Pfizer's New Structure: Has The Company Learned From Past Merger Mistakes?

| About: Pfizer Inc. (PFE)

So Pfizer's (NYSE:PFE) announced its post-Wyeth structure, and on the face of it, the plan makes as much sense as you can make of such a massive organization. The big divide is between small molecules and biologics, which makes sense - the two of them have different R&D, manufacturing, and regulatory issues in many ways. Besides, that's how most companies already divide things up internally if they do both.

There's a lot of brave talk in the press releases about how Pfizer has learned from its past mergers, how this organization will be ready to take wing just as soon as the last signature is put on the last form. I'm not buying it. It's good to hear that the company realizes that the previous mergers led to so much disruption and lost time, but I don't see how good intentions will help that much. There is no way, as far as I can imagine, to integrate ten billion dollars worth of R&D in an orderly fashion. The best that they can hope for is "not as hideous as the last couple of times", but I suppose the lawyers wouldn't sign off on that language as appropriate. And even that's a fairly ambitious goal.

We won't know for years if they've succeeded, either. The final measure is the productivity of the new organization, and for some time they'll be running on what was already in the works at both companies before. That, as I've said before, is one of the hardest things about the drug business: the lag time before you see results. You can change the early R&D, and see in a year or two if you've started more projects than you used to. But you won't know if they were good projects (or better ones, anyway) until they've run for a while. Maybe you just lowered your standards and initiated a bunch of stuff with a higher failure rate?

For that to resolve itself, you have to see how many of these new-regime projects make it all the way to the clinic. But then you'll have to wonder if you've just thrown some exhausted, just-barely-there stuff over the wall to declare victory - everyone who's worked in a big pharma organization has seen that one. The real measure of success in this industry is how many things come out of the clinic alive, and that's so dependent on luck (since we don't understand enough about toxicology and drug mechanisms), that those numbers may not reflect anything you're doing particularly right or wrong. No one at Pfizer saw torcetrapib's horrible failure coming, for example.

But hold on - another real measure of success in this industry, when you get right down to it, is money. Did those projects you started, took to the clinic, got through human trials, took to the FDA, and got out onto the market ever pay for themselves? There's always the possibility of an Exubera, to pick another example from Pfizer's recent past. And now we're up to ten or twelve years since you overhauled basic R&D. How many overhauls have you done since? Who's to say what thing had which effect and how? Pfizer can tell you about that, too - the dust hadn't settled from the Warner-Lambert deal when the Pharmacia one went through.

So, yes, we'll see about all this. But we won't see for a while, and when we finally do see, it'll probably be impossible to say just what we're looking at.