Thursday, October 09, 2008

Pfizer's Newfound Flexibility

The restructuring at Pfizer that will see the group split into business units may or may not improve productivity, boost the bottom line, or resonate positively with investors. But one thing's for sure: Pfizer's move should lead to a more flexible, nimble company. If they're not quite Gumby, they're no longer Pokey either.

Our take on the new structure--and on Pfizer's slimmed-down R&D focus--will be in the next issue of IN VIVO.

In the new Pfizer, the company's business units--comprising mature products, emerging markets, oncology, specialty products, and primary care--will be managed independently.

Essentially the groups will vie for resources with one another, manage their own P&Ls, and as Pfizer R&D chief Martin Mackay tells us, essentially run the show. "It really empowers those business unit heads to run P&Ls so they will have tremendous responsibility to maximize revenues of the projects we have in those groups but also to make sure the business is thriving at the earlier stages," he says.

Mackay and the rest of the executive leadership will then decide how to dole out Pfizer's dollars between these different businesses. "Of course a lot of strategy is simply down to where do you allocate your resources," he says.

Running smaller units under the umbrella of a large pharma isn't a new concept; GSK's centers of excellence in drug discovery (CEDDs) similarly compete with one another for corporate resources, albeit earlier on in the value chain. In some ways Pfizer's move is less ambitious than GSK's experiment, started way back in 2001 and aimed in part at mimicking the entrepreneurial essence of a biotech firm.

The CEDDs though still have to prove their worth 8 years on--GSK may talk about a broader pipeline but the proof of the pipeline is in the marketing, to stretch a phrase. And if the CEDDs were really thriving, new initiatives like GSK's drug performance units, announced over the sumer, mightn't be necessary. (It's worth noting too that GSK has also recently created an oncology unit--GSK Oncology--which takes different DPUs out of various CEDDs.)

But Pfizer's new structure ought to by its very nature (in that the units are later-stage development and commercialization focused) thrive or fail more quickly.

And when Pfizer decides its time to pull the plug on a unit--presto!--it's already wrapped up in an easy to spin-off or sell package. And it should, by then, have plenty of practice in offloading unwanted assets. As part of the research reshuffle, Pfizer is pushing forward with its efforts to monetize shelved programs. Earlier this year, it spun-off both RaQualia and Esperion 2.0.

“We’ll be much more active in out-licensing assets,” Mackay promises. “It will vary between single assets and small groups of assets, depending on what is the best deal for both parties.” Pfizer, he says, is in active discussions with potential collaborators. “We’ll be much more creative than we’ve been in the past in this particular arena.” For more on Pfizer's externalization program, see this piece in today's Pink Sheet Daily.

image from flickr user jessedybka used under a creative commons license.

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