New Pfizer up and running on day one, R&D cuts expected

Pfizer chiefs have been talking about the new entity that has been created with the $68 billion merger with Wyeth, which has begun operations today.

Chief executive Jeffrey Kindler said Pfizer’s “newly-strengthened company will have some of the best assets, people, pipeline and capabilities in the industry,” but all this potential needs to be turned into “meaningful results”. Having finally received the necessary regulatory approvals, some ten months after the deal was first announced, Pfizer and Wyeth claim that they have worked diligently to ensure that the combined company “is fully operational immediately upon the closing”.

Chief financial officer Frank D’Amelio said that being “operational on ‘day one’ is a true testament to the dedication of the integration teams at both companies”. The merger has created “a broad and diversified global product portfolio” and strengthened capabilities in biotechnology, vaccines, consumer healthcare, nutrition and animal health, Pfizer noted, adding that “it is expected that no drug will account for more than 10% of the combined company’s revenue in 2012”.

As well as setting up “patient-centric business units”, R&D has been split into two units – the PharmaTherapeutics and BioTherapeutics groups. However Martin Mackay, president of Pfizer Global R&D told Bloomberg that the new entity’s research budget is going to be reduced as the new entity looks to become more efficient. The news agency also quoted Barbara Ryan, an analyst for Deutsche Bank, as saying that Pfizer may set its R&D spend at $8 billion, the same as in 2008 but 30% less than the total both companies invested last year.

Pfizer added that it is now in the process of “finalising the decisions related to talent and site matters and will work quickly to effectively implement those decisions”. These decisions are subject to works council and/or union consultations and other legal requirements, it noted.

The acquisition is expected to be accretive to Pfizer’s adjusted diluted earnings per share in the second full year after closing and should yield synergies of $4 billion by the end of 2012. These cuts will come across the board, ie in “selling, informational and administrative functions, R&D and manufacturing”.