Pfizer Interview Guide

Salary – Salary is always top of mind for job candidates. Unfortunately, salaries are one of the most difficult areas to provide guidance. The factors that go into deciding an individual’s salary are many and often subject to unique conditions. Despite these difficulties, Preptel feels it is important to provide general salary guidance and ranges on a select list of positions. This list is not meant to be comprehensive. Instead, it is to provide examples and a reference point.

As compared to similar large pharmaceutical companies, Pfizer, Inc. scores on the higher side of the salary range. This may be due in part to a significant number of their employees residing in a location with a higher than usual cost of living. Salaries for large pharmaceutical companies tend to average around the mean for the industry. While individual salaries may vary, the benefits of working for a large pharmaceutical company are not restricted to pay only. Like other large pharmaceutical companies, Pfizer offers a broad range of excellent benefits including brand name, diverse culture, upward mobility, career training, job training and support, as well as other compensation factors.

Implications: When considering your employment offer, take into account your education and managerial experience, as well as the current unemployment rate and other factors that affect compensation. These concepts are outlined in their respective sections of this report. In addition, be sure to factor in cost of living as this will affect compensation. Pfizer’s headquarters are in New York City where the cost of living is one of the highest in the U.S.

Stock Options – Pfizer stock has not been favorable to employee stock option plans as the price over the past 5 years has held steady or declined, depending on specific points in time. With standing the economic challenges occurring in late 2008 and early 2009, employees with stock options have not seen a noticeable appreciation in their value. Financial analysts have set a price target of between $17 and $30 with the average being around $25. Most of these estimates are targeted for 2012-2015. For new stock options, value of the stock offered assuming an $18 par value would be worth $0-$7 using the low to average spread from analysts. Employees should consider the likelihood of these options appreciating from the current stock price as part of their overall compensation.

Implications: When negotiating over stock options, past performance is a strong negotiating factor. Since most stock option plans did not appreciate and likely lost value from the original grant date, candidates should look to increase their total stock options to compensate for poor past performance. Keep in mind, the company will likely characterize the lack of appreciation in the stock value as one of 3 factors.

1. Economic collapse was the primary reason and the economy starting moving towards recession in 2007. Current economic forecast have the economy improving thus the stock is undervalued.
2. The company has struggled to find growth but the acquisition of Wyeth plus the current drug pipeline are all areas of opportunity, thus the stock is undervalued.
3. Pfizer is looking for employees who believe in the company and job candidates who believe they can positively affect the company.

Pfizer stock performance for past 5 years

Over the past 5 years, employees have rated Pfizer as an excellent place to work. Employees comment that they have a high regard of the management team, and view the social activities as a plus. Compensation and benefits are also noted as positives. Recently, however, employees have noted the downturn in the pharmaceutical space as a concern. However, perception is that this is an industry issue and not a company-specific issue. In 2005, Pfizer was 76 on the 100 Best Places to work.

In 2009 and into 2010, Pfizer is implementing new Customer Facing Units with responsibility from proof-of-concept thru the entire product lifecycle. This new business structure will likely mean reorganizations as the company shifts employees into these new structures and as the business models solidify.

Implications: Pfizer has a strong record in employee satisfaction demonstrating they value their employees. With high employee satisfaction, you can expect a good work environment, mentoring and career support. In addition, the new Customer Facing Units provides both concern and opportunity as reorganizations disrupt existing teams but also afford opportunities for increased responsibility.

Nov. 10, 2009: Layoffs at Pfizer are expected through 2012, according to its 10-Q filing with the SEC, but the bulk of its expected layoffs have already occurred. After announcing that it will be reorganizing and closing 6 of 20 R&D sites worldwide, Pfizer/Wyeth announced that as many as 2000 R&D scientists will lose their jobs. It is expected that others will lose their jobs in the next few months or so.

Pfizer Layoffs: Whose Jobs Are Safe, and Whose Aren’t?

By Jim Edwards | Jan 13, 2010

Pfizer (PFE) has begun the wield the ax as it begins to make the 19,500 layoffs it needs to make its merger with Wyeth work. Will your job be safe? Here’s a guide:

So far, Pfizer has targeted former Wyeth facilities for layoffs. Pfizer will eliminate nearly 1,200 jobs:

• 680 in Pennsylvania (230 at Wyeth’s Great valley, Pa. site and 450 at Wyeth’s Collegeville site. The two locations once had 4,500 employees).
• 400 in New Jersey
• 116 in Wyeth’s Pearl River site in Rockland County, New York (411 jobs already went at that site, which has about 2,931 workers).

Gwen Fisher, a spokeswoman for Pfizer, told the Philadelphia Business Journal, the final number of job cuts at Wyeth’s former facilities has not yet been determined.

Normally, BNET likes to look at companies’ franchises to see where cuts might be made. After all, if a drug’s revenues are declining, you can’t justify keeping extra staff on. But a look at both companies’ product sales shows that it is easier to name the drugs where jobs might be safe than it is to list those in peril — at both companies, all but six of their major brands have falling revenues. Here are the growth franchises:

• Pfizer
  Sutent
  Revatio
  Lyrica
• Wyeth
  Prevnar
  Enbrel
  Protonix
  Nutritionals

Even Wyeth’s Advil saw a 5 percent decline in revenues.

Pfizer Layoffs: 556 Reps; 800 R&D Staff

By Jim Edwards | Jan 13, 2009

Pfizer is cutting 556 sales reps in Italy and about 800 researchers across its R&D divisions worldwide. The moves were expected, as Pfizer braces for a round of cuts at the end of January as part of CEO Jeff Kindler’s plan to ax $2 billion from its cost structure. (Read BNET’s back-story on Pfizer’s layoff plans here.)

The layoffs made one group of people happy: bankers at Goldman Sachs moved their rating of Pfizer stock from “sell” to “neutral.”

The R&D layoffs represent 5% to 8% of its 10,000 research employees, according to the WSJ. Despite the shrinkage, the number of drugs in late stages of testing jumped to 25 from 16 less than a year earlier, the company reckons.

Pfizer reps are, understandably, freaking out. Here’s one thread on Cafe Pharma:

Please let us know sooner then later…make it the 20th, next week…please, for gods sake!! NO ONE, let me repeat, NO ONE is WORKING….THIS IS GETTING INSANE!

more…

Implications: With the acquisition of Wyeth, employee attrition will continue through 2010. However, Pfizer’s strategy and goals for the year, should stabilize the company in the second half of 2010.

Upon review of Pfizer’s recent reports, the company ranks on the high end for upward mobility, seeking internal candidates when possible. From entry level positions to executive positions, the company demonstrates a willingness to promote from within. Approximately 15% of employees were either promoted or received a change in job title.

Recent Promotions and Changes

Candidate Selection

Generally, candidates chosen range in background from college graduates to veterans of the industry. Common backgrounds include experience from the industry.

New Hires

Implications: Acquisitions create a time of change which affords opportunity. As seen recently, many new positions, promotions, and responsibilities are created when combining Wyeth and Pfizer. As the organization settles and executives monitor performance, expect additional opportunities. During an acquisition, companies will hire key individuals as performance is mandatory and new structures take time to resolve.

Growth is analyzed across 3 dimensions – Revenue, cash and employee. Over the past 3 years, Pfizer has been one of the largest and growing pharmaceutical companies in the world. With the acquisition of Wyeth, Pfizer has increased its revenue size, and employee size. Cash on hand remains strong but flat.

The 2009 acquisition of Wyeth is expected to increase the overall size of the organization significantly.

Note: This does not include the acquisition of Wyeth

Implications: While the company continues to operate very strongly, the acquisition of Wyeth puts pressure on potential job candidates as there are many internal candidates seeking these positions. Pfizer has a surplus of employees and finding them positions within the organization is a priority. Until these employees either attrite or find new positions within the company, job candidates are competing against internal employees and a management trying to control morale from layoffs.

Pfizer fabricates pharmaceuticals for quite a few infirmities. The company is the world’s largest research-based pharmaceuticals firm. Its best-known products include erectile dysfunction therapy Viagra, pain management drug Celebrex, high-blood-pressure therapy Norvasc, and cholesterol-lowering Lipitor. Pfizer also keeps Fluffy and Fido in mind with its animal health products, including Revolution (antiparasitic). The company markets its pharmaceuticals directly to health care providers and patients; most of its sales are conducted through wholesalers including McKesson and Cardinal Health. Pfizer acquired pharma rival Wyeth in a $68 billion deal in 2009.

The combination of the two drug giants — the largest pharmaceuticals merger in nearly a decade — was designed to help both companies deal with upcoming patent losses on top-selling drugs. The acquisition of Wyeth broadened Pfizer’s traditional and biological product offerings in areas including vaccines, antibiotics, women’s health, inflammatory and cardiovascular conditions, and gastroenterology. The combined company, which continues to operate under the Pfizer moniker, also has an expanded development pipeline for targets including Alzheimer’s disease, cancer, pain, and psychosis.

Pfizer is working to cut costs by integrating overlapping operations between the two organizations, including administration, sales, research and development, and manufacturing. The company launched a 10% workforce reduction to prepare for the transaction, and it estimates that the integration efforts will eventually result in an overall 15% reduction of the combined workforce.

The acquisition of Wyeth brought Pfizer back into the consumer health arena, adding products such as analgesic Advil and cough medicine Robitussin. (Pfizer sold its consumer unit — which made such sniffle-and-sneeze treatments as Benadryl and Sudafed — to Johnson & Johnson in 2006 to focus on the prescription pharmaceutical market.) The Wyeth deal also expanded Pfizer’s animal health business, even after the companies sold some animal health assets (primarily from Wyeth’s Fort Dodge Animal Health unit) to Boehringer Ingelheim to meet regulatory approval requirements.

Pfizer had four drugs topping $2 billion in sales in 2008: Lipitor, Norvasc, Celebrex, and pain medication Lyrica. (Wyeth’s top three products — antidepressant Effexor, arthritis treatment Enbrel, and pneumonia vaccine Prevnar — also pulled in over $2 billion each.) Five more Pfizer drugs pulled in over $1 billion, including Viagra, overactive-bladder treatment Detrol, and antibiotic Zyvox. However, Pfizer’s revenues from these established blockbusters continue to slide due to one of the pitfalls of the drug game: patent expiration. Bestsellers Norvasc and antidepressant Zoloft lost patent protection in 2007, and former bestselling allergy medication Zyrtec (which the company has since divested) faced generic competition starting in 2008.

Knockoff versions of the top Wyeth drug, Effexor, have been on the market for several years. Pfizer’s largest patent threat has been over cash cow Lipitor, the world’s top-selling drug that brings Pfizer over $12 billion in annual sales. After a years-long court battle over a proposed generic equivalent release by Ranbaxy, Pfizer reached a settlement agreement with the generics maker in 2008 allowing Ranbaxy to sell a generic Lipitor version in the US after November 30, 2011.

The drug giant claims that it will be able to launch new blockbusters from its robust pipeline to make up for the off-patent losses and return to revenue growth. Investment in R&D has increased (Pfizer spent about $8 billion on R&D in 2008) in order to bolster its pipeline. Pfizer’s pipeline includes about 100 projects in development, including drugs for diabetes, breast cancer, epilepsy, pain, and anxiety disorders. Pfizer has increasingly relied on acquisitions and partnerships to build its R&D activities. Products launched in 2007 and 2008 include AIDS drug Selzentry, smoking-cessation aid Chantix, and overactive-bladder treatment Toviaz.

The company seems to have an awareness that it’s not the only company in the pipeline bind; it has begun to work with its competition on developing replacement blockbusters. In 2007, for example, the company inked a 60/40 deal with Bristol-Myers Squibb for collaboration on cardiovascular and metabolic candidates.

Vaccines have taken on a new luster for many “druggernauts” looking for the next big therapeutic treatment. As such, Pfizer purchased Coley Pharmaceutical in early 2008 to gain access to Coley’s vaccine-facilitating technology. Pfizer also expanded through acquisitions in key growth areas including oncology (Serenex), cardiovascular therapies (Encysive Pharmaceuticals), and animal health (Embrex and several European products of the former Schering-Plough, which is now part of Merck). Pfizer is also looking to establish a presence in the generic drug business by licensing rights to off-patent pharmaceuticals from other manufacturers.

CEO Jeffrey Kindler took over the company’s reins in mid-2006 and immediately broadened the company’s existing restructuring initiatives to make its operations more nimble. A major program to tighten the company financially and operationally was launched in early 2007; about 12% of the company’s workforce was eliminated that year. The company has also closed or divested numerous research and manufacturing facilities. The program aimed to reduce costs by $1.5-$2 billion. By the end of 2008, the company exceeded its goal by cutting costs by about $2.8 billion.

During 2008, Kindler outlined a strategy to increase the number of drug candidates in late-stage trials in select targeted areas such as oncology, pain, and biotechnology. As a result, the company cut some early-stage development projects and reduced the overall number of drug candidates by nearly half. Kindler also stated that the company would continue to consolidate manufacturing facilities and expand its Asian operations. Pfizer aims to reduce costs by another $3 billion by the end of 2010.

Pfizer took a financial hit, however, in 2009 when it agreed to pay $2.3 billion to settle allegations that it improperly marketed several drugs, including discontinued painkiller Bextra. In a recent crackdown effort against pharmaceutical marketing fraud (promoting drugs for unapproved uses), the federal government has reached several settlement agreements with large pharmaceutical companies (including smaller deals with Pfizer); however, Pfizer’s 2009 settlement was the largest to date.

Recommended Interview Questions:

• Based on the goals of 2010, what key initiatives and employee programs were created to ensure alignment, enthusiasm, and performance?
• The acquisition of Wyeth is the largest Pfizer has ever done. What changes to the culture, processes, or company do you expect?
• Wyeth had strengths as a company. What changes does Pfizer want to retain from Wyeth and incorporate and change in the Pfizer employees?

Recommended Facts to Include in Your Answers:

The Wyeth acquisition is an opportunity. Look to include comments on how you can assist in the effort to help merge the company, cultures, processes and employees.

Look for areas to discuss:

• Protection of patents and intellectual property
• New business models and ways to provide effective healthcare to the community
• Identify ways to deliver medicine to underserved markets
• Layoffs will remain a significant part of the 2010 strategy and ensuring layoffs are handled properly is a priority.

Total revenue has remained flat for the past 3 years. Pfizer’s cost of revenue in 2007 increased but went back to normal in 2008. Operating expenses for the company are in line with other pharmaceutical companies. In 2006, $8 billion dollars was added to net income when they discontinued operations in a segment of their business. From a financial perspective, the company is large and diversified. Only large transactions, like the Wyeth acquisition, should cause any concern for someone considering employment. The company is healthy. Top line growth of their revenue has stalled. Pfizer may be turning to acquisitions to fuel growth in its markets.

2006 Notable Financial Variations:

• Revenues increased 2% to $48.4 billion over 2005, due primarily to the solid aggregate performance of Pfizer’s broad portfolio of patent-protected medicines and an aggregate year-over-year increase in revenues from new products launched since 2004, largely offset by the impact of the loss of U.S. exclusivity on Zithromax in November 2005 and Zoloft in June 2006.
• Income from continuing operations before cumulative effect of a change in accounting principles was $11.0 billion compared with $7.6 billion in 2005. This increase was primarily due to event-driven expenses, such as: lower acquisition-related In-process Research and Development charges (IPR&D), lower asset impairment charges, and a lower effective income tax rate.
• Discontinued operations—net of tax were $8.3 billion in 2006, compared with $498 million in 2005. The results in both years relate primarily to our Consumer Healthcare business, which was sold on December 20, 2006.

2007 Notable Financial Variations:

• Income from continuing operations before cumulative effect of a change in accounting principles was $8.2 billion compared to $11.0 billion in 2006. The decrease was primarily due to event-driven expenses, such as: higher asset impairment charges. In 2007, Pfizer expensed $2. 8 billion, pre-tax, related to the decision to exit Exubera, compared to $320 million, pre-tax, in 2006, related to the impairment of our Depo-Provera intangible asset; higher restructuring charges and acquisition-related costs associated with expanded cost-reduction initiatives.
• Discontinued operations—net of tax were losses of $69 million in 2007, compared with income of $8.3 billion in 2006. The results in 2006 relate primarily to our former Consumer Healthcare business, which was sold on December 20, 2006.

2008 Notable Financial Variations:

Income from continuing operations was $8.0 billion compared to $8.2 billion in 2007. The decrease reflected the following:

• A $2.3 billion, pre-tax and after-tax, charge resulting from an agreement in principle with the U.S. Department of Justice to resolve the previously reported investigation regarding allegations of past off-label promotional practices concerning Bextra, as well as certain other open investigations, and a $640 million after-tax charge related to agreements and agreements in principle to resolve certain non-steroidal anti-inflammatory drugs (NSAID) litigation and claims;
• Higher Acquisition-related in-process research and development charges (IPR&D). In 2008, we incurred IPR&D of $633 million, pre-tax, primarily related to our acquisitions of Serenex, Encysive, CovX, Coley, and a number of animal health product lines from Schering-Plough, as well as two smaller acquisitions also related to Animal Health, compared with IPR&D of $283 million, pre-tax, in 2007, primarily related to our acquisitions of BioRexis Pharmaceutical Corp. (BioRexis) and Embrex, Inc. (Embrex);
• The up-front payment of $225 million to Medivation, Inc. (Medivation) in connection with Pfizer’s collaboration to develop and commercialize Dimebon and the up-front payment of $75 million to Auxilium Pharmaceuticals, Inc. (Auxilium) in connection with our collaboration to develop and commercialize Xiaflex;
• A higher effective income tax rate, despite the tax benefits in 2008 related to favorable effectively settled tax issues and the sale of one of our biopharmaceutical companies (Esperion Therapeutics, Inc.); and lower interest income compared to 2007, due primarily to lower average net financial assets during 2008 as compared to 2007, reflecting proceeds of $16.6 billion from the sale of Pfizer’s Consumer Healthcare business in December 2006, and lower interest rates

Recommended Interview Questions:

• Based on the revenue from 2006 through 2009, growth seems to remain flat. What changes is the company making to improve growth in the next 2-3 years. Note: you can alter this question to any group or function to be more specific.
• Accounts receivable continue to increase. What structural changes is the company making to adjust for this change?

Recommended Facts to Include in Your Answers:

Strength of cash flow and the balance sheet indicates the possibility for additional acquisitions. Include examples regarding acquisitions that pertain to open position.

“Spirit of small and the power of scale.” Jeff Kindler, CEO

Pfizer’s employee base remains loyal and satisfied. Attrition not related to the Wyeth acquisition continues to be below the market average of 17%. Key officers and leadership remain with the company. One important change was the recent exodus of the R&D department to competitive firm GlaxoSmithKline. This appears to be a normal occurrence, though groups reporting to R&D will likely feel pressure and change as a replacement is identified and they institute their own culture and processes.

Pfizer is aggressively hiring in its biosciences practices across all functions. This continues to be a focus for Pfizer and a growth area for the market. New employees to Pfizer come from pharmaceutical companies like Novartis, Johnson & Johnson, and Warner Lambert. Pfizer has an affinity towards University of Michigan, Rutgers, Penn State, Michigan State, and University of Connecticut. In the last 30 days, Pfizer has hired 3 Vice Presidents, 12 directors, and 58 associates or managers. Pfizer continues to add employees across all areas of the business, though the greater New York City area is the largest employment area.

Upon review of Pfizer’s recent reports, the company ranks on the high end for upward mobility, seeking internal candidates when possible. From entry level positions to executive positions, the company demonstrates a willingness to promote from within. Approximately 15% of employees either were promoted or change in job title. This ranks on the high-end for the industry.

Senior Scientist in Chesterfield, MO

“Pfizer is a good company. Resources are a plenty. The benefits are great. Pfizer often does analysis to make sure your salary range is in the ball park. There is a hierarchy of degrees, if you did not get your Ph.D. from Harvard, then you are nobody.”

Other comments:

Recommended Interview Questions:

• What are current areas of growth for Pfizer and how will my position/team/group participate in those growth areas?
• Where does your group’s budget come from (asked to a hiring manager)?
• What is the average length of time that a manager remains in their job role?
• What is the average length of time that an employee in my prospective job role remains in their job? What is the rate of attrition in the group (to competitors vs. internal moves, etc.)?
• How do you incent employees to stay and grow with the company?
• How has Pfizer managed to integrate individual contributors and leadership roles from Wyeth?
• How often do groups re-organize, and why?
• Walk me through your requisition and candidate review process … how are internal candidates identified and reviewed for growth?
• How do groups organize to accommodate rapid growth? How do they react to pullbacks?
• How do you think the company’s top level organization will change over the next few years? How have those leaders adapted their strategies to match recent economic conditions? Has the company been able to realized opportunities and remain agile in the current market?
• How many new positions have been created in reaction to growth? How many positions have been eliminated due to reorganization?

Recommended Facts to Include in Your Answers:

Senior leadership and key company officers have remained steady through recent changes. Many groups within Pfizer are aggressively hiring.

Pfizer pays above or equal to the industry. Their typical compensation package includes a salary, a cash bonus paid annually, and stock options. Incentive based positions also include commissions that adjust annually. Pfizer’s benefit package includes medical, dental and vision coverage with multiple programs for the employee to choose from. Starting vacation allotment begins at 2 weeks and increases to 5 weeks based on duration of employment. Pfizer also includes a retirement 401K package where they match the employee’s contribution up to $10,000 per year.

View more Pfizer salary details

PFIZER’S EXECUTIVE SUMMARY OF COMPENSATION ACTIONS

The following highlights the Committee’s key compensation decisions for 2009, as reported in the 2009 Summary Compensation Table. These decisions were made with the advice of the Committee’s independent consultant, Frederic W. Cook & Co. (see “Role of Compensation Consultant” below), and are discussed in greater detail elsewhere in this Compensation Discussion and Analysis.

• Base salaries were frozen at the time of the regular salary review in February 2009, reflecting uncertain and deteriorating macroeconomic conditions at that time. The only Named Executive Officer who received a salary increase during 2009 was Mr. Read as a result of his promotion, reflecting his increased responsibilities.
• Annual incentives for 2009 were determined in February 2010. The 2009 awards for the Named Executive Officers were paid at an average of 133% of target as compared to 130% of target for 2008. The awards were based on the Company’s strong 2009 operating performance, which exceeded the goals set by the Committee for Revenue, Adjusted Diluted Earnings per Share (“Adjusted Diluted EPS”), and Cash Flow from Operations (see “Financial Measures” below). The Committee also took into account the closing of the Wyeth acquisition, which we completed in an efficient and expeditious manner.
• The regular annual long-term incentive awards granted in February 2009 had a lower grant date fair value than those granted in 2008, reflecting the same macroeconomic concerns that led to the salary freeze. In particular, the grant value for Mr. Kindler’s 2009 long-term incentive award was $8.3 million compared to $9 million in 2008. The annual long-term incentive values for the other continuing Named Executive Officers were also lower in 2009 than in 2008, excluding the special awards discussed below.
• In October 2009, the Committee approved special awards in recognition of the outstanding contributions made by Messrs. D’Amelio and Read in completing the Wyeth acquisition. These awards, which are discussed below, were delivered 50% in cash and 50% in equity. The awards are subject to recovery in certain circumstances, and the equity does not vest for three years.

In February 2010, the Committee lifted the salary freeze and granted increases to the Named Executive Officers. Except for Mr. Kindler (whose compensation is discussed below), the increases ranged from 0% to 3.8% and were based upon individual performance, tenure in position, and existing salary levels in relation to comparable peer company positions. There were no changes in annual incentive target award amounts for the Named Executive Officers other than Mr. Kindler, because these amounts represent a percentage of each executive’s salary grade midpoint, and the midpoints were unchanged. Except for Mr. Kindler, the Named Executive Officers’ annual long-term incentive grant values declined by 3% to 8% as compared to the 2009 award values.

Our executive compensation program is structured to support the ongoing transformation of Pfizer’s business and is designed to ensure that total direct compensation is competitive and tied to performance. Our restructured program became effective in 2008 and has three key principles:

1. Positioning total direct compensation (the sum of salary, annual incentive awards and long-term incentive awards), as well as each individual compensation element, at approximately the median of our peer companies, with emphasis on pharmaceutical companies with large market capitalization.
2. Placing greater emphasis on aligning short-term incentive awards with our annual operating financial objectives.
3. Rewarding both absolute and relative performance in total shareholder return through long-term equity incentive awards.

Applying these principles resulted in three significant changes to our executive compensation program beginning in 2008:

• First, both individual compensation elements and total direct compensation were structured to be more closely aligned with the median compensation of similarly sized pharmaceutical companies. Our salary midpoints and target annual short- and long-term incentives continue to approximate competitive medians.
• Second, the annual incentive program (the “Global Performance Plan” or “GPP”) was modified to utilize a pool that is funded based on Pfizer’s performance on three financial metrics: Total Revenue, Adjusted Diluted EPS, and Cash Flow from Operations. The pool funding percentage ranges from 0% to 200% of target award levels (performance must exceed a threshold level of performance or the pool is not funded; the threshold levels are shown in the “Financial Objective” chart under “Evaluating CEO Performance-CEO Performance Assessment-Financial Results” below). Earned individual payouts also range from 0% to 200% of target and reflect allocations from the available earned pool based on corporate, business unit, and individual performance, as discussed later in further detail.
• Third, we modified our Executive Long-Term Incentive Program by moving 25% of the target value of our long-term incentive awards to a Short-Term Incentive Shift Award, the “STI Shift Award”, determined on the same basis as short-term incentive awards for the applicable performance year. This approach was adopted to promote the achievement of Pfizer’s annual financial, operating and strategic objectives as we transformed our business model while strengthening the link between individual performance and shareholder value. Consistent with the Committee’s strategy to use this approach for a three-year period, it intends to reevaluate this approach for long-term incentive awards granted in 2011. The STI Shift Award has the following features:- The STI Shift Award is performance-based, denominated in dollars, and determined in the same manner as the annual incentive.

  - Unlike current annual incentive awards, which are paid entirely in cash, the STI Shift Award is paid 50% in cash and 50% in restricted stock units (RSUs) that are subject to three-year vesting; however the Named Executive Officers may elect to receive 100% of this award in RSUs.

  - This STI Shift Award is treated for all purposes as part of the long-term incentive award and is not included in determining pensionable earnings.

Implications: When considering your employment offer, consider the actions the board has taken with the executive team in weighing where you can negotiate. For Pfizer, in 2009, executives were is a salary freeze that likely trickled down to all employees. As the enter 2010, they are focused on emphasizing short-term goals. Focus negotiating efforts on quarterly and annual bonuses in either cash, stock options, restricted stock options. Companies are more likely to be flexible in these areas as employees have to earn them through on-the-job performance. As a broader business trend, organizations are increasing their overall “at-risk” compensation compared to “fixed” compensation. At-risk compensation includes bonuses and stock tied to company and employee performance versus fixed compensation such as salary.

Recommended Interview Questions:

• How does Pfizer determine its salaries, and how open are you to negotiation?
• What is Pfizer’s bonus structure?
• What is Pfizer’s method for determining/assessing employee performance?
• How many hours of training are typically required per year, and how is it provided? (On location, online, etc.?)
• How does Pfizer maintain competitive benefits? Have you ever had to cut back on employee benefits?

Recommended Facts to Include in Your Answers:

Pfizer has a solid record of compensation and benefits, including vacation and 401k.

Pharmaceutical drugs are chemicals with beneficial biological activity. Modern drug development is an outgrowth of recent research into the specific causes of illness and disease, coupled with advances in chemistry and industrial technology that allow scientists to manufacture chemicals to improve these conditions. The explosion of scientific knowledge about human biology in the past 40 years, and in particular, the discovery that the chemistry of proteins is involved in many illnesses and diseases, has provided a wide array of protein “targets” for drugs to act on. R&D is the major activity of most drug companies.

While some drugs can now be designed from the ground up to fulfill a specific biological function, drug development in most cases still involves testing a large number of chemicals “in vitro” (in a test tube) to see if they have biological activity. Many of these chemicals are derived from natural sources, especially plants. A company may test thousands of chemicals before finding a few that have the desired effect. The pharmaceutical industry has about 2,700 compounds in various stages of development. The entire drug development process may take many years (while patent protection is running down), with only a small percentage of candidate drugs surviving the testing and approval process. On average, the industry claims, discovering and developing a new drug takes 10 to 15 years and can cost more than $1 billion.

Major areas of research include the cardiovascular system (high blood pressure, high cholesterol); cancer; the endocrine system (diabetes, osteoporosis); the gastrointestinal system (ulcers); HIV/AIDS; neurological disorders (Alzheimer’s and Parkinson’s disease); arthritis; infections; and antidepressants. The actual manufacture of drugs involves one of three major methods: synthesis (using well-known chemical reactions to build a drug from simpler components); extraction (using solvents to remove and purify a drug from a natural source); or biotechnology (such as gene-splicing to produce large quantities of drugs from bacterial fermentation, or the production of monoclonal antibodies using mouse or human cells).

Small companies may use a contract manufacturer to produce their products. Because large research budgets don’t guarantee new products, many large companies supplement their own efforts by buying or licensing products from other companies. Companies often buy smaller ones that have a promising research program, to ensure a future stream of products. Some large companies manufacture over-the-counter (OTC) medications, dietary supplements, or personal care products in addition to patent drugs. Offering a more diverse product line can often mitigate potential cash flow issues that can stem from patent drug development costs. Joint research is also becoming more common as the cost of research increases.

• Lipitor, for the treatment of elevated LDL-cholesterol levels in the blood, is the most widely-used branded prescription treatment for lowering cholesterol and the best-selling pharmaceutical product of any kind in the world.
• Norvasc, for treating hypertension, lost exclusivity in the U.S. in March 2007 and has also experienced patent expirations in most other major markets, including Japan in July 2008 and, most recently, Canada, in the third quarter of 2009.
• Caduet is a single pill therapy combining Lipitor and Norvasc for the prevention of cardiovascular events.
• Chantix/Champix, the first new prescription treatment to aid smoking cessation in nearly a decade, has been launched in all major markets. Pfizer is continuing educational and promotional efforts, which are focused on the Chantix benefit-risk proposition, the significant health consequences of smoking and the importance of the physician-patient dialogue in helping patients quit smoking. For further information on Chantix/Champix, including label changes, see the discussion under the heading Biopharmaceutical-Selected Product Descriptions, Chantix/Champix in the Financial Review section of Pfizer’s 2009 Financial Report, which is incorporated by reference.
• Lyrica is indicated for the management of post-herpetic neuralgia (PHN), diabetic peripheral neuropathy (DPN), fibromyalgia, and as adjunctive therapy for adult patients with partial onset seizures in the U.S., and for neuropathic pain, adjunctive treatment of epilepsy and general anxiety disorder (GAD) outside the U.S.
• Revatio is for the treatment of pulmonary arterial hypertension.
• Geodon/Zeldox, a psychotropic agent, is a dopamine and serotonin receptor antagonist indicated for the treatment of schizophrenia, acute manic or mixed episodes associated with bipolar disorder and maintenance treatment of bipolar mania.
• Aricept, discovered and developed by Eisai Co., Ltd., is the world’s leading medicine to treat symptoms of Alzheimer’s disease. Pfizer co-promotes Aricept with Eisai in the U.S. and several other countries and have an exclusive license to sell this medicine in certain other countries.
• Celebrex is for the treatment of the signs and symptoms of osteoarthritis and rheumatoid arthritis and acute pain in adults. Celebrex is supported by continued educational and promotional efforts highlighting its efficacy and safety profile for appropriate patients.
• Zyvox is the world’s best-selling branded agent for the treatment of certain serious Gram-positive pathogens, including Methicillin-Resistant Staphylococcus-Aureus.
• Viagra remains the leading treatment for erectile dysfunction and one of the world’s most recognized pharmaceutical brands after more than a decade.
• Detrol/Detrol LA, a muscarinic receptor antagonist, is the most prescribed branded medicine worldwide for overactive bladder. Detrol LA is an extended-release formulation taken once a day.
• Sutent is for the treatment of advanced renal cell carcinoma, including metastatic renal cell carcinoma (mRCC), and gastrointestinal stromal tumors (GIST) after disease progression on, or intolerance to, imatinib mesylate. Pfizer continues to drive total revenue and prescription growth, supported by cost-effectiveness data and efficacy data in first-line mRCC—including 2-year survival data, which represents the first time overall survival of two years has been seen in the treatment of advanced kidney cancer, as well as through access and health care coverage. As of December 31, 2009, Sutent was the best-selling medicine in the world for the treatment of first-line mRCC.
• Xalatan, a prostaglandin, is the world’s leading branded agent to reduce elevated eye pressure in patients with open-angle glaucoma or ocular hypertension. Xalacom, a fixed combination prostaglandin ( Xalatan) and beta blocker (timolol), is available outside the U.S. In the first quarter of 2009, Pfizer entered into a five-year agreement with Bausch & Lomb to co-promote prescription pharmaceuticals in the U.S. for the treatment of ophthalmic conditions, including the Xalatan product and certain Bausch & Lomb products.
• Genotropin, the world’s leading human growth hormone, is used in children for the treatment of short stature with growth hormone deficiency, Prader-Willi Syndrome, Turner Syndrome, Small for Gestational Age Syndrome, Idiopathic Short Stature (in the U.S. only) and Chronic Renal Insufficiency (outside the U.S. only), as well as in adults with growth hormone deficiency. Genotropin is supported by a broad platform of innovative injection-delivery devices.
• Vfend, as the only branded agent available in intravenous and oral forms, continues to build on its position as the best-selling systemic, antifungal agent worldwide. Vfend’s overall global sales continue to be driven by its acceptance as an excellent broad-spectrum agent for treating yeast and molds. In October 2009, Pfizer settled certain patent litigation involving Vfend by entering into an agreement granting two subsidiaries of Mylan Inc. the right to market voriconazole tablets in the U.S. beginning in the first quarter of 2011.
• Effexor is Pfizer’s antidepressant for treating adult patients with major depressive disorder, generalized anxiety disorder, social anxiety disorder and panic disorder. See Patents and Intellectual Property Rights for further information on Effexor. Prevnar/Prevnar7 is Pfizer’s vaccine for preventing invasive pneumococcal disease in infants and young children.
• Enbrel is Pfizer’s treatment for rheumatoid arthritis, juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis and ankylosing spondylitis, arthritis affecting the spine. The approval of a number of competing products for the treatment of psoriasis is expected to increase competition with respect to Enbrel in 2010. Pfizer has exclusive rights to Enbrel outside the U.S. and Canada and co-promote Enbrel with Amgen Inc. (Amgen) in the U.S. and Canada. Pfizer’s co-promotion agreement with Amgen expires in 2013, and Pfizer is entitled to a royalty stream for 36 months thereafter, which is significantly less than the current share of Enbrel profits from U.S. and Canadian sales. Pfizer’s rights to Enbrel outside the U.S. and Canada will not be affected by the expiration of the co-promotion agreement.
• Zosyn ( Tazocin internationally), Pfizer’s broad-spectrum intravenous antibiotic, faces generic competition in the U.S. and certain other markets.
• Pfizer’s Premarin family of products remains the leading therapy to help women address moderate to severe menopausal symptoms.
• Pfizer’s Hemophilia family of products, which includes BeneFIX, ReFacto AF and Xyntha, provides state-of-the-art products that offer patients with this lifelong bleeding disorder the potential for a near-normal life.
• Protonix (pantoprazole sodium) is Pfizer’s proton pump inhibitor for the treatment and maintenance of healing of erosive esophagitis with associated gastroesophageal reflux disease symptoms. Sales of Protonix are affected by the December 2007/January 2008 “at risk” launches of generic pantoprazole tablets in the United States. In response, Pfizer sells generic version of Protonix tablets.
• Spiriva is Pfizer’s inhaled maintenance prescription treatment for breathing problems associated with chronic obstructive pulmonary disease (COPD), a lung condition that includes chronic bronchitis, emphysema, or both. Pfizer co-promotes Spiriva in the U.S. with Boehringer Ingelheim Pharmaceuticals, Inc.

Pfizer had four drugs topping $2 billion in sales in 2008: Lipitor, Norvasc, Celebrex, and pain medication Lyrica. (Wyeth’s top three products — antidepressant Effexor, arthritis treatment Enbrel, and pneumonia vaccine Prevnar — also pulled in over $2 billion each.) Five more Pfizer drugs pulled in over $1 billion, including Viagra, overactive-bladder treatment Detrol, and antibiotic Zyvox. However, Pfizer’s revenues from these established blockbusters continue to slide due to one of the pitfalls of the drug game: patent expiration. Bestsellers Norvasc and antidepressant Zoloft lost patent protection in 2007, and former bestselling allergy medication Zyrtec (which the company has since divested) faced generic competition starting in 2008. Knockoff versions of the top Wyeth drug, Effexor, have been on the market for several years.

Pfizer’s largest patent threat has been over cash cow Lipitor, the world’s top-selling drug that brings Pfizer over $12 billion in annual sales. After a years-long court battle over a proposed generic equivalent release by Ranbaxy, Pfizer reached a settlement agreement with the generics maker in 2008 allowing Ranbaxy to sell a generic Lipitor version in the US after November 30, 2011.

The drug giant claims that it will be able to launch new blockbusters from its robust pipeline to make up for the off-patent losses and return to revenue growth. Investment in R&D has increased (Pfizer spent about $8 billion on R&D in 2008) in order to bolster its pipeline. Pfizer’s pipeline includes about 100 projects in development, including drugs for diabetes, breast cancer, epilepsy, pain, and anxiety disorders. Pfizer has increasingly relied on acquisitions and partnerships to build its R&D activities. Products launched in 2007 and 2008 include AIDS drug Selzentry, smoking-cessation aid Chantix, and overactive-bladder treatment Toviaz.

The company seems to have an awareness that it’s not the only company in the pipeline bind; it has begun to work with its competition on developing replacement blockbusters. In 2007, for example, the company inked a 60/40 deal with Bristol-Myers Squibb for collaboration on cardiovascular and metabolic candidates.

Vaccines have taken on a new luster for many druggernauts looking for the next big therapeutic treatment. As such, Pfizer purchased Coley Pharmaceutical in early 2008 to gain access to Coley’s vaccine-facilitating technology. Pfizer also expanded through acquisitions in key growth areas including oncology (Serenex), cardiovascular therapies (Encysive Pharmaceuticals), and animal health (Embrex and several European products of the former Schering-Plough, which is now part of Merck). Pfizer is also looking to establish a presence in the generic drug business by licensing rights to off-patent pharmaceuticals from other manufacturers.

Sales and Marketing efforts primarily focus on physicians. Doctors are the primary customers of pharmaceutical manufacturers, because the success of a prescription drug depends largely on whether doctors will prescribe it for patients. The big drug companies have large sales forces to regularly call on doctors, hospitals, wholesalers, pharmacists, and managed care organizations (MCOs). To market their products, drug companies also advertise heavily in medical journals, send direct mail advertising and samples to doctors, and participate at medical meetings. Some prescription drugs are marketed directly to consumers via TV, radio, print, and online advertising. The US pharmaceutical industry spends more than $4 billion per year on direct-to-consumer advertising (DTCA), according to the US Government Accountability Office. Small companies can’t match the marketing efforts of big companies and therefore often license their drugs to big companies or enter into marketing agreements with them. Companies distribute drugs directly to large users such as MCOs, hospital chains, and retail drug chains, as well as through drug wholesalers. Relative to development cost, the manufacturing cost for many drugs is low. Pricing decisions therefore are based mainly on market demand and the sunk costs of development.

Pfizer Marketing & Sales

In the global Biopharmaceutical segment, Pfizer promotes products to health care providers and patients. Through Pfizer’s marketing organizations, they explain the approved uses, benefits and risks of the products to health care providers, such as doctors, nurse practitioners, physician assistants, pharmacists, hospitals, Pharmacy Benefit Managers (PBMs), Managed Care Organizations (MCOs), employers and government agencies. Pfizer also markets directly to consumers in the U.S. through direct-to-consumer advertising that communicates the approved uses, benefits and risks of its products while continuing to motivate people to have meaningful conversations with their doctors. In addition, Pfizer sponsor general advertising to educate the public on disease awareness, prevention and wellness, important public health issues, and patient assistance programs.

In January 2009, Pfizer announced the creation of customer-focused units within its Biopharmaceutical segment to better meet the diverse needs of physicians, patients and customers while maximizing value for the Company and shareholders.

The Biopharmaceutical segment includes five human health, customer-focused units: Primary Care, Specialty Care, Oncology, Established Products and Emerging Markets. Upon the closing of the Wyeth acquisition on October 15, 2009, the Specialty Care customer-focused unit expanded to include vaccines.

In April 2009 in the U.S., Pfizer also restructured into regional units in order to create a more flexible organization empowered to identify and address local market dynamics and customer needs. Pfizer’s structure aligns the sales, marketing, and medical functions to work closely to meet the needs of key customer segments while ensuring common coordination, focus and accountability across the organizations.

Pfizer’s prescription pharmaceutical products are sold principally to wholesalers, but also sells directly to retailers, hospitals, clinics, government agencies and pharmacies. Pfizer seeks to gain access to health authority, PBM and MCO formularies (lists of recommended, approved, and/or reimbursed medicines and other products). Pfizer also works with MCOs, PBMs, employers and other appropriate health care providers to assist them with disease management, patient education and other tools that help their medical treatment routines.

During 2009, Pfizer revenues generated from three largest biopharmaceutical wholesalers were as follows:

• McKesson, Inc.-17% of Pfizer’s total revenues;
• Cardinal Health, Inc.-11% of Pfizer’s total revenues; and
• AmerisourceBergen Corporation-10% of Pfizer’s total revenues.

Sales to these wholesalers were concentrated in the Biopharmaceutical segment. Apart from these instances, neither of the business segments is dependent on any one customer or group of related customers.

Pfizer’s global Diversified segment consists of four global units: Animal Health, Consumer Healthcare, Nutrition and Capsugel. Each unit utilizes its own sales and marketing organization to promote its products, and occasionally uses distributors in smaller markets.

The Animal Health unit’s advertising and promotions are generally targeted to health care professionals, directly and through veterinary journals. Animal Health products are sold through veterinarians, distributors and retail outlets as well as directly to users.

The Consumer Healthcare unit’s advertising and promotions are generally targeted to consumers through television, print and other media advertising, as well as through in-store promotion. Consumer Healthcare products are sold through a wide variety of channels, including distributors, pharmacies and retail chains.

The Nutrition unit supports and adheres to the World Health Organization code and national codes on the marketing of breast milk substitutes. Nutrition encourages breastfeeding as the best nutrition for infants, and provides important products for infants who are not exclusively breastfed. Advertising and promotion of Nutrition products for older children and adults generally target consumers and health care professionals through print and media advertising and television. Nutrition products are sold through a wide variety of channels, including distributors, pharmacies, hospitals and retail chains.

Recommended Interview Questions:

• How much do current and future patent threats affect the organization, and what are the plans to combat these threats?
• How much importance does Pfizer place on acquiring new patents?
• How does Pfizer plan to continue to deliver new products while advancing the Wyeth integration?

Recommended Facts to Include in Your Answers:

• Determine the product(s) that apply to the job opening and include information from analysts, market and the current state of the product to demonstrate product market knowledge.
• Be sure to include information about a products performance and state in the product life-cycle. The products state in the lifecycle will often indicate the types of people they are seeking.

Pfizer’s investment in R&D has recently increased. Pfizer’s pipleline includes about 100 projects in development. Investments in emerging markets appear to be paying off with revs up 25% in 4Q.

On the positive side, Pfizer is currently investing more than $17M in revenue growth opportunities. However, if this strategy does not pay off, there will be cuts, which will affect morale, projects, salaries, benefits, etc.In late 2009, Pfizer announced a reduction in R&D site square footage by 35% and the number of lead development research projects by 22%. They also provided details regarding R&D portfolio prioritization and rationalization for the new combined company. The combined pipeline includes 133 programs from phase 1 through registration and is focused in 6 areas of research: oncology, pain, inflammation, psychoses, Alzheimer’s disease, and diabetes. Pfizer has prioritized and pared down its overall research portfolio from 600 projects to about 500, and has increased its emphasis on biotherapeutics, with 6 vaccines and 27 biologics currently in development.

LIPITOR sales increased 1% to $2.17 billion in 4Q09 ($329 million above our estimate. US sales were down 6% at $1.52 billion, while international sales increased 8% to $1.65 billion, aided by FX. Statin Rx demand in the US increased 5-6% in 2009, driven primarily by increased use of generic products. Lipitor, as the primary target of therapeutic substitution in the US, continues to be consistently pressured, with declines in total Rx demand of 12% in ‘07, 10% in ‘08 and 12% in’09. ln 4Q09, TRx levels declined 2.7% sequentially and 14% Y-o-Y and Lipitor’s share of the total cholesterol market fell about 400 bp to ~19% (based on weekly IMS Rx audit data). As a reminder, the PFE- Ranbaxy settlement preserves market exclusivity for Lipitor and Caduet in the US and 10 other countries to November 2011. ln November 2008, Apotex filed an ANDA for Lipitor, challenging four patents for Lipitor that expire between June 2011 and January 2017, and others have also filed recently asserting the invalidity and/or non-infringement of 3 Lipitor patents expiring-between 2013 and 2017, (but not the enantiomer patent expiring in June 2011).

CADUET, the Lipitor/Norvasc combination, generated $156 million in sales in the quarter, up 5% y-o-y. Demand to date has been modest and declined steeply in ‘09 (total Rx in the US down ~5% in 2008 and 18% in’09).

NORVASC, for hypertension, posted 4Q09 sales of $486 million, down 10%. Generic Norvasc has been available in the US since 2007, and US sales were $15 million for the quarter. lnternationally, sales declined 11% to $471 million. Norvasc exclusivity has expired in most major ex-US markets, with the exception of Canada (2010), but in July ‘09 the Canadian Federal Court ruled that the ‘393 patent was invalid. Pfizer has appealed that decision.

GEODON growth and market share gains in the U.S. have been modest in the last few years (US TRx up 2% in 2008 and 1.5% in ‘09) because of increased competitive pressures from both branded and generic products. US sales increased 5% to $239 million, and international sales were $50 million (+3%) in the quarter. Geodon’s US exclusivity period ends in March 2012.

LYRICA sales in the quarter totaled $820 million, with sales up 7% to $410 million in the US, but up 29% to $410 million internationally, aided by currency effects. Lyrica was initially approved in the US for the management of diabetic peripheral neuropathy and postherpetic neuralgia, and for the adjunctive treatment of partial onset epileptic seizures. It is approved in many other markets for these indications, and additionally in the EU for the treatment of GAD. In mid 2007, the FDA approved Lyrica for fibromyalgia treatment (but it received a negative opinion in the EU for this indication), which drove some incremental growth for this important franchise in 2Q07. However, Rx demand in the US moderated in’08 as usage was subjected to increased step therapy restrictions and TRx unit demand decreased 7% in 2009, in part from direct competition in the US fibromyalgia market from LLY’s Cymbalta (mid ‘08 approval) and FR)VCYPB’s milnacipran (2Q09 launch).

CELEBREX demand continues to decline in the US, with TRx levels down 4% in ‘08 and about 9% in ‘09. Celebrex sales increased 1% y-o-y to $669 million in 4Q09, down 4% in the US, but up 15% internationally to $202 million, partly reflecting an Fx benefit. In March 2008, the US Court of Appeals upheld two of three patents for Celebrex that were challenged by Teva, maintaining exclusivity until May 2014.

VIAGRA has maintained its US leadership position in the ED category, but continues to lose US market share to LLY’S Cialis over time (its current US TRx share is about 50%). Worldwide sales in 4Q09 were $549 million, up 9% year over year. In the US, total Rx units declined about 3% in 2008 and fell 4% in ‘09. Sildenafil is also marketed by PFE at higher doses as Revatio for the treatment of PAH, and is part of the SOC for this condition ($131 million in WW sales in 4Q09, +38%). Viagra US exclusivity expires in March 2012.

XALATAN Worldwide sales increased 10% to $499 million in 4Q09. US TRx demand for this franchise also has been declining modestly in the last few years, with Rx levels down 3% in ‘08 and another 5% in ‘09.

DETROL franchise sales decreased 1% in 4Q09 to $309 million. Overall growth of the overactive bladder market has slowed in the last few years, and this is reflected in U.S. Detrol script trends. Competitive products continue to pressure the Detrol franchise, which experienced a 4% decline in TRx in 2008 and 6% in ‘09. PFE recently introduced Toviaz (fesoterodine) in the US, a Detrol follow-on product that was launched in the EU during 2Q08, and has recently stepped up DTC promotional activity for the product.

SUTENT, an oral multi-targeted kinase receptor inhibitor, is indicated for Gleevec-refractory GIST and 1^st line treatment of advanced RCC. It currently has ~90% second line GIST share and ~60% 1^st line RCC share. PFE has embarked on an extensive clinical study program for Sutent in most major tumor types, and several other solid tumor types with high unmet need (including rare pancreatic neuroendocrine tumors for which an sNDA was recently submitted). However, in 2009, two phase 3 trials in advanced breast cancer and a phase 3 trial for 1^st line use in metastatic CRC were discontinued because of lack of efficacy. Other studies in NSCLC, prostate cancer, and hepatic cancer are ongoing, but these terminations suggest that it may be difficult to extend Sutent’s initial success into more substantial, widespread use in other areas of oncology. Sales in the quarter were $293 million (+33%), up $47 million sequentially, and increased 37% y-o-y internationally to $212 million.

CHANTIX (varenicline) for smoking cessation was launched in August 2006 and did exceptionally well, exceeding expectations and significantly expanding the size of the small Rx smoking deterrent market. However US demand declined significantly in 2008 (Rx levels fell 26% because of negative publicity and relabeling regarding potential neuropsychiatric symptoms associated with the therapy. Although Rx trends improved sequentially in early ‘09, the FDA updated the Chantix label in mid ‘09 to include a boxed warning on neuropsychiatric AEs, requiring multiple communications to providers and users, with a resulting marked negative impact on demand (TRx levels tell 27% sequentially and 23% y-o-y in 2Q09). US sales were $83 million in 4Q09, up $8 million sequentially, but down 9% Y-o-Y. Varenicline is marketed as Champix in the EU and was approved for the Japanese market in January of ‘08. lnternational sales were $93 million (+5%) in 4Q09, increasing $13 million sequentially.

Legacy Wyeth products: Note: 4Q09 sales for legacy Wyeth products include approximately 2.5 months of 4Q09 US sales and 1.5 months of 4Q09 international sales.

PREMARIN family reported sales in 4Q09 were $213 million, with pricing increases offsetting declining TRx trends. Underlying demand in the US continues to decline over time. Total US Rx for the franchise declined 11% in’07, 9% in ‘08, and 12% in ‘09.

EFFEXOR/XR sales in the quarter were $520 million, with international sales of $65 million, reflecting the loss of exclusivity in EU markets at the end of ‘08. Reported US sales were $455 million. Total Rx demand in the U.S. for the Effexor franchise declined more steeply in ‘09 (-17% because of the 4008 US launch of non-AB rated tablet forms of Effexor XR. Effexor XR US marketing exclusivity will expire in June.

PREVNAR 4Q09 sales were $287 million, evenly split between the US and international markets. And well below our estimate, in large part likely due to inventory workdowns ahead of Prevnar-13 approval and availability in 2010. Pfizer has secured approval in the EU and other o-US market for pediatric use of Prevnar-13, and US approval is expected very shortly. The increased serotype coverage confers better protection and utility, and the follow-on product should quickly supplant the older product. Importantly, the newer version includes coverage of serotype 19A that is emerging as an increasingly important pathogen. The new product is also being studied in the adult population for the initial vaccination of a broad (50+ years old) population (with a 2010 filing).

Pfizer’s share of ENBREL sales in the U.S. are recorded as part of Alliance Revenues, and were not specified in the earnings release. Underlying demand for Enbrel in the US softened modestly in ‘09, with TRx levels down 3%. Reported international sales of Enbrel were $378 million in 4Q09. Enbrel is facing increasing competition from monoclonal products that have obtained a similar range of approved indications, especially Abbott’s Humira, which has now surpassed Enbrel in overall market share in the anti-TNF alpha category in the EU (note that some MAbs like Humira, have additional Gl indications).

Sales for ZOSYN, the IV antibiotic product marketed in an EDTA-containing formulation (introduced in 2006) were $184 million in 4Q09, with US sales of $138 million. Generic versions of the original discontinued formulation are now available in many markets.

The Benefix and Refacto hemophilia franchises produced combined reported revenues of $145 million in 4Q09, and include sales of Xyntha (Refacto AF (albumin-free)) that was approved by the FDA for hemophilia A in 1Q08 and in the EU in 1Q09.

Management needs to convincingly demonstrate it can achieve bottom-line growth via cost cutting, largely the rationale for the Wyeth purchase.

Patent expirations are the overarching concern. Even beyond indirect pressure on its largest drug Lipitor, continued direct pressure from generics’ several drugs is weighing on Pfizer’s operations and is expected to affect them regularly for the next few years until reaching the cliff of the US patent expiration for Lipitor in 2011. At that point, Lipitor sales in the US should approximate $5 billion, a gap that is too material to make up with its existing operations and pipeline drugs. Pfizer has taken steps to address an infrastructure too bloated to withstand multiple generics and their challenges. Despite the acquisition of Wyeth, collectively these issues remain too large for us to enthusiastically recommend Pfizer shares, despite an inexpensive multiple. We continue to examine Pfizer operating results for signs of more aggressive-cost cutting, which would make us more enthusiastic about its prospects. For Pfizer, Prevnar has now replaced Lipitor as the company’s most valuable franchise with an NPV of $3/share. This incorporates revenue estimates for the current Prevnar 7 and Prevnar 13, which is awaiting approval in the US, and includes our estimates for the potential expansion of Prevnar 13 into the adult population. Bapineuzumab and tanezumab are also valuable pipeline products and both of these products have pivotal data being released later in 2010 and 2011. Positive data releases on Prevnar 13 adult, dimebon, Tanezumab, bapineuzumab, the JAK (‘550), IGF and neratinib could lead to multiple expansion for Pfizer’s shares from their current level at 8.1x our 2010 EPS estimate of $2.18.

Pfizer’s Pipeline:
http://media.pfizer.com/files/research/pipeline/2010_0127/pipeline_2010_0127.pdf

While cost savings, synergies and an increased dividend are attractive pieces to the Pfizer story in the short term, in the longer-term organic growth will need to come from the pipeline. There are a number of interesting products in Pfizer’s late-stage pipeline that are targeting areas of significant unmet medical need such as Alzheimer’s Disease, chronic pain, cancer and autoimmune disorders. We expect important data releases for several of these products throughout 2010 and 2011 and, if even half of these are positive, it could lead to increased positive sentiment on the company’s R&D productivity and on the valuation of the company as a whole.

Note: Certain companies have strong outlook, Pfizer being one of them. The pipeline plays a critical role in a company’s success. There is a good opportunity from stock appreciating, and it looks like Pfizer will be strong going forward.

Yahoo Finance Consensus Chart

Finance experts who watch the company very closely are rating the company positively.

Competitors to Pfizer include Bayer, Merck, Novartis, and other pharmaceutical, drug and biotech companies. A comparison of Pfizer to competitors shows Pfizer as the largest in the market. With the addition of Wyeth, Pfizer is 30% larger than their next biggest competitor.

DIRECT COMPETITOR COMPARISON

Demand for pharmaceutical manufacture is driven by the desire to cure illness and disease. The profitability of individual companies depends on their ability to discover and market new drugs. Large companies benefit from their economies of scale in research, manufacturing, and marketing. Small companies can compete effectively by specializing in drugs that target one or two specific ailments. The industry is capital-intensive average annual revenue per worker is about $700,000. The pharmaceutical manufacture industry is marked by rapid advances in scientific knowledge that produce ever-more effective medicines. The traditional drug manufacturing industry increasingly overlaps with the biotechnology industry, which is a source of many new medical treatments. To a large extent, traditional drug manufacturers are becoming development and marketing companies that acquire new drugs from smaller research companies.

Competitor strengths include advancement in the biosciences area and the areas of oncology, gastro/intestinal, and pulmonary sciences.

Recommended Interview Questions:

• How does Pfizer plan to maintain its competitive edge in the next five years?
• What are Pfizer’s goals in terms of beating its competitors in the marketplace, and how does the Wyeth acquisition help advance those goals?

Recommended Facts to Include in Your Answers:

Pfizer performs strongly in a pack of highly competitive organizations. With its acquisition of Wyeth, it has grown to 30% larger than its next biggest competitor.

Description: This is an excellent overview of Pfizer including the organizational structure, challenges, pipeline and operating model. Martin McKay, President of Pfizer Therpuetics R&D, is the presenter. Martin covers the Wyeth acquisition, pipeline, their model for developing drugs and focus for the future. Martin covers Pfizer’s structure, including business units and R&D organizations. This is an excellent presentation cover details about Pfizer current and future drugs. Martin also covers 6 drugs and reviews Pfizer’s human genetechs and cell biology research efforts.

Length = ~22 minutes

Description: This presentation is done by 4 Pfizer leaders. The audio quality is not best as it was a recording from a breakfast meeting. However, the presentation is done by 4 of Pfizer’s top leaders covering all aspects of the business. This presentation focuses more on the financials and growth at the beginning but transitions into an overview of each major component of Pfizer’s business. The overviews provide an excellent review of Pfizer’s products and top level strategies. While the beginning of the presentation is best suited from manaagers and executives about 10 minutes in, the presentation is applicable to everyone.

Length = ~57 minutes