Pfizer's Layoff Plan Explained

Last Updated Oct 8, 2008 11:45 AM EDT

jeffrey kindler pfizerPfizer CEO Jeff Kindler isn't resting in his reorganization of the company. But although that plan is said not to involve layoffs, no one seems to believe it. As such, Pfizer is heading into territory previously ploughed by GlaxoSmithKline, which was plagued by layoff rumors throughout the summer while the company officially kept silent.

The result was mass confusion among the GSK ranks. In the absence of transparency from Pfizer, that is exactly what's happening at the Big Blue Giant of 42nd St. right now.

Take a look: The "no-layoffs" Pfizer plan was reported by Ed Silverman at Pharmalot and his comments section is already filling up with people who say things like "massive layoffs anticipated." New London's The Day has a story in which the moves "will have no direct impact on jobs worldwide or locally" and, at the same time, "We do anticipate there will be some job loss," from a previous decision, Pfizer says. The plan officially revolves around reorganizing Pfizer's businesses into three areas: primary care docs, specialty care docs, and emerging markets like Brazil, Russia, India and China. The plan comes after R&D chief Ian Read said Pfizer had already implemented $1.2 billion in cuts of an existing plan to excise $2 billion from the company's expenses.

So more layoffs are indeed on their way -- about $800 million of them, by Read's math. That's why so few Pfizer workers believe their jobs are safe. Check out Pfizer's internal human resources communications system, or as I like to call it, Café Pharma. Here's a nicely detailed thread in which Pfizer reps get a voicemail from Area VP Dan M:
Area VP Dan M sent a Voicemail out late last week saying he has heard all of the rumors and they are not true...or at least he has not been in any discussions with anyone above him. Dan is a good guy and seems very honest. The interesting thing is the day after he sent the voicemail is when the rumors began to pick up steam ... So either there are not layoffs (which come on that is not likely!), or he is lying (which I don't believe he would do), or the details of this layoff are really really high level.
One rep responded:
I took that voicemail to say that there would be layoffs THIS year.
Which kind of goes to show the atmosphere among Pfizer pfolks right now: You can tell a rep to her face that there are no layoffs, and she will conclude from that evidence -- and Pfizer's history -- that it somehow it means layoffs are on the way. You can see other examples of layoff discussion details here and here. And these guys seem to think April 1 is a key date.

It's the same over at Biofind Rumor Mill, which seems to be where tech and R&D people hang out. The current speculation is that Groton, Conn.; St. Louis; Sandwich (in the UK); and La Jolla, Calif., will all be hit.

Worse, Derek Lowe thinks more R&D layoffs are coming. His sources are better than mine in that area so I bow to his superior rumor-gathering.

Pfizer isn't helping itself by remaining officially silent. Here's its press release web page. There's no layoffs explanation.

But you can ignore all the chatter and focus on what we already know for a fact. Kindler's plan was telegraphed to the company back in 2007. It's worth reading in detail, if you're interested in where Pfizer is actually going. One important paragraph in terms of layoffs:
Pfizer will generate cost savings through site rationalization in research and manufacturing, streamlined organizational structures, staff function reductions, increased outsourcing and procurement savings. The company will reallocate many of these cost savings to more value-added activities. After making those investments, Pfizer plans to achieve an absolute net reduction in the pre-tax total expense component of adjusted income(1) of between $1.5 billion and $2 billion by the end of 2008, while continuing to invest in R&D, business development, emerging markets and new marketing approaches.
The problem Kindler has is that so few people seem to be listening to what he is actually saying, and observing what he is actually doing. (I know, it's counterintuitive, but stick with me.) Investors keep looking at that Lipitor patent cliff and asking, when will Pfizer acquire another company to fill the gap? Well, Kindler already (allegedly) passed on ImClone, Sepracor and Bayer.

As I noted earlier, this is probably because in the short-term Kindler is sticking to his boring, difficult and vanilla strategy of reforming his company from within, so that it has a staff base that actually reflects the revenues he expects to soon see reduced. That's not a very exciting story to tell, which is why it's been ignored in favor of M&A rumors. Beyond that, Kindler expects his juicy phase III cancer pipeline to kick in, and the stock to rise as a result.

In the meantime, don't buy a new car. You may need the money.

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