Pfizer, Inc. Animal Health Products

Pat Gross Gavin Batchelder

Introduction to Pfizer

• • • Founded in 1889 as a chemical company Headquartered in New York, NY Made up of three major parts – Pfizer Animal Health – Consumer Health Care Group – US Pharmaceuticals

Introduction to Pfizer

• • • Research and Development facilities both in the U.S. and abroad. Listed on the New York Stock Exchange, London Exchange, Euronext, and Swiss Exchange.

Pfizer employs 120,000 individuals worldwide.

Introduction to Pfizer 1999 Revenues

• • • 89% from Human Pharmaceuticals 8% from the animal sector 3% from over the counter products including – Listerine, Visine, Rolaids, and Sudafed

Introduction to Pfizer

• Pfizer’s products include such well know names as – Zyrtec – Celebrex – Viagra

Introduction to Pfizer Mission Statement

• "We will become the world’s most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live."

Introduction to Pfizer Pfizer’s Purpose

• "We dedicate ourselves to humanity’s quest for longer, healthier, happier lives, through innovation in pharmaceutical, consumer and animal health products."

Introduction to Pfizer Pfizer Today

• Pfizer was named by Fortune magazine as the fifth best wealth creator in America • Pfizer has merged with Warner-Lambert – They expect revenues to climb by 40% from a wider and heightened volume and a more favorable product mix

Introduction to the case

• • • This case centers on Pfizer’s Animal Health Division.

About their Animal health business Pfizer has this to say: "Leading the way to better animal health care, Pfizer Animal Health discovers, develops, manufactures and sells products that improve the safety, quality and productivity of the food supply and help pets live longer, healthier lives.”

Introduction to Pfizer Animal Health

• Pfizer Animal Health recently acquired Pharmaci Animal Health. Pharmaci alone has operations in the United States, Argentina, Australia, Brazil, Canada, France, Germany, India, Italy, Japan, Korea, The Netherlands, New Zealand and Spain.

Introduction to Pfizer Animal Health

• Pfizer divides consumers into two groups.

– Pet owners, horse owners, and vets – livestock/beef cattle, dairy cattle, and pork.

Introduction to Pfizer Animal Health Pfizer’s Strengths

• • Pfizer has consistently superior product.

Competitive products typically can’t match Pfizer’s performance.

The Environment

• • Currently the pharmaceutical industry is strong, experiencing growth over the last 10 years in terms of absolute growth and as a percentage of Gross Domestic Product.

This may be caused by several factors such as: the aging populace, increasing price of prescriptions, new drugs for previously untreatable conditions and even inappropriate prescriptions by doctors

The Environment

• The government plays a major role in pharmaceutical industry.

– Restricting types of drugs that get government support – Allowance of cheaper, generic brands – Arresting counterfeiters

The Environment

• • Animal Health sales fell from 12% in 1998 to 8% in 1999.

The cattle industry feels threatened because: – – More meals are being eaten out Beef is being passed over due to concerns about cholesterol, bacteria, and Mad Cow disease.

– New alternatives always coming to market.

The Industry

• There were times not long ago that drug companies were merely the size of nations. Now, after a frenzied two-year period of pharmaceutical mega-mergers, they are behemoths, which outweigh entire continents. The combined worth of the world’s top five drug companies is twice the combined GNP of all sub-Saharan Africa and their influence on the rules of world trade is many times stronger because they can bring their wealth to bear directly on the levers of western power." – from

The Guardian

The Industry

• Pfizer’s competitors include: – Merck – Glaxo SmithKline – Novartis – Bristol Myers Squib – AstraZeneca

The Industry

• Research and Development comprise a significant portion of pharmaceutical cost.

– In 1999 Pfizer budgeted more than any competitor for R&D, 5 billion.

– Critics charge that companies spend twice as much on sales and advertising

The Industry

• Pharmaceutical makers are using new techniques to sell their products – Direct advertisements to consumers – large pre-launch product advertisements – Incentive programs to sales people – Increased concentration of sales people

Marketing

• Pfizer’s techniques are aggressive and expensive – The largest advertiser in the

Journal of the American Medical Association

– Advertise extensively in

Beef Magazine

and

Bovine Veterinarian

as well as many others – Advertise in direct media, treating pharmaceuticals like any other household product.

Marketing Criticisms

• • Pfizer is accused of trying to persuade doctors to replace effective drugs that have been used for years.

Files have been found that show company ghost-writers have written medical journal articles for doctors and offered expensive vacations or other gifts for the winners

Other marketing strategies

• • Pfizer provides educational programs to educate people about their products and the benefits Pfizer sells animal products only to vets and “feed and seed” stores based on the fact that farmers and ranchers perceive vets as their most trusted contacts

Other marketing strategies

• Pfizer uses thousands of sales reps to build the trust of customers, gain their friendship, and sell their products while offering personal assistance in problematic areas and setting up educational programs.

Other marketing strategies

• Pfizer has gained considerable respect from consumers by offering superior products and high quality production techniques.

• Pfizer markets direct to consumers, eliminating most of the middle-men.

Pfizer SWOT Analysis -Strengths-

• • • • Currently the largest pharmaceutical company in the industry.

Realizes potential and strength in mergers and takeovers, and actively pursues those opportunities.

Strong educational programs.

Lack of international regulations offer time and opportunity to validate potential drugs in foreign countries.

Pfizer SWOT Analysis Strengths cont.

• • Adequate revenues to pursue aggressive advertising, marketing programs.

Innovative marketing structure that is usually followed by other corporate fire and then followed by example by the other companies.

Pfizer SWOT Analysis Weaknesses

• • • • Marketing expenditures exceeding Research and Development budget have come under scrutiny. Much of it is publicly funded.

Compensation packages for top executives are under scrutiny. Public record shows a huge amount of revenue is channeled to executive bank accounts.

Accused of R & D budgets being inflated by creative accounting.

Poor public relations regarding maintenance of high prices bringing drugs beyond the reach of the potential users.

Pfizer SWOT Analysis Weaknesses cont.

• • • Pfizer has been sited twice for price fixing conspiracies and is No. 17 on the list of "Top Corporate Criminals of the 1990’s", Pfizer has recently been accused of stealing indigenous knowledge. 3rd world countries have low legal regulations and have natural resource information that is used and profited by Pfizer.

Pfizer uses animals to test it’s products, a real no-no in the animal avocation sector that is making it’s way to public avocation in the US and other countries, as well..

Pfizer SWOT Analysis Opportunities

• Wealth offers acquisition of smaller companies to heighten product base.

• Global infiltration, with less stringent regulation offer longer study statistics to solidify results that offer marketing facts needed to gain FDA approval.

• Opportunity for public funding gained from historic success.

Pfizer SWOT Analysis Threats

• • • • • • Other major competitors merge to form a super power.

Continuous threat of FDA disapproval of new products.

Potential litigation from other companies regarding marketing procedures.

Potential litigation regarding theft of ideas.

Government regulation and restrictions.

Failure of target industry, such as the beef industry in the US.

The Basic Problem

The failing market for U.S. beef producers and the resulting sales decline of Pfizer products Per Capita Meat Consumption 60% 40% 20% 0% 1970 1980 1992 Year 1997 2003 Cow Poultry Pig Other (Veal/Lamb)

Options

• • • Recognize the shifting market and focus on the emerging markets Begin reducing expenditures on the declining beef market, and instead focus on growth markets Partner with U.S. beef growers to help return producers to profitability

Option #1 Recognize the shifting market and focus on the emerging markets

• Positives – Focusing on growth industries may allow Pfizer to make more effective use of new Research and Development dollars – Pfizer may sell more product overall by concentrating marketing and sales efforts in different markets – Pfizer could begin more aggressive efforts to market their products in Canada, Mexico, and Australia using their new acquisition Pharmaci – Acquiring market share in emerging markets will make it more difficult for competitors to gain a foothold.

Option #1 Recognize the shifting market and focus on the emerging markets

• Negatives – Pfizer may not have be as dominant player in other markets, and may not be able to command a premium price based on their consistent quality – Low cost producers in Mexico, Canada, and Australia may not have the capability to pay Pfizer’s prices – Competitors may already have secured the dominant position in other markets requiring an expensive battle for market share

Option #2 Begin reducing expenditures on the declining beef market, and instead focus on growth markets

• Positives – Greater potential sales – Reduced marketing costs – Less expenditures on research and development in a shrinking market

Option #2 Begin reducing expenditures on the declining beef market, and instead focus on growth markets

• Negatives – Pfizer’s position may be weakened, and the market may enter a growth mode – Pfizer may not have the profit margin or product selection in other industries – The market may be more competitive in other segments of the industry

Option #3 producers Partner with U.S. beef growers to help return to profitability

• Positives: – – – Pfizer has extensive skill and experience in marketing and advertisement Pfizer’s products are recognized as consistently high quality Pfizer is very aggressive in the market and could help to educate producers – – – – Pfizer has extensive capital Pfizer has strong trusting relationships with ranchers Currently only four packing houses control access to the U.S. beef market Pfizer “Certified” beef

Option #3 Partner with U.S. beef growers to help return producers to profitability

• Negatives: – Pfizer has no experience in marketing of beef or in meatpacking operations – Ranchers may trust Pfizer’s pharmaceuticals because they are recommended by Vets, not because they trust Pfizer – They may not make any money trying to compete with the major players

The Solution

• • • Option #3 Pfizer should partner with ranchers to build their own packing house and market a premium line of “certified” beef using their extensive experience in marketing Business is about finding a customer need and meeting that need for profit – The ranchers have a need for a closer connection to the customer and the skills to market their products direct to consumers at a premium price - Pfizer can fill that need

Pfizer Animal Products

Any Questions?