strategic-management

Pfizer’s consolidated Balance Sheet in Exhibit 6 reveals that total assets shrunk
from $114.84 billion in 2006 to $111.15 billion in 2008, and total liabilities increased
from $43.48 billion in 2006 to $53.59 billion in 2008. Note that total stockholders’ equity
fell 19.34 percent, from $71.36 billion in 2006 to $57.56 billion in 2008.
Competition
Pfizer faces high competition in all its business segments due to the presence of many players,
large and small, in the industry. Bayer AG, Merck & Co., and Novartis AG are Pfizer’s
direct competitors in the pharmaceutical industry. Of the four major players in the pharmaceutical
industry, Pfizer and Merck are American companies Bayer is German, and
Novartis is Swiss. A comparison of key indicators included in Exhibit 7 shows that Pfizer
leads the pack, with Novartis trailing closely behind.
With $97.13 billion in market capitalization, Pfizer is the largest company in this
strategic group. It has 80,250 employees, second to Novartis, but it is the leader in revenues
($47.32 billion), gross margins (85.86 percent), operating margins (36.13 percent), and net
income of $7.96 billion. However, note that Pfizer has the lowest earnings per share
($1.23) and price-earnings (P/E) ratio among its direct competitors.
Potential Risks
The Wyeth acquisition is fraught with potential risks. First and foremost, there are several
regulatory hurdles to overcome not only from regulators in the United States, but also overseas.
Some of these approvals include the expiration or termination of the waiting period
under the Hart-Scott-Rodino Act, a decision to be issued by the European Commission
under the EC Merger Regulation declaring that the proposed merger is compatible with the
Common Market, and the approval of the proposed acquisition under the China Anti-
Monopoly Law and by regulators in Canada and Australia as well.
The acquisition would also increase Pfizer’s debt because it is set to take on about
$22.5 billion of debt in addition to assuming Wyeth’s debt. Servicing this much additional
debt is a risky move for Pfizer, which experienced a decline of revenues from $48.42 billion
in 2007 to $48.3 billion in 2008.
Assuming the merger agreement moves forward unencumbered, Pfizer will assume
all responsibilities for pending litigation facing Wyeth. Like other companies in the industry,
Wyeth is currently facing various lawsuits and litigation claims related to patents,
product liability, consumers, commercial, securities, environmental and tax laws, and
government investigations. Outcomes of these pending claims can overburden Pfizer and
mitigate potential benefits from the Wyeth acquisition.
Pfizer also faces litigation in several courts around the world. For example, Pfizer is
in a contentious battle in a Jamaican court to protect its patented medication amlodipine
(Norvasc) used for treating high blood pressure to avoid complications of severe congestive
heart failure, stroke, renal failure, and other vascular complications due to hypertension.
The company is fighting the Jamaican court’s decision that Pfizer’s patent on its drug
expired in Jamaica as it had expired in other countries.
At home, Pfizer spent about $900 million in June 2008 to settle pending U.S.
consumer fraud-related class action lawsuits and personal injury claims involving
Celebrex and Bextra. Several of Pfizer’s key products are slated to expire in the near future,
as indicated in Exhibit 8.
Pfizer’s Focus on Emerging Markets
As shown in Exhibit 9, Pfizer is determined to become the leading biopharmaceutical company
in emerging markets through bold and innovative partnerships.
In addition to traditional partnerships, alliances, mergers and acquisitions, Pfizer
recently partnered with world-class foundations and nonprofit organizations like the
Grammeen Foundation in Bangladesh, whose founder is Mohammad Yunus, the recipient
of the Nobel Peace Prize in 2006 for his efforts in alleviating poverty through microfinancing.
Pfizer recently entered into a partnership with Grammeen Health, an affiliate
of Grammeen Foundation, to bring sustainable health-care delivery models that address
CASE 25 • PFIZER, INC. — 2009 247