Pfizer to Slash 10,000 Jobs in Cost-Cutting Move
Pfizer said it will cut 10,000 jobs, or about 10% of its global workforce, in an effort to reduce costs by between $1.5 billion and $2 billion by the end of 2008.
In addition, the company said it will close three research sites in Michigan and two manufacturing plants in New York and Nebraska. It may also sell another manufacturing site in Germany and close research sites in Japan and France.
It's the second time in two years that Pfizer has announced a major cost reduction plan in order to combat the loss of about $14 billion in revenues this year due to expiring patents on key drugs. The company is at risk of losing 41% of its sales to generic competition between 2010 and 2012, according to one analyst.
Pfizer also provided per-share earnings guidance for 2007 in the range of $2.18 to $2.25, which would represent growth of between 6% and 9%. A Thomson Financial consensus estimate puts the company's earnings at $2.19 for the year.
In 2008, Pfizer anticipates earnings of $2.31 a share to $2.45 a share. Thomson Financial forecasts 2008 profits of $2.30.
Pfizer said it expects sales for 2007 and 2008 to remain comparable to last year's sales.
Analysts are skeptical that Pfizer's crop of current and pipeline products can generate enough sales to compensate for the lost revenue. Pressure on Pfizer has intensified since safety issues forced it to halt development of the star drug in its pipeline, which was slated to replace Pfizer's best-selling drug Lipitor as it loses patent protection as early as 2010.
"You can't cost cut your way to prosperity," said Les Funtleyder, an analyst at Miller Tabak & Co.
Still, the cuts do help shore up business and remain a good short-term strategy as the company seeks acquisitions to boost revenue, said Barbara Ryan, an analyst at Deutsche Bank.
The latest cuts come on the heels of Pfizer's announcement two months ago that it was laying off about 20 percent of its U.S. sales representatives, around 2,200 people. Those cuts are included in the 10,000 layoffs announced Monday.
Analysts estimated that move would save between $400 million and $500 million annually.
Two years ago, Pfizer announced it was slashing $4 billion in costs by 2008 and that effort is ongoing.
Earlier Monday, the drugmaker reported that its quarterly profit more than tripled on the sale of its consumer health business, although revenue was flat amid lower sales of its Lipitor cholesterol fighter and generic competition for several medicines.
Pfizer earned $9.45 billion in the fourth quarter, or $1.32 a share, compared with $2.73 billion, or 37 cents a share, a year earlier.