Presentation Overview
y
Company Overview
Business Segments Geographic Reach Goals and Objectives Mission Statement/ Values Relevant History Strategy Diamond
External Environment
Industry defined and Life Cycle Macro environmental Factors Porters 5 Forces External Weighted Avg. Table
2
Overview (continued)
y
Internal Environment
Current Financial Performance vs. Rivals Building Blocks Value Chain Analysis
Company Overview
Overview
External
Internal
Recommendations
NPV
4
Business Segments
Pharmaceutical
Provide treatment for:
Overview
Cardiovascular and metabolic diseases CNS disorders Arthritis and pain Infectious and respiratory diseases Urogenital conditions Cancer Endocrine disorders Allergies
External Internal Recommendations NPV
5
Animal Healthcare
Treat and prevent diseases associated with livestock and companion animals Parasticides/anti-inflammatories/vaccines/antibiotics
Corporate/Other
Manufacturing of empty soft gelatin capsules Contract manufacturing Bulk pharmaceutical chemicals
Overview
External
Internal
Recommendations
NPV
6
Geographic Reach
Operates and markets its products in over 150 countries worldwide About 98,000 employees in over 115 countries
Overview
External
Internal
Recommendations
NPV 7
Grow in Emerging Markets Find new opportunities for established products Refocus and optimize patent protected portfolio Instill culture of innovation and continuous improvement Invest in complimentary businesses
External Internal Recommendations NPV
8
Overview
Mission Statement
We will become the world's most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live.
Charles Pfizer
Overview External Internal
Charles Erhart
Recommendations NPV
9
Vision Statement
We dedicate ourselves to humanity's quest for longer, healthier, happier lives through innovation in pharmaceutical, consumer, and animal health products.
Overview
External
Internal
Recommendations
NPV
10
Integrity Respect for People Customer/Community Focus Innovation Teamwork Performance Leadership Quality
External Internal Recommendations NPV
11
Overview
1849- Founded by Charles Pfizer and Charles Erhart in Brooklyn, NY 1900- Incorporated in New Jersey 1971- Companys Central Research Division created 1995- Animal health care segment acquired from SmithKline Beecham 2000- Pfizer and Warner Lambert merge 2003- Acquired Pharmacia Corporation, creating worlds largest research based pharmaceutical company 2005- Acquired Vicuron Pharmaceuticals to improve anti-viral development program 2006- Sold consumer healthcare business to J&J
External Internal Recommendations NPV
12
Overview
Competition
GlaxoSmithKline PLC Novartis AG Sanofi-Aventis
Overview
Offer similar types of products Large in size (established distribution channels) Close in sales margins Close in terms of Market Share Good Benchmark
External Internal Recommendations NPV
13
Strategy Diamond
What businesses will we be in?
Products/Services, Regions, Customers
Economic Logic
Vehicles
Differentiators
Overview
External
Internal
Recommendations
NPV
14
Corporate/Other
Contract Manufacturing Bulk pharmaceutical chemicals
Overview External Internal Recommendations NPV
15
Vehicles (continued)
Overview
External
Internal
Recommendations
NPV
17
Economies of Scale
Taking advantage of cost efficiency
Overview
Differentiators (continued)
Marketing Capabilities
(Lipitor- Warner Lambert and Viagra)
Overview
External
Internal
Recommendations
NPV
19
Economic Logic
How will we achieve our competitive position?
y
Adjusting to a projected Negative sales growth out to 2012 y Declining unit costs with increased volume Reducing Operating Costs
COGS, Sales, & Marketing Sales Force
Altering sales approach Reduce sales force 20% in order to increase profits
Overview
External
Internal
Recommendations
NPV
20
Emerging markets
Moving into other geographic areas
Overview
External
Internal
Recommendations
NPV
21
External Environment
y y
Risk of Entry from Potential Competitors Threat of Substitute Products Bargaining Power of Suppliers Bargaining Power of Buyers Intensity of Competition among Rival Firms
External Internal Recommendations NPV
22
Industry Definition
Definition: The pharmaceutical industry develops and manufactures medications that treat diseases and illnesses in a variety of therapeutic areas.
Overview
External
Internal
Recommendations
NPV
23
products with increasing costs and processes cause a decline Goal: sustain and strengthen position within specific business segments, Increase customer loyalty and cash flows
Overview External Internal Recommendations NPV
450 million are over the age of 65 (7% of global population)(17% by 2020) Healthcare spending highest among over 65 age range (Social Security and Defense only higher Federal Spending) Baby Boomers dependant on use of prescription medication to treat health problems (opportunity)
External Internal Recommendations NPV
25
Overview
Continued..
Threat
y
In America, 77 million people will be enrolled in Medicare by 2031 Health care and Medicare programs will not be able to finance this many people Possible increase in bulk buying/ price controls placed on medicines produced
Overview
External
Internal
Recommendations
NPV
26
Technological: Biotechnology
Opportunity
Young Industry- Developed Insulin/ Cancer Drugs Uses living organisms (cells) or products to improve the health of a human (medicines and remedies) Develops molecular procedures that finds a target patient population for a drug (DNA/Genetics) Medicines are created faster and cheaper than traditional methods
External Internal Recommendations NPV
27
Overview
Alzheimers/ Dementia/ Cancer have replaced infectious diseases as number one cause of death in adults over 65 Studies show people over the age of 65 are 17% more likely to get cancer Progress in medicine and disease prevention will take on larger role in near future (rising demand for elderly)
External Internal Recommendations NPV
28
Overview
FDA (USA) lengthy process (up to 15 years) and strict Unpredictable clinical trials (less than 2% approval rate) Constant pressure from governments to lower prescription drug prices and yield to generics Outside the U.S- Canada and Europe have national healthcare coverage (bargaining power increased) Medicare Prescription Drug, Improvement and Modernization act of 2006 broad coverage/more power Firms profitability and health greatly affected
External Internal Recommendations NPV
29
Overview
Hospitalization
x Surgery x Chemotherapy
Overview External Internal Recommendations NPV
31
High revenue growth within the industry Rivalry is intense because fragmented industry
No company holds more than six to ten percent of the market share
y y
Differentiation Companies use tactics such as price competition, advertising battles and new product introductions
Maximizes position in market
External Internal Recommendations NPV
32
Overview
Private insurance companies may negotiate drug prices, use rebates, and drug-volume discounts with pharmaceutical manufacturers to alter prices
y
Governmental Influence
National Healthcare outside of U.S
Overview
External
Internal
Recommendations
NPV
33
Effects Profitability normal in a competitive market Switching costs are low (pharmacies) allows companies to consistently change suppliers to find the most efficient supply chain possible Biotechnology Firms Capacity to create their own drugs/products Provide chemicals and compounds
External Internal Recommendations NPV
34
Overview
Airline
Rating Weight Rating
Specialty Retail
Rating Weight Rating
Weight
Rating
Weight Rating
.2 .3 .2 .3 1.00
External
6 7 4 9
5 3 3 8
5 5 6 6
Recommendations
Internal Environment
y
y y
Overview
Overview
External
Internal
Recommendations
NPV
37
Pharmaceuticals
5.36%
Corporate/Other
Overview
External
Internal
Recommendations
NPV
38
Overview
External
Internal
Recommendations
NPV
39
Overview
External
Internal
Recommendations
NPV
40
Overview
External
Internal
Recommendations
NPV
41
Overview
External
Internal
Recommendations
NPV
42
Overview
External
Internal
Recommendations
NPV
43
Overview
External
Internal
Recommendations
NPV
44
Profitability Ratios
Return on Assets Net Income/ Total Assets
2007 2006 2005 ROA Pfizer 7.39 GlaxoSmithKline 21.27 Novartis 17.95 Sanofi-Aventis 7.67 5.55 3.25 -7.71 24.10 -68.17% 12.59 12.19 12.07 11.55 55.41% 23.59 21.88 21.97 23.74 -10.40% 17.01 7.01 9.67 5.03 46.92%
2004
2003
5 Year Growth
Overview
External
Internal
Recommendations
NPV
45
Overview
External
Internal
Recommendations
NPV
46
Profitability Ratios
Return on Equity Industry Average = 23.2 Net Income/ Shareholder Equity
2007 2006 2005 2004 2003 5 Year Growth ROE
Pfizer
Overview
External
Internal
Recommendations
NPV
47
Overview
External
Internal
Recommendations
NPV
48
Stock Price
Company Name 2007 27.73 22.24 2006 2005 29.21 20.27 2004 38.89 21.99 2003 36.92 27.90 5 Year Growth -26.25% Pfizer High Low 28.60 22.16
58.40 50.03
53.80 44.17
47.53 38.80
47.64 31.85
51.07 31.35
14.35%
Novartis
High Low
31.22%
Sanofi-Aventis
High Low
52.59%
Overview
External
Recommendations
NPV
49
Overview
External
Internal
Recommendations
NPV
50
Building Blocks
Quality Quality is ingrained in the work of our colleagues and all our Values. We are dedicated to the delivery of quality healthcare around the world
Collaborations with academic and other research institutions
Overview
External
Internal
Recommendations
NPV
51
http://www.themanager.org/models/ValueChain.htm
Overview
External
Internal
Recommendations
NPV
53
Channels:
Television (commercials) Print ads Online ads
Performance:
Identifies trends
Lipitor Viagra
http://youtube.com/watch?v=rE0up432ohY
Sales reps receive the best training in the business Spread all over the world, working every day with doctors, hospitals, managedcare organizations and drug distributors Knowledge of Pfizers product and competitors
Overview
External
Internal
Recommendations
NPV
54
Different Perspectives
University Relations
Various areas of study
http://www.pfizer.com/careers/faq/faqs.jsp#companies
Overview
External
Internal
Recommendations
NPV
55
Technology Development
Outsourcing 10 therapeutic areas of interest Diabetes, Cancers, Schizophrenia, Alzheimer's Disease and Immunology
http://www.pfizer.com/research/licensing/wwbd.jsp
Overview
External
Internal
Recommendations
NPV 56
Technology Development
Physician-directed and patient-directed enabling technologies Finally, Pfizer seeks to forge partnerships with companies that can help them integrate technologies with therapeutics and informatics
Feb 2007, Pfizer acquired BioRexis Pharmaceutical Corporation (develop protein therapeutic agents) Recently, Pfizer entered into a research agreement with Genstruct, which is a Biotechnology firm
(Focus on underlying mechanisms of drug-induced liver injury)
GlaxoSmithKline
Weight Rating Rating Weight Rating
Novartis
Rating Weight Rating
Weight
Rating
Marketing & Sales Innovation Aging Portfolio Costs (total) Total: Overview
8.5 6 6 7
8 5 5 6.5
6 5 5 6.5
Recommendations
Recommendation #1
Emerging Markets:
Asia Japan grew 5.5% in 2007 and their GDP 4.3 trillion (3rd largest in purchasing power) Main health problem Obesity China grew 6.5% in 2007 and their GDP 10.7 trillion (2nd largest in purchasing power) Main health problems insomnia, anxiety and depression India - grew 6% in 2007 and their GDP 1.3 trillion (4th largest in purchasing power) Main health problems infant mortality, increasing usage of tobacco, and diabetes
Overview External Internal Recommendations NPV 59
Recommendation #1 (continued)
Overview
External
Internal
Recommendations
NPV
60
Recommendation #2
Overview
External
Internal
Recommendations
NPV
61
Recommendation #3
Overview
External
Internal
Recommendations
NPV
62
NPV Analysis
Initial Investment = $21 billion COGS = 25% of sales Other Expenses = 50% of sales Additional Investment = 1.5% per quarter (6% per year) Sales Growth Rate = 1.2% per quarter (4.8% per year) Discount Rate = 5% per year (Target ROA/4) Target ROA = 20
Overview External Internal Recommendations NPV
63
NPV (continued)
Biogen Revenue 2007 $3.2 billion 2-3 years before FDA approval/ Filing phase Help Pfizer recover lost profits from Lipitor loss 10 year span- more realistic for drug development
Year 1 = (12,920,411) Year 2 = (5,944,836) Year 3 = (294,152) Year 4 = 5,864,430 Year 5 = 11,483,248 Year 8 = 24,820,527 Year 10 = 31,360,258
Overview
External
Internal
Recommendations
NPV
64