To give you an idea of the cost-cutting misery going on at Pfizer (PFE) right now, take a look at Cafe Pharma, the anonymous gossip site for pharmaceutical industry workers. One thread, titled "Being forced to room with someone at meetings is so degrading and dehumanizing," has had more than 10,000 views from Pfizer employees (and those interested in them), thousands more than any of the other Pfizer threads. It describes Pfizer's morale-killing policy of requiring drug sales reps and other executives to double up in hotel rooms when on the road to save money. It begins:
I think I speak for everyone at this company when I say that this is something that is just reprehensible. Not just at training, but at regional meetings as well. Nothing says "f-this" like flying into NY from the west coast, getting to the compound at 11PM and opening the door to find a complete stranger snoring away in his underwear.(Meanwhile, Pfizer's top executives are flying around the world in three private planes and six helicopters.) So the news that Pfizer will lay off more than the 19,000 staff it estimated when it merged with Wyeth in 2009 to form a 129,500-employee colossus will come with a special sting. Pfizer reported to the SEC on Friday afternoon:
At the end of the third quarter of 2010, the workforce totaled approximately 111,500, a decrease of 5,000 from December 31, 2009. Since the closing of the Wyeth acquisition on October 15, 2009, the workforce has declined by 9,200, primarily in the U.S. Primary Care field force, manufacturing, R&D and corporate operations. We expect to exceed our original 15% workforce reduction target.Former Wyeth staffers have a right to be angry: This is more Pfizer's fault than Wyeth's. It's no secret that Wyeth's drugs are driving Pfizer right now. Here are a couple of charts showing the effect -- or lack thereof -- of the Pfizer/Wyeth merger. The first one shows the number of dollars in sales Pfizer gets for every dollar it spends on sales, marketing and admin costs, the company's single biggest quarterly operating expense:
The lines show that before the merger, Wyeth was slightly more efficient at generating its revenues. After the merger, Pfizer has struggled to continue generating sales as efficiently as Wyeth used to.
This chart shows how much Pfizer gets in sales for every dollar spent on manufacturing costs. It measures the efficiency and productivity of Pfizer's factories and whether the company is able to keep the cost of chemicals down (or the price of drugs up):
Clearly, Wyeth's manufaturing operations generated more revenues than Pfizer's or the combined company's. Pfizer is just unable to keep its manufacturing costs in line (or it is unable to maintain high prices for its goods in the face of cheaper competiton). Either way, both charts indicate that from an operating efficiency point of view, Wyeth would probably have been better off without Pfizer.
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