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Strategy in the twenty-first century pharmaceutical industry: Merck & Co. and Pfizer inc. MGMT 495 Summer 2011: Kelly Bossolt Marta Kovorotna Sarah Smith. Global Financial Analysis:. Global Industry Forecast- 2010 Overall market projected to grow 4-6% exceeding $825 billion

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strategy in the twenty first century pharmaceutical industry merck co and pfizer inc

Strategy in the twenty-first century pharmaceutical industry: Merck & Co. and Pfizer inc.

MGMT 495

Summer 2011:

Kelly Bossolt

Marta Kovorotna

Sarah Smith

global financial analysis
Global Financial Analysis:
  • Global Industry Forecast- 2010
    • Overall market projected to grow 4-6% exceeding $825 billion
    • Overall market sales projected to grow at a 4-7% compounded annual growth rate through 2013

Pharmaceutical Market Trends 2010: http://www.pharmaceutical-drug-manufacturers.com/articles/pharmaceutical-market-trends-2010.html

financial analysis presence of generics
Financial Analysis: Presence of Generics
  • 79 percent of FDA approved drugs have a generic version available
  • 69 percent of prescriptions dispensed are generics
  • The generic industry is currently worth $80 billion
  • Worldwide market for off-patent drugs is set to balloon to $520 billion in 2012, up from about $270 billion in 2006

The US Generic Drugs Industry Overview: http://www.themedica.com/articles/2009/04/the-us-generic-drugs-industry.html

Pfizer Goes Generic:

http://blogs.wsj.com/health/2008/10/16/pfizer-goes-generic/

financial analysis pfizer inc and merck co
Financial Analysis: Pfizer Inc and Merck & Co.

http://finance.yahoo.com/q/is?s=PFE+Income+Statement&annual

http://finance.yahoo.com/q/is?s=MRK+Income+Statement&annual

financial analysis pfizer inc and merck co1
Financial Analysis: Pfizer Inc and Merck & Co.
  • Pfizer Inc:
    • Ability to service debt: EBITDA
      • 25.48 Billion
    • Operating cash flow:
      • 22.46 Billion
  • Merck & Co.:
    • Ability to service debt: EBITDA
      • 7.01 Billion
    • Operating cash flow:
      • 11.18 Billion

http://finance.yahoo.com/q/ks?s=MRK+Key+Statistics

http://finance.yahoo.com/q/ks?s=PFE+Key+Statistics

internal analysis overview
Internal Analysis: overview
  • R&D – Time & Money Saver
    • Every $1 increase in drug expenditure led to $2.11 decrease in other health care spending.
    • 100 prescription increase led to 16 less days in the hospital.
  • Manufacturing – 10% of costs
    • Difficult and requires expertise
    • Majority is outsourced
      • Counterfeiting costs $35 billion a year, and causes deaths
  • Marketing
    • Personalize medicine based on genetic profile
    • Direct to Consumer
      • Specific drug and illness treated
internal analysis merck co
Internal Analysis: Merck & Co.
  • Research Expert
    • Detailed biological and chemical drug profiles
      • Assess projects early
      • High FDA approval rate – 70% (Industry was 50%)
  • “Hire brilliant Scientists and let them follow their instincts”
      • 6 major labs in the US and Japan
      • Smaller research labs in the U.K., France, Spain, Italy
      • Focus on Blockbuster drugs in all areas
  • “Discover new and better medicines through breakthrough research and then demonstrate their value” – Ray Gilmartin, CEO
    • Recruit top scientists
    • Decentralize R&D department
internal analysis merck co1
Internal Analysis: Merck & Co.
  • Mergers
    • Science not size
    • Establish relationships with firms pursuing complementary research
      • 1999 entered into 10 alliances to complement its internal R&D and stay competitive with new technology
  • Marketing
    • Undervalued, out of the loop, off target
        • Label is the product, not the molecule
    • Pfizer’s Lipitor
        • Switched to “key-franchise” management
        • Data- driven approaches
        • Assigned and organized a sales force to each top selling drug
        • Increased marketing presence in clinical trials
internal analysis pfizer inc
Internal Analysis: Pfizer Inc.
  • “Hunter, not a gatherer”
    • Merger maniacs
  • Research
    • $17 billion on R&D
    • 12,000 researchers
    • 9 major labs in the U.S., U.K., and Japan
    • Several satellite labs
  • Mergers
    • Warner-Lambert – Lipitor $89 billion
      • Hostile takeover after they merged with American Home Products
      • Lowered costs by $270 million
  • Pharmacia
    • Helped with the generic line when patents came up
internal analysis pfizer inc1
Internal Analysis: Pfizer Inc.
  • Marketing
    • Effective, and largest sales force in the industry
      • $3.5 billion budget
      • 9,000 representatives
      • Targeted reach and frequency of doctors
      • Highly ranked by physicians
    • Training
      • 40 simulated calls
      • 30 second briefs
    • “Partner of Choice”
      • Biotech marketing
      • Bundle drugs for PBMs
internal analysis 2005 2006
Internal Analysis: 2005-2006
  • Merck & Co. Restructuring
    • Closed 5 manufacturing plants
    • Laid off 7,000 workers
    • Closed 3 of the smaller research labs
  • 2006
    • Narrows research to the 9 areas of the world’s most critical health care challenges
  • Pfizer Inc. Cost Cutting Initiative
    • Save $4 billion over 4 years
    • Closed plants
    • Administrative cutbacks
    • Streamlining sales forces
  • 2006
    • Sold their Consumer Healthcare Business
    • Spend $17 billion excess cash on future acquisitions
    • Spend $17 billion on buy back stock
recommendations
Recommendations:
  • Invest more in R&D
    • Without drugs to sell, there is no business
  • Merck & Co.
    • Marketing
  • Pfizer Inc.
    • No more mergers
recommendations1
Recommendations:
  • Increase global presence by filling the 10/90 gap
    • How?
      • This can be done by increasing generic pharmaceuticals that are affordable to the rest of the world.
    • Why?
      • The market for generic pharmaceuticals is growing at a fast pace, and with patents expiring, the competition will only increase. It’s time to penetrate this market.