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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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February 8, 2005

Maybe They Should Fire Them All?

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Posted by Derek

So I see that Pfizer's stock is up today, partly on news that an oncology compound of theirs worked very well in a clinical trial against stomach cancer.. Well, it's not their compound, actually; they bought it from a little outfit called Sugen. Well, actually, they just went ahead and bought Sugen, and the compound came with it. It's a pattern. Hardly any of Pfizer's big compounds are from Pfizer, and when they go out shopping for one, they often just buy the company it came from. They must be on the mailing list for some kind of coupon offer that the rest of us don't get.

Where was I? Pfizer's stock price, yes. Good clinical news is certainly a legit reason for a drug stock to go up, and congratulations to everyone involved. But the other reason for Pfizer's stock action, a bigger one in terms of earnings per share, was the report that they might be about to cut 10,000 jobs from their sales force. The market liked the sound of these layoffs, as it often does, because those savings show up pretty quickly in a company's earnings reports.

That figure should give you an idea of what a leviathan Pfizer really is. There are plenty of well-known companies whose sales force couldn't be cut like that without first hiring a few thousand people. Perhaps I'm a bit thick-headed, though. Is it a good time to be bidding up the stock of a company that's thinking about heaving 30% of their sales force overboard? The reason you do such a thing is, well, slow sales. Firing people isn't going to make the sales pick up - just the reverse, actually.

At the very least, I wouldn't touch Pfizer until after the FDA hearings on COX-2 inhibitors next week. I can't imagine that their Celebrex sales are doing very well so far this year, but that meeting could really put on the brakes. Add that to slower sales for Neurontin and Viagra, and the medium-term patent expiration of Lipitor, and I can only ask again what I've been asking for a few years now: just how is Pfizer going to make this work?

Comments (9) + TrackBacks (0) | Category: Business and Markets


1. leland burrill on February 9, 2005 2:39 AM writes...

P.S. The Sugen building was shuttered a couple years ago. I still pass the big, empty parking lot every day.

P.P.S. As of Dec 30, Celebrex sales were not so hot.

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2. schinderhannes on February 9, 2005 4:56 AM writes...

Let´s hope they never come up with the only truly stringent idea:
Cut all jobs in their own (huge) reserch organisation and rely entirely on taking over small companies (inlicensing Pfizer style).

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3. Kay on February 9, 2005 6:54 AM writes...

Who will feed the beast?

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4. Gil Roth on February 9, 2005 9:05 AM writes...

If you check out today's Times article on the Pfizer analyst-warning, you'll find the following:

"Many analysts say that major drug companies spend too much on marketing [...] Some critics also cite drug makers' spending on research and development, arguing that laboratory productivity appears to be dropping even as spending rises."

So now it seems we're supposed to complain that drug companies spend TOO MUCH on R&D, along with their big marketing budgets.

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5. Derek Lowe on February 9, 2005 9:17 AM writes...

Gil, I just noticed that one this morning, too. It's true that the new technology hasn't been as productive as we'd hoped, but if these guys are implying that the way to get more productive is to cut R&D, they should get their office ventilation systems checked.

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6. Jack Vinson on February 9, 2005 12:50 PM writes...

Pfizer has been known in the industry as a massive marketing machine, so maybe this is a slight change in direction?

Other notes: Sugen came to Pfizer as part of the Pharmacia purchase that gave them Celebrex and a number of other compounds. (And Pharmacia got Celebrex when they merged with Monsanto to get Searle.) And the Chicago site where Searle R&D was housed has been in the press a bunch as a potential biotech / technology center, assuming the developers and city can convince someone to subsidize their work.

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7. Ian Argent on February 10, 2005 2:24 PM writes...

A friend of mine works for a company that supplies robot to big pharma. One of his anecdotes is priceless:
"We sent a quote to Alanex, got the order from Agouron, billed Warner Lambert, and got the check from Pfizer..."

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8. smallpharmarep on February 10, 2005 6:48 PM writes...

as a drug rep who sells to primary care, I welcome any reduction in the number of reps, as long as I am not included. This business has gotten completely out of control with some products having 6 different reps selling it, going to the same offices week after week. Almost every doctor will welcome a reduction in the number of reps.

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9. Michael Vickers on February 17, 2005 7:15 AM writes...

I don't think reduction in sales force is a bad thing for huge Pharma (I believe Pfizer has 24 different sales forces!). Pharma sales reps are perceived in many parts of the industry as inefficient. That, and the FDA are just beginning to scrutinize the Pharma/doctor interaction, especially as it occurs with sales reps.

You can bet that when Pfizer drops the hammer, others (such as GSK) will follow suit.

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