Pfizer Resorts to More Cost Cutting

After reporting a 12% decline in Q4 adjusted EPS on flat sales, Pfizer met with analysts and investors to explain its "immediate priorities." Pfizer's first priority is to maximize both short and long term revenues. Its second priority is to cut costs and have a more flexible cost base. It announced a 10% reduction (10,000 employees) of its global work force, which includes a 20% cut of its European sales force and a similar cut to its U.S. sales force announced in late Nov. In addition, Pfizer will close plants and research centers worldwide, reducing the number of factories it plans to be operating by the end of next year to 48, from 93 in 2003. Its third priority is to simplify R&D and reorganize its pharmaceutical business into four units. Overall, recent cost savings plans implemented by the former and current CEOs will save Pfizer $4.5b to $5b by the end of next year, of which $3b will be reinvested in new products. Its last two priorities include collaborating more with stakeholders and making Pfizer a "great place to work" by cutting bureaucracy and reducing management layers. Separately, the non-profit AIDS Healthcare Foundation filed a lawsuit against Pfizer, claiming its Viagra ads encourage its use as a party drug, resulting in the spread of HIV and other STDs.

• Sources: Press release, Bloomberg, NY Times, Washington Post-AP, WSJ
• Related commentary: Pfizer Beats Street Estimates; All Eyes on CEO Kindler's Cost Cutting Plans, Pfizer's Sales Force Cut: Like 'The End of an Arms Race', Pfizer Trading Well Below Its Intrinsic Value
• Potentially impacted stocks and ETFs: Pfizer (PFE). ETFs: iShares Dow Jones US Pharmaceuticals (IHE), iShares Dow Jones US Healthcare (IYH), Pharmaceutical HOLDRs (PPH), Vanguard Health Care (VHT), Health Care Select SPDR (XLV), First Trust Morningstar Dividend Leaders (FDL)

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