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Pfizer's 10,000 job cuts may prompt Glaxo, Sanofi to follow

Pfizer Inc.'s plan to eliminate 10,000 jobs, or 10% of its workforce, may ripple through the pharmaceutical industry and prompt similar cuts from rivals such as GlaxoSmithKline Plc and Sanofi-Aventis SA.

Pfizer Inc., the world's biggest drugmaker, said yesterday it will close two US factories, consider selling one in Germany, shut down five research centers in the US, Japan and France, and reduce its European sales force 20%. The plan will slash annual spending by $500 million (€385.9 million) to $1 billion (€771.9 million). CEO Jeffrey Kindler is deepening cuts after Pfizer reported a 43% drop in Q4 profit and generic copies of top-selling drugs began eating into revenue. GlaxoSmithKline Plc, Sanofi-Aventis SA and other drugmakers facing competition from cheaper copies would benefit by following New York-based Pfizer's staff reductions and site closings.
„In the face of stalling sales with limited new-product flow and significant generic competition for a lot of the big brands, it does make sense that the industry unilaterally disarms” after a 15-year expansion, said Deutsche Bank analyst Barbara Ryan yesterday in an interview. „Pfizer is the 800-pound gorilla.” Drugs generating a combined $23 billion in annual sales, or almost 10% of the US market, lost patent protection last year, according to health research firm IMS Health Inc.
Cheaper copies can drive prices down as much as 80%. Alice Hunt, a spokeswoman for London-based Glaxo, and Steve Brown, a spokesman for London-based AstraZeneca Plc, declined to comment on how Pfizer's plan would affect their need for sales staff. Jean-Marc Podvin, spokesman for Paris-based Sanofi, declined to comment before the company's February 13 earnings release and press conference.

At Pfizer, Q4 revenue rose less than a% to $12.6 billion as generic competition weighed on sales of the antidepressant Zoloft, Pfizer's third-biggest drug. The company repeated a forecast that revenue won't grow in 2007 and 2008 above last year's $48.4 billion. Pfizer's sales will plummet after 2011 when it loses patent protection for its Lipitor cholesterol pill, which accounts for almost half of profit, analysts predicted.
In the Q4, revenue from the drug declined to $3.34 billion from $3.36 billion a year earlier. The product's sales for 2006 rose 6% to $12.9 billion, missing the company's goal of $13 billion. Pfizer shares declined 27 cents, or 1%, to $26.95 at the close of New York Stock Exchange composite trading yesterday. The stock gained 9% in the past 12 months, underperforming a 13% rise in the 14-member Standard & Poor's 500 Pharmaceutical Index.

Analysts estimate Pfizer will lose patent protection through 2011 on five other drugs with $8.69 billion in 2005 sales. „We project that the current late-stage pipeline will generate more than $7 billion in sales from 2011 to 2012,” said J.P. Morgan analyst Chris Shibutani, who carries StarMine Corp.'s top rating, in a January 3 research report. „But even that amount would be insufficient to offset the almost $14 billion in sales that we estimate will be lost during the same period from the Lipitor patent expiry.”
Most of the job reductions across the industry are likely to involve sales representatives who market medicines to doctors. The number of sales reps in the US has more than tripled since 1998 to about 100,000, said Bob Davenport, a vice president in Jersey City, New Jersey, for the Hay Group consulting firm. The number of pharmaceutical sales people may shrink by 30% in the next few years, Davenport said.

„With some of these blockbuster drugs, you'll have eight reps calling on the same doctor,” Davenport said in a January 19 interview. „There has been a lot of frustration on the side of the doctors saying, ‘I just can't see all these sales people.”’ Pfizer and other drugmakers, including Merck & Co. and Eli Lilly & Co., already slashed more than 10,000 jobs last year in sales, manufacturing, research and administration. By itself, Pfizer said it eliminated 8,000 positions in 2006. Wyeth, based in Madison, New Jersey, dropped 800 positions, or 17% of its full-time sales force, over the past two years, company spokesman Chris Garland said in an e-mail.
Wyeth added about 600 part-time sales jobs over that period. „The new selling model has minimized the number of sales people calling on identical doctors for the same product,” Garland said. Bristol-Myers Squibb Co. has cut its marketing force in half since 2000, spokesman Jeffrey Macdonald said in a telephone interview. The New York-based company now has 2,500 to 3,000 representatives, he said.

Bristol-Myers also made the reductions as part of a shift away from selling drugs directly to primary-care physicians. The company now targets specialists such as oncologists. „It's really part of a long-term corporate strategy to get out of primary care and focus in specialty areas,” Macdonald said. Bayer AG of Germany said in November it would abolish more than 800 US jobs, many in research, after completing its purchase of Schering AG. The move will save Bayer $210 million a year by the end of 2008. (Bloomberg)