfaltering. Economist. 5 December 2006. http://www.economist.com/daily/news/displaystory.cfm?story_id=8375233
Simons, John. When Big Pharma Gets Too Big. Fortune. 4 December 2006. http://money.cnn.com/2006/12/04/news/companies/pluggedin_simons_pfizer.fortune/index.htm?postversion=2006120415