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Wyeth Pharmaceuticals. Presented by: Veronica Barker Mike Detz Barbara Manzari Zig Nowicki. Wyeth Background. Headquartered in Madison, NJ History of innovation A leading pharmaceutical and biotech company

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Wyeth Pharmaceuticals


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    1. Wyeth Pharmaceuticals Presented by: Veronica Barker Mike Detz Barbara Manzari Zig Nowicki

    2. Wyeth Background • Headquartered in Madison, NJ • History of innovation • A leading pharmaceutical and biotech company • Presence in over 145 countries

    3. Wyeth Timeline • Founded in 1860s as a small drugstore • 1931-American Home Products (AHP) purchases Wyeth • 1943- John Wyeth & Brother Incorporated is renamed Wyeth Laboratories. AHP consolidates six companies into the Wyeth company • 1950- By this time AHP had acquired 34 new companies • 1985- Ives Laboratories merges with Wyeth • 1987- Merger of Wyeth and Ayerst forms Wyeth-Ayerst • 1989- AHP acquires A.H. Robins • 1993- Wyeth establishes Women’s Health Research Institute • 2002- AHP changes its name to Wyeth

    4. History of Innovation • 1877- The Wyeths coin the term “compressed tablets” • 1942- First estrogen product • 1963- First oral form of poliovirus vaccine • 1968- First oral contraceptive released • 1968- Bifurcated needle development- small pox • 1984- First nonprescription ibuprofen • 1993- First serotonin reuptake inhibitor- depression • 1999- First recombinant fact IX hemophilia product • 2003- First bone formation agent drug-osteoporosis

    5. Business Model • Employs 52,726 people worldwide • Wyeth develops, manufactures, and distributes name-brand prescription drugs and OTC products • Profit is derived from high margins received from products on the market

    6. Wyeth- Mission Statement “We bring to the world pharmaceutical and health care products that improve lives and deliver outstanding value to our customers and shareholders”

    7. Vision “To lead the way to a healthier world” Wyeth carries out this vision in every level of their organization, in an effort to gain global recognition as the best pharmaceutical company in the world

    8. Issues Facing Wyeth • Recent changes in leadership • Dealing appropriately with external dynamics • Manufacturing and production inadequacies

    9. Problem Statement What strategic direction should Wyeth pursue in light of all the changes they are facing in the regulatory, socio-cultural, and within their own organization?

    10. External Assessment

    11. Opportunities Real GDP rising Personal consumption rising CPI slower rise Prime Rate down Threats Prescription prices rising faster than inflation Decreased government spending on social programs High overall cost of healthcare General Environment Economic

    12. Threats Aggressive marketing/ pricing seen as unethical by consumers Consumer privacy concerns Increase in demand for generic drugs Alternative channels of acquiring drugs Terrorism has created security concerns at manufacturing facilities Opportunities Healthcare increasing priority Internet allows access to more medical information General EnvironmentSocio-cultural

    13. General Environment Demographic- Opportunities • Aging of Baby Boomers- Average age of the population is increasing • Age 60+ is projected to increase from over 600 million in 2000 to over 1 billion by 2020 • Increase of average life expectancy • 1900-47.3 years, 2000-76.9 years • Rising increase in chronic diseases • Women comprise larger portions of population as age bracket increases • >65 years, 58% women, >85 years, 70% women • Growth in older population segments: • 2000 2% > 85 years, projected 2050 5% > 85 years • Drug spending will rise • Older population tends to be in poorer health, requires more services

    14. General EnvironmentDemographic-Threats • Concentration of Managed Care as buyer • Managed Care 73% • Cash 16% • Medicare 11% • Prescription Drug Drug pricing controls

    15. Opportunities Enhanced technology could expedite research process E-prescribing systems Internet allows access to more medical information Threats Technological advances providing permanent fixes (ex. laser surgery, improved surgical tools) Internet- consumers can comparison shop for cheaper drugs General EnvironmentTechnological

    16. General EnvironmentPolitical/Regulatory- Opportunities Opportunities • Drug industry-supported healthcare • Hatch-Waxman Act • Extends monopoly for branded pharmaceuticals

    17. General EnvironmentPolitical/Regulatory- Threats Threats • Medicare prescription drug benefit • Hatch-Waxman • Amplified generic brand sector • Simplified and expedited filing approval for generics • 180 Day exclusivity for generic makers • Innovation barriers due to: • Price regulation • Reimportation/counterfeit issues • Patent-term restrictions

    18. Threats Government pricing environment overseas Foreign drug prices cheaper Lack of intellectual property protection in China and India Opportunities Cures for Bioterrorist/SARS outbreaks of diseases Analysts project 10-15% growth internationally SARS outbreak General Environment Global

    19. General Environment Environmental-Threats • Specialty chemicals and pharmaceutical waste disposal

    20. Summary- External Assessment • Political, regulatory and soci-cultural concerns may hinder the ability of pharmaceutical companies to capitalize on demographic and technological opportunity.

    21. Industry Analysis

    22. Life Cycle Stage • Maturity • Consolidations through mergers and acquisitions • Expected growth rate 9% over 2002-2006

    23. Economic Structure • Tight Oligopoly • Top 3 companies control 32% of market; top 6 companies control 48% of market • Limited Rivalry • Can avoid competition (patents, segments) • Suppliers and customers have limited power

    24. Market Players

    25. Porter 5 Forces • Threat of New Entrants-Low • Threat of Substitute Products- Moderate/High • Bargaining Power of Suppliers-Low & Rising • Bargaining Power of Buyers- Moderate & Rising • Level of Competitive Rivalry-Moderate & Rising

    26. General Competition AnalysisPorter’s Five Forces Model Threat of Entry • High capital requirement • Sales force, R&D, intellectual capital • Substantial economic, regulatory, and legal obstacles for new entrants • Lengthiness of drug development • Scale and scope LOW

    27. General Competition AnalysisPorter’s Five Forces Model Threat of Substitutes • Permanent cures could cause some drugs to be obsolete • Therapeutic substitutes MODERATE/HIGH

    28. General Competition AnalysisPorter’s Five Forces Model • Power of Suppliers • Suppliers: Biotech and chemical firms • Low switching costs • Low threat of forward integration • Biotech firms better capitalized LOW & RISING

    29. General Competition AnalysisPorter’s Five Forces Model Power of Buyers • Wholesalers, physicians, hospitals, managed health care providers, pharmacies, other health care institutions • Small number of buyers becoming responsible for large portion of pharmaceutical revenues MODERATE & RISING

    30. General Competition AnalysisPorter’s Five Forces Model Competitive Rivalry • Mergers & Acquisitions • Generics accounted for 47% of units of prescription drugs market in 2000 • Diverse competition- no dominant firm across all various drug types MODERATE & RISING

    31. Porter’s Five Forces Model Threat of Entry Moderate Power of Suppliers Low Competitive Rivalry Power of Buyers Moderate/High Moderate & Rising In the Pharmaceutical industry, the power lies with the PHARMACEUTICAL COMPANIES! Threat of Substitutes Low & Increasing

    32. Driving Forces • Demographics • New regulatory policies and/or government legislation • Pricing Pressure (increasing buyer power, industry consolidation) • Participant Consolidation

    33. Industry Attractiveness • Incumbents- Highly Attractive due to opportunity for potential growth, and high profit margins • New Entrants- Unattractive- due to high barriers of entry “The pharmaceutical industry is unattractive to new entrants due to high barriers of entry, yet continues to be attractive to incumbents despite increasing price pressure from buyers.”

    34. Competitor Analysis

    35. Strategic Group • Eli Lilly • Wyeth • Abbott Laboratories

    36. Strategic Group Analysis

    37. Strategic Group Analysis

    38. SGA

    39. Strategic Group Analysis

    40. Key Success Factors • Research and Development • Legal Competencies • Effective Marketing/Sales Force • Financial Strength • Product Pipeline/Portfolio • Biotech Presence

    41. Key Success Factors

    42. Competitor Analysis

    43. Competitor Analysis Summary • Our competitors are not satisfied, and are facing significant challenges. Because we are highly leveraged, we cannot take an offensive position and must be cautious to avoid activities that would cause competitors to retaliate. Our strong portfolio, favorable patent situation and product pipeline may attract suitors.

    44. Internal Assessment

    45. Culture • Results- oriented • High degree of interaction and collaboration among employees • Performance and accountability • Team- based, cross-functional structure • Innovative • Diversity

    46. Leadership Robert Essner, Chairman, President & CEO • Age – 56: homegrown - 14 years with firm • Recently appointed Wyeth Chairman on 1/1/03 • Instilling corporate responsibility back into organization – NY Times Test • Elected president of PhRMA on 3/1/ 03 • “Hands On” Approach • Focused on creating a team environment and gradually changing culture

    47. Organizational StructureSBU Form

    48. Value Chain Patents Revenue Stream Corporate Responsibility Culture Change in Leadership Pending Litigation Product Development Excellence Robust Pipeline Recruiting talent Sales Force Strategic Alliance with Amgen Purchasing Raw Materials Manufacturing Issues Brand Recognition

    49. Inbound Logistics • HR- Recruiting and retaining talent • Technology- Alliance with Amgen • Procurement- Inventory Management

    50. Operations • R&D- Excellent product development • R&D- Robust pipeline from R&D • Tech- Depth in small molecules, biopharmaceuticals, and vaccines • Manufacturing Issues