Pfizer Inc


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Pfizer Inc

  1. 1. George Barnes Christophe Chirol Dan Cooper Katelyn Griffasi
  2. 2. Presentation Overview <ul><li>Company Overview </li></ul><ul><ul><li>Business Segments </li></ul></ul><ul><ul><li>Geographic Reach </li></ul></ul><ul><ul><li>Goals and Objectives </li></ul></ul><ul><ul><li>Mission Statement/ Values </li></ul></ul><ul><ul><li>Relevant History </li></ul></ul><ul><ul><li>Strategy Diamond </li></ul></ul><ul><li>External Environment </li></ul><ul><ul><li>Industry defined and Life Cycle </li></ul></ul><ul><ul><li>Macro environmental Factors </li></ul></ul><ul><ul><li>Porters 5 Forces </li></ul></ul><ul><ul><li>External Weighted Avg. Table </li></ul></ul>
  3. 3. Overview (continued) <ul><li>Internal Environment </li></ul><ul><ul><li>Current Financial Performance vs. Rivals </li></ul></ul><ul><ul><li>Building Blocks </li></ul></ul><ul><ul><li>Value Chain Analysis </li></ul></ul><ul><li>Recommendations </li></ul><ul><li>NPV Analysis </li></ul><ul><li>Question and Answer </li></ul>
  4. 4. Company Overview <ul><li>Three Business Segments: </li></ul><ul><ul><li>Pharmaceutical </li></ul></ul><ul><ul><li>Animal Health </li></ul></ul><ul><ul><li>Corporate/Other </li></ul></ul><ul><ul><li>Pfizer Inc. is the world’s largest research based pharmaceutical company through the: </li></ul></ul><ul><ul><ul><li>Discovery/development/manufacturing and marketing of prescription medicines for humans and animals </li></ul></ul></ul>Overview External Internal Recommendations NPV
  5. 5. Business Segments <ul><li>Pharmaceutical </li></ul><ul><ul><li>Provide treatment for: </li></ul></ul><ul><ul><ul><li>Cardiovascular and metabolic diseases </li></ul></ul></ul><ul><ul><ul><li>CNS disorders </li></ul></ul></ul><ul><ul><ul><li>Arthritis and pain </li></ul></ul></ul><ul><ul><ul><li>Infectious and respiratory diseases </li></ul></ul></ul><ul><ul><ul><li>Urogenital conditions </li></ul></ul></ul><ul><ul><ul><li>Cancer </li></ul></ul></ul><ul><ul><ul><li>Endocrine disorders </li></ul></ul></ul><ul><ul><ul><li>Allergies </li></ul></ul></ul>Overview External Internal Recommendations NPV
  6. 6. Business Segments (continued) <ul><li>Animal Healthcare </li></ul><ul><ul><ul><li>Treat and prevent diseases associated with livestock and companion animals </li></ul></ul></ul><ul><ul><ul><li>Parasticides/anti-inflammatories/vaccines/antibiotics </li></ul></ul></ul><ul><li>Corporate/Other </li></ul><ul><ul><ul><li>Manufacturing of empty soft gelatin capsules </li></ul></ul></ul><ul><ul><ul><li>Contract manufacturing </li></ul></ul></ul><ul><ul><ul><li>Bulk pharmaceutical chemicals </li></ul></ul></ul>Overview External Internal Recommendations NPV
  7. 7. Geographic Reach <ul><li>Operates and markets its products in over 150 countries worldwide </li></ul><ul><li>About 98,000 employees in over 115 countries </li></ul>Overview External Internal Recommendations NPV
  8. 8. Company Goals and Objectives <ul><li>Grow in Emerging Markets </li></ul><ul><li>Find new opportunities for established products </li></ul><ul><li>Refocus and optimize patent protected portfolio </li></ul><ul><li>Instill culture of innovation and continuous improvement </li></ul><ul><li>Invest in complimentary businesses </li></ul>Overview External Internal Recommendations NPV
  9. 9. Mission Statement <ul><li>“ We will become the world's most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live.” </li></ul><ul><li>Charles Pfizer Charles Erhart </li></ul>Overview External Internal Recommendations NPV
  10. 10. Vision Statement <ul><li>“ We dedicate ourselves to humanity's quest for longer, healthier, happier lives through innovation in pharmaceutical, consumer, and animal health products.” </li></ul><ul><li>-Jeffrey B. Kindler </li></ul><ul><li>Chairman of the Board and CEO </li></ul>Overview External Internal Recommendations NPV
  11. 11. Pfizer’s Core Values <ul><li>Integrity </li></ul><ul><li>Respect for People </li></ul><ul><li>Customer/Community Focus </li></ul><ul><li>Innovation </li></ul><ul><li>Teamwork </li></ul><ul><li>Performance </li></ul><ul><li>Leadership </li></ul><ul><li>Quality </li></ul>Overview External Internal Recommendations NPV
  12. 12. <ul><li>1849- Founded by Charles Pfizer and Charles Erhart in Brooklyn, NY </li></ul><ul><li>1900- Incorporated in New Jersey </li></ul><ul><li>1971- Company’s Central Research Division created </li></ul><ul><li>1995- Animal health care segment acquired from SmithKline Beecham </li></ul><ul><li>2000- Pfizer and Warner Lambert merge </li></ul><ul><li>2003- Acquired Pharmacia Corporation, creating worlds largest research based pharmaceutical company </li></ul><ul><li>2005- Acquired Vicuron Pharmaceuticals to improve anti-viral development program </li></ul><ul><li>2006- Sold consumer healthcare business to J&J </li></ul>Pfizer Inc. History Overview External Internal Recommendations NPV
  13. 13. Competition <ul><ul><li>GlaxoSmithKline PLC </li></ul></ul><ul><ul><li>Novartis AG </li></ul></ul><ul><ul><li>Sanofi-Aventis </li></ul></ul><ul><ul><ul><li>Offer similar types of products </li></ul></ul></ul><ul><ul><ul><li>Large in size (established distribution channels) </li></ul></ul></ul><ul><ul><ul><li>Close in sales margins </li></ul></ul></ul><ul><ul><ul><li>Close in terms of Market Share </li></ul></ul></ul><ul><ul><ul><li>Good Benchmark </li></ul></ul></ul>Overview External Internal Recommendations NPV
  14. 14. Strategy Diamond How will we get there? Internal Development? How will we compete? On Cost? Via Differentiation (what unique features are included)? What businesses will we be in? Products/Services, Regions, Customers What will be our speed and sequence of moves? How will achieve our competitive position? How are cost advantages generated (scope economies)? How are unique attributes created & delivered? Overview External Internal Recommendations NPV Arenas Vehicles Staging Differentiators Economic Logic
  15. 15. Arenas What businesses will we be in? <ul><ul><li>Pharmaceuticals </li></ul></ul><ul><ul><ul><li>Prescription Medication </li></ul></ul></ul><ul><ul><li>Animal Health Care </li></ul></ul><ul><ul><ul><li>Vaccines/ Antibiotics/ Anti-Inflammatories </li></ul></ul></ul><ul><ul><li>Corporate/Other </li></ul></ul><ul><ul><ul><li>Contract Manufacturing </li></ul></ul></ul><ul><ul><ul><li>Bulk pharmaceutical chemicals </li></ul></ul></ul>Overview External Internal Recommendations NPV
  16. 16. Vehicles to Growth Strategies How will we get there? <ul><li>Merger and Acquisition Activity (M&A) </li></ul><ul><ul><li>2006 </li></ul></ul><ul><ul><ul><li>TransTech Pharma agreement </li></ul></ul></ul><ul><ul><ul><ul><li>RAGE Modulators </li></ul></ul></ul></ul><ul><ul><li>2007 </li></ul></ul><ul><ul><ul><li>Animal Health division acquired Embrex </li></ul></ul></ul><ul><ul><ul><ul><li>Vaccine delivery system </li></ul></ul></ul></ul><ul><ul><ul><li>Acquired BioRexis Pharmaceutical </li></ul></ul></ul><ul><ul><ul><ul><li>Diabetes candidates and technology for protein drug candidates </li></ul></ul></ul></ul>Overview External Internal Recommendations NPV
  17. 17. Vehicles (continued) <ul><li>Enters world-wide collaboration with Bristol Myers Squibb and Adolor </li></ul><ul><ul><li>Apixadan & pain relieving medications </li></ul></ul><ul><li>Acquired Coley Pharmaceutical Group </li></ul><ul><ul><li>Specialized in treating cancers, allergy and asthma disorders, and autoimmune diseases </li></ul></ul><ul><li>Acquired CovX biotherapeutics </li></ul><ul><ul><li>Treating diabetes and cancers </li></ul></ul>Overview External Internal Recommendations NPV
  18. 18. Differentiators How will we compete? <ul><li>Economies of Scale </li></ul><ul><ul><li>Taking advantage of cost efficiency </li></ul></ul><ul><li>Sales Force (2nd Largest) </li></ul><ul><ul><li>Enhancements of productivity and effectiveness of sales force interactions </li></ul></ul><ul><li>Adjust to the needs of customers </li></ul><ul><ul><li>Brand loyalty </li></ul></ul>Overview External Internal Recommendations NPV
  19. 19. Differentiators (continued) <ul><li>Marketing Capabilities </li></ul><ul><ul><li>(Lipitor- Warner Lambert and Viagra) </li></ul></ul><ul><li>Research and Development </li></ul><ul><li>Blockbuster Drug Portfolio </li></ul><ul><ul><li>Zoloft </li></ul></ul><ul><ul><li>Celebrex </li></ul></ul><ul><ul><li>Lipitor </li></ul></ul>Overview External Internal Recommendations NPV
  20. 20. Economic Logic How will we achieve our competitive position? <ul><li>Adjusting to a projected Negative sales growth out to 2012 </li></ul><ul><li>Declining unit costs with increased volume Reducing Operating Costs </li></ul><ul><ul><li>COGS, Sales, & Marketing </li></ul></ul><ul><ul><li>Sales Force </li></ul></ul><ul><ul><ul><li>Altering sales approach </li></ul></ul></ul><ul><ul><ul><li>Reduce sales force 20% in order to increase profits </li></ul></ul></ul>Overview External Internal Recommendations NPV
  21. 21. Long Term Strategy Where do we want to go in the future? <ul><li>Mergers and Acquisitions/ Alliances with Non-Pharma firms </li></ul><ul><ul><li>Biotechnology </li></ul></ul><ul><ul><li>Small molecule cancer therapies </li></ul></ul><ul><ul><li>Generic </li></ul></ul><ul><li>Emerging markets </li></ul><ul><ul><li>Moving into other geographic areas </li></ul></ul>Overview External Internal Recommendations NPV
  22. 22. External Environment <ul><li>Industry Definition and Industry Life Cycle </li></ul><ul><li>Macro Environmental Factors </li></ul><ul><ul><li>Socio Demographic </li></ul></ul><ul><ul><li>Technological </li></ul></ul><ul><ul><li>Political/Regulatory actions </li></ul></ul><ul><ul><li>Michael Porters Five Forces </li></ul></ul><ul><ul><ul><li>Risk of Entry from Potential Competitors </li></ul></ul></ul><ul><ul><ul><li>Threat of Substitute Products </li></ul></ul></ul><ul><ul><ul><li>Bargaining Power of Suppliers </li></ul></ul></ul><ul><ul><ul><li>Bargaining Power of Buyers </li></ul></ul></ul><ul><ul><ul><li>Intensity of Competition among Rival Firms </li></ul></ul></ul>Overview External Internal Recommendations NPV
  23. 23. Industry Definition <ul><li>Definition : </li></ul><ul><li>The pharmaceutical industry develops and manufactures medications that treat diseases and illnesses in a variety of therapeutic areas. </li></ul>Overview External Internal Recommendations NPV
  24. 24. Industry Life Cycle “ Shakeout” Phase- growth rates, intense rivalry, margins fall, inferior products with increasing costs and processes cause a decline Goal: sustain and strengthen position within specific business segments, Increase customer loyalty and cash flows Overview External Internal Recommendations NPV
  25. 25. Socio-Demographic Factor Aging Population (Baby Boom) <ul><li>Opportunity </li></ul><ul><li>450 million are over the age of 65 (7% of global population)(17% by 2020) </li></ul><ul><li>Healthcare spending highest among over 65 age range </li></ul><ul><ul><li>(Social Security and Defense only higher Federal Spending) </li></ul></ul><ul><li>“ Baby Boomers” dependant on use of prescription medication to treat health problems (opportunity) </li></ul>Overview External Internal Recommendations NPV
  26. 26. Continued.. <ul><li>Threat </li></ul><ul><li>In America, 77 million people will be enrolled in Medicare by 2031 </li></ul><ul><li>Health care and Medicare programs will not be able to finance this many people </li></ul><ul><li>Possible increase in bulk buying/ price controls placed on medicines produced </li></ul>Overview External Internal Recommendations NPV
  27. 27. Technological: Biotechnology <ul><li>Opportunity </li></ul><ul><li>Young Industry- Developed Insulin/ Cancer Drugs </li></ul><ul><li>Uses living organisms (cells) or products to improve the health of a human (medicines and remedies) </li></ul><ul><li>Develops molecular procedures that finds a target patient population for a drug (DNA/Genetics) </li></ul><ul><li>Medicines are created faster and cheaper than traditional methods </li></ul>Overview External Internal Recommendations NPV
  28. 28. Socio-Demographic: Chronic Illnesses/ Cancer <ul><li>Opportunity </li></ul><ul><li>Alzheimers/ Dementia/ Cancer have replaced infectious diseases as number one cause of death in adults over 65 </li></ul><ul><li>Studies show people over the age of 65 are 17% more likely to get cancer </li></ul><ul><li>Progress in medicine and disease prevention will take on larger role in near future (rising demand for elderly) </li></ul>Overview External Internal Recommendations NPV
  29. 29. Political/Regulatory: Government Regulations <ul><li>Threat </li></ul><ul><li>FDA (USA) lengthy process (up to 15 years) and strict </li></ul><ul><li>Unpredictable clinical trials (less than 2% approval rate) </li></ul><ul><li>Constant pressure from governments to lower prescription drug prices and yield to generics </li></ul><ul><li>Outside the U.S- Canada and Europe have national healthcare coverage (bargaining power increased) </li></ul><ul><li>Medicare Prescription Drug, Improvement and Modernization act of 2006 – broad coverage/more power </li></ul><ul><li>Firms profitability and health greatly affected </li></ul>Overview External Internal Recommendations NPV
  30. 30. Threat of New Entrants into Market LOW <ul><li>Barriers to Entry HIGH </li></ul><ul><ul><li>Economies of scale </li></ul></ul><ul><ul><ul><li>Manufacturing </li></ul></ul></ul><ul><ul><ul><li>R & D </li></ul></ul></ul><ul><ul><ul><li>Marketing/Sales </li></ul></ul></ul><ul><ul><li>Distribution product differentiation </li></ul></ul><ul><ul><ul><li>Established products </li></ul></ul></ul><ul><ul><ul><li>Brands </li></ul></ul></ul><ul><ul><ul><li>Relationships </li></ul></ul></ul><ul><ul><li>Regulatory policy </li></ul></ul><ul><ul><ul><li>Patents </li></ul></ul></ul><ul><ul><ul><li>Government influence </li></ul></ul></ul><ul><ul><li>Switching costs </li></ul></ul><ul><ul><ul><li>Employee retraining </li></ul></ul></ul><ul><ul><ul><li>New equipment </li></ul></ul></ul><ul><ul><ul><li>Technical assistance </li></ul></ul></ul><ul><ul><li>Access to distribution channels </li></ul></ul><ul><ul><ul><li>Preferred arrangements </li></ul></ul></ul>Overview External Internal Recommendations NPV
  31. 31. Threat of Substitute Products RELATIVELY LOW <ul><li>Very little substitutes </li></ul><ul><li>Main substitutes </li></ul><ul><ul><li>Medical devices </li></ul></ul><ul><ul><li>Alternative therapies </li></ul></ul><ul><ul><ul><li>Homeopathic remedies </li></ul></ul></ul><ul><ul><ul><li>Acupuncture </li></ul></ul></ul><ul><ul><ul><li>Herbal medicines </li></ul></ul></ul><ul><ul><li>Hospitalization </li></ul></ul><ul><ul><ul><li>Surgery </li></ul></ul></ul><ul><ul><ul><li>Chemotherapy </li></ul></ul></ul>Overview External Internal Recommendations NPV
  32. 32. Rivalry Among Established Firms HIGH <ul><li>High revenue growth within the industry </li></ul><ul><li>Rivalry is intense because fragmented industry </li></ul><ul><ul><li>No company holds more than six to ten percent of the market share </li></ul></ul><ul><li>Differentiation </li></ul><ul><li>Companies use tactics such as price competition, advertising battles and new product introductions </li></ul><ul><ul><li>Maximizes position in market </li></ul></ul>Overview External Internal Recommendations NPV
  33. 33. Bargaining Power of Buyers MODERATE to HIGH <ul><li>Hospitals and Managed Care organizations </li></ul><ul><ul><li>High bargaining power </li></ul></ul><ul><li>Patients - low bargaining power for prescription drugs </li></ul><ul><li>Insurance Companies </li></ul><ul><ul><li>Private insurance companies may negotiate drug prices, use rebates, and drug-volume discounts with pharmaceutical manufacturers to alter prices </li></ul></ul><ul><li>Governmental Influence </li></ul><ul><ul><li>National Healthcare outside of U.S </li></ul></ul>Overview External Internal Recommendations NPV
  34. 34. Bargaining Power of Suppliers LOW to MODERATE <ul><li>Effects Profitability </li></ul><ul><ul><li>normal in a competitive market </li></ul></ul><ul><li>Switching costs are low (pharmacies) </li></ul><ul><ul><li>allows companies to consistently change suppliers to find the most efficient supply chain possible </li></ul></ul><ul><li>Biotechnology Firms </li></ul><ul><ul><li>Capacity to create their own drugs/products </li></ul></ul><ul><ul><li>Provide chemicals and compounds </li></ul></ul>Overview External Internal Recommendations NPV
  35. 35. External Weighted Avg. Table Pharmaceutical Airline Specialty Retail Overview External Internal Recommendations NPV Strategic Factors Weight Rating Weight × Rating Rating Weight × Rating Rating Weight × Rating Opportunities & Threats Competition .2 6 1.2 5 1.0 5 1.0 Industry Growth .3 7 2.1 3 .9 5 1.5 Substitutes .2 4 .8 3 .8 6 1.2 Barriers to Entry .3 9 2.7 8 2.4 6 1.8 Total: 1.00 6.80 5.10 5.50
  36. 36. Internal Environment <ul><li>Current Financial Performance vs. Rivals </li></ul><ul><li>Building Blocks </li></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Innovation </li></ul></ul><ul><li>Value Chain Analysis </li></ul><ul><li>Internal Weighted Avg. Table </li></ul>Overview External Internal Recommendations NPV
  37. 37. Current Financial Performance: Revenues by Business Segment Overview External Internal Recommendations NPV
  38. 38. Revenue Breakdown Graph Overview External Internal Recommendations NPV
  39. 39. Current Financial Performance vs. Rivals Revenues (millions) Overview External Internal Recommendations NPV
  40. 40. Pfizer Revenues vs. Rivals Overview External Internal Recommendations NPV
  41. 41. Cost of Goods Sold (millions) Overview External Internal Recommendations NPV
  42. 42. Pfizer COGS vs. Rivals Overview External Internal Recommendations NPV
  43. 43. Net Income (millions) Overview External Internal Recommendations NPV
  44. 44. Pfizer Net Income vs. Rivals Overview External Internal Recommendations NPV
  45. 45. Profitability Ratios <ul><li>Return on Assets Industry Average = 11.2 </li></ul><ul><li>Net Income/ Total Assets </li></ul>Overview External Internal Recommendations NPV ROA 2007 2006 2005 2004 2003 5 Year Growth Pfizer 7.39 17.01 7.01 9.67 5.03 46.92% GlaxoSmithKline 21.27 23.59 21.88 21.97 23.74 -10.40% Novartis 17.95 12.59 12.19 12.07 11.55 55.41% Sanofi-Aventis 7.67 5.55 3.25 -7.71 24.10 -68.17%
  46. 46. Pfizer ROA vs. Rivals Overview External Internal Recommendations NPV
  47. 47. Profitability Ratios Return on Equity Industry Average = 23.2 Net Income/ Shareholder Equity Overview External Internal Recommendations NPV ROE 2007 2006 2005 2004 2003 5 Year Growth Pfizer  11.95 28.26 12.10 17.07 9.18 30.17% GlaxoSmithKline 55.95 64.74 72.21 78.32 99.19 -43.59% Novartis 26.57 19.52 19.04 17.96 16.96 56.66% Sanofi-Aventis 11.60 8.85 5.45 -16.52 36.84 -68.51%
  48. 48. Pfizer ROE vs. Rivals Overview External Internal Recommendations NPV
  49. 49. Stock Price Overview External Internal Recommendations NPV Company Name 2007 2006 2005 2004 2003 5 Year Growth Pfizer High 27.73 28.60 29.21 38.89 36.92 -26.25% Low 22.24 22.16 20.27 21.99 27.90 GlaxoSmithKline High 58.40 53.80 47.53 47.64 51.07 14.35% Low 50.03 44.17 38.80 31.85 31.35 Novartis High 60.36 61.60 54.71 50.77 46.00 31.22% Low 51.19 51.72 45.63 41.30 33.85 Sanofi-Aventis High 50.05 45.87 40.48 37.92 32.80 52.59% Low 41.65 36.60 29.22 22.53 24.90
  50. 50. Pfizer Stock Price vs. Rivals Overview External Internal Recommendations NPV
  51. 51. Building Blocks <ul><li>Quality </li></ul><ul><li>“ Quality is ingrained in the work of our colleagues and all our Values. We are dedicated to the delivery of quality healthcare around the world” </li></ul><ul><ul><li>Collaborations with academic and other research institutions </li></ul></ul>Overview External Internal Recommendations NPV
  52. 52. Building Blocks (continued) <ul><li>Innovation </li></ul><ul><li>“ The pursuit of innovation is basic to Pfizer's culture. It shapes our strategy, defines our purpose, and governs every facet of our operations” </li></ul><ul><ul><li>Research and Development </li></ul></ul><ul><ul><li>Value for the customer </li></ul></ul>Overview External Internal Recommendations NPV
  53. 53. Value Chain Analysis Overview External Internal Recommendations NPV
  54. 54. Marketing & Sales <ul><li>Channels: </li></ul><ul><ul><li>Television (commercials) </li></ul></ul><ul><ul><li>Print ads </li></ul></ul><ul><ul><li>Online ads </li></ul></ul><ul><li>Identifies trends </li></ul><ul><ul><li>Lipitor </li></ul></ul><ul><ul><li>Viagra </li></ul></ul><ul><li>Performance: </li></ul><ul><ul><li>Sales reps receive the best training in the business </li></ul></ul><ul><ul><li>Spread all over the world, working every day with doctors, hospitals, managed-care organizations and drug distributors </li></ul></ul><ul><ul><li>Knowledge of Pfizer’s product and competitors </li></ul></ul> Overview External Internal Recommendations NPV
  55. 55. Human Resource Management <ul><li>Different People </li></ul><ul><li>Environment </li></ul><ul><ul><li>Challenging </li></ul></ul><ul><ul><li>Open </li></ul></ul><ul><ul><li>Diverse </li></ul></ul><ul><li>University Relations </li></ul><ul><ul><li>Various areas of study </li></ul></ul><ul><li>Different Perspectives </li></ul>One common commitment Overview External Internal Recommendations NPV
  56. 56. Technology Development <ul><li>Outsourcing </li></ul><ul><ul><li>10 therapeutic areas of interest </li></ul></ul><ul><ul><ul><li>Diabetes, Cancers, Schizophrenia, Alzheimer's Disease and Immunology </li></ul></ul></ul> Overview External Internal Recommendations NPV
  57. 57. Technology Development <ul><li>Physician-directed and patient-directed enabling technologies </li></ul><ul><li>Finally, Pfizer seeks to forge partnerships with companies that can help them integrate technologies with therapeutics and informatics </li></ul><ul><ul><li>Feb 2007, Pfizer acquired BioRexis Pharmaceutical Corporation ( develop protein therapeutic agents) </li></ul></ul><ul><ul><li>Recently, Pfizer entered into a research agreement with Genstruct, which is a Biotechnology firm </li></ul></ul><ul><ul><ul><li>(Focus on underlying mechanisms of drug-induced liver injury) </li></ul></ul></ul><ul><ul><li>Acquired Schering Plough’s animal health care segment </li></ul></ul>Overview External Internal Recommendations NPV
  58. 58. Internal Weighted Avg. Table Pfizer GlaxoSmithKline Novartis Overview External Internal Recommendations NPV Strategic Factors Weight Rating Weight × Rating Rating Weight × Rating Rating Weight × Rating Strengths & Weaknesses Marketing & Sales .25 8.5 2.125 8 2.00 6 1.50 Innovation .25 6 1.50 5 1.25 5 1.25 Aging Portfolio .25 6 1.50 5 1.25 5 1.25 Costs (total) .25 7 1.75 6.5 1.625 6.5 1.625 Total: 1.00 6.875 6.125 5.625
  59. 59. Recommendation #1 <ul><li>Emerging Markets: </li></ul><ul><li>Asia </li></ul><ul><ul><li>Japan – grew 5.5% in 2007 and their GDP 4.3 trillion </li></ul></ul><ul><ul><li>(3 rd largest in purchasing power) </li></ul></ul><ul><ul><li>Main health problem – Obesity </li></ul></ul><ul><ul><li>China – grew 6.5% in 2007 and their GDP 10.7 trillion </li></ul></ul><ul><ul><li>(2 nd largest in purchasing power) </li></ul></ul><ul><ul><li>Main health problems – insomnia, anxiety and depression </li></ul></ul><ul><ul><li>India - grew 6% in 2007 and their GDP 1.3 trillion </li></ul></ul><ul><ul><li>(4 th largest in purchasing power) </li></ul></ul><ul><ul><li>Main health problems – infant mortality, increasing usage of tobacco, and diabetes </li></ul></ul>Overview External Internal Recommendations NPV
  60. 60. Recommendation #1 (continued) Overview External Internal Recommendations NPV
  61. 61. Recommendation #2 <ul><li>Acquire Mylan Laboratories </li></ul><ul><ul><li>Patent Expires </li></ul></ul><ul><ul><li>Offset pressure from government and insurance companies </li></ul></ul><ul><ul><li>Penetrate the market of Pfizer’s competitors </li></ul></ul><ul><ul><li>Follow Novartis’ acquisition of Sandoz generics </li></ul></ul><ul><ul><li>Potential risks </li></ul></ul>Overview External Internal Recommendations NPV
  62. 62. Recommendation #3 <ul><li>Acquire Biotechnology firm Biogen Idec </li></ul><ul><ul><li>Create drugs for unmet medical needs </li></ul></ul><ul><ul><ul><li>Oncology (cancer treatment) </li></ul></ul></ul><ul><ul><ul><li>Neurological disorders (Multiple Sclerosis) </li></ul></ul></ul><ul><ul><ul><li>Immunology (arthritis) </li></ul></ul></ul><ul><ul><ul><li>Already established presence in emerging markets such as Brazil, India and China </li></ul></ul></ul><ul><ul><ul><li>Over15 products in 2008 in Phase 2 or better </li></ul></ul></ul>Overview External Internal Recommendations NPV
  63. 63. NPV Analysis <ul><li>Initial Investment = $21 billion </li></ul><ul><li>COGS = 25% of sales </li></ul><ul><li>Other Expenses = 50% of sales </li></ul><ul><li>Additional Investment = 1.5% per quarter (6% per year) </li></ul><ul><li>Sales Growth Rate = 1.2% per quarter (4.8% per year) </li></ul><ul><li>Discount Rate = 5% per year (Target ROA/4) </li></ul><ul><li>Target ROA = 20 </li></ul>Overview External Internal Recommendations NPV
  64. 64. NPV (continued) <ul><li>Biogen Revenue 2007 – $3.2 billion </li></ul><ul><li>2-3 years before FDA approval/ Filing phase </li></ul><ul><li>Help Pfizer recover lost profits from Lipitor loss </li></ul><ul><li>10 year span- more realistic for drug development </li></ul><ul><li>Year 1 = (12,920,411) Year 2 = (5,944,836) </li></ul><ul><li>Year 3 = (294,152) Year 4 = 5,864,430 </li></ul><ul><li>Year 5 = 11,483,248 Year 8 = 24,820,527 </li></ul><ul><li> Year 10 = 31,360,258 </li></ul>Overview External Internal Recommendations NPV