Why I Pick on Pfizer

I get occasional comments and e-mails asking why I’m so hard on Pfizer (PFE). It’s not that I have anything personal against the company – I’ve never worked there, and they’ve never turned me down for a job. And I have a lot of friends there as well - the company has a lot of good people working for it. No, it’s not Pfizer so much as the way that Pfizer exemplifies for me a lot of things that I think have gone wrong with the industry.

First, of course, is sheer size. As I’ve said numerous times, I think that many things scale as a drug company gets larger, but research productivity isn’t one of them. If anything, it may go in the other direction. Pfizer is an excellent example of just what I’m talking about. If there was any reliable correlation of size to internal research success, this is where you’d expect to see it. But Pfizer has been notoriously unproductive in its own labs. Some of that has been sheer bad luck, but you can’t use that explanation to cover the whole problem.

Put simply, I think that really huge drug companies are a bad thing. A collection of smaller ones carved out of the same resources would probably explore more therapeutic avenues, and in a more nimble and focused manner. I also like competition in this business, because it keeps us moving, and because it leads to a wider variety of approaches being tried out for each problem. Mergers and buyouts have, I feel sure, not been good for the ecology of the industry, and Pfizer is the absolute champion of that style. Large and productive research organizations have disappeared beneath the waves because they had the misfortune of discovering something that Pfizer wanted to buy.

And there’s also the triumph of marketing. That’s one area where Pfizer really excels, but the problem with being a marketing powerhouse is that you might end up thinking that you can sell almost anything. The company’s disastrous experience with Exubera (the inhaled insulin product that missed its sales targets by, what, 98 percent?) is a sobering example. If you start believing your own press releases, you might convince yourself that you’re going to sell a billion dollars of Exubera, and at a huge company you’ve got the money and the resources to pursue that dream right over the cliff. Groupthink finds a bigger arena in which to work its magic.

So there it is. Other companies have similar problems, but when you go to Pfizer, you find them all together, in concentrated form. So when they announce that they’re going to go out and buy someone else to work their way out of their (massive) coming troubles, it makes me wince. It just seems like the opposite of what we need.

Comments

[howard_roark:]

Derek, I have a large position in PFE, but I found your article interesting. Do you think the company needs to restructure into smaller units to be able to focus more fully on new and innovative medicines? Or do you think the company is so bloated that there's really no answer to their problems?

Jan 07 09:24 AM

[desicon:]

Nice objective analysis. I wish PFE can somehow defy the pitfalls you have listed.

Jan 07 04:10 PM

[desicon:]

Needless to say I too have big positions in PFE. Can PFE devise a strategy analogous to what IBM is doing in the tech market? Essentially what I am asking is there a strategy in which success is predicated on size and global reach.

Jan 07 04:14 PM