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Pfizer Case Solution

Solution Id Length Case Author Case Publisher
2254 896 Words (5 Pages) Jeffrey S.Harrison, Ryan McGowan, Kevin O’Neill, Lauren Shotwell, Joshua Torres Robins School of Business
This solution includes: A Word File A Word File

Pfizer is faced with an impending issue of its blockbuster drug’s patent nearing expiry. As a result, the company has increased the prices of the drug to cash it before its patent expires. Furthermore, Pfizer’s revenues have been declining steadily despite a restructuring of the firm into two parts, innovative businesses and established businesses. 

Following questions are answered in this case study solution:

  1. Problem Statement 

  2. Problem Analysis 

  3. Recommendations 

  4. Financial Analysis

  5. Conclusion

Case Study Questions Answers

2. Problem Analysis 

Currently, the company is divided into two main segments, innovative products, and established products. While the innovative products business is further divided into Global Vaccines, Oncology, and Consumer Healthcare (VOC) businesses and Global Innovative Pharma (GIP), the established products have three segments. Two of these segments include products that have lost market exclusivity. This shows that the language of the divisions has resulted in a lower financial investment in the established segment. This is evident from exhibit 1 of the case study where over the years, selling, administrative, and informational expenses have reduced for the established unit while it has increased for the innovative division. 

Furthermore, the revenue and income are declining for the established division. For the innovative division, the company’s R&D expenses have increased, however, since Pfizer claims to have an innovative core, it is not reflecting in the financials. Amongst major competitors, Pfizer and Johnson and Johnson’s research over revenue ratios are the lowest. Johnson and Johnson had the largest revenue of over $70 billion in 2015. Bristol-Myers Squibb has the highest research-over revenue ratio along with $18.8 billion in revenues in 2015 while that of Pfizer is $49 billion. Merck & Co. had a revenue of $39.5 billion in 2015 and Novartis AG led the rest with $50.4 billion in revenues. Pfizer also has the highest working capital behind Johnsons and Johnsons. 

An analysis of the competitors shows that Johnsons and Johnsons have benefitted from a large working capital and investment in R&D because of its focus on consumer-packaged goods manufacturing. The consumer products division of Pfizer was sold to Johnsons and Johnsons in 2006. Since then, Pfizer has been focusing towards strategic acquisitions that gets Pfizer the rights to many drugs. 

At Pfizer, a sub-division of the Innovative division is Global Vaccines, Oncology, and Consumer Healthcare (VOC) businesses which shows that it is a division with a not-so-common focus. In order to get a more detailed understanding of the different business units, Pfizer should structure the company to analyze each division more effectively. Bristol-Myers Squibb also benefits the most from a wider market spread of cheaper drugs. This shows that to achieve the high profits that can in turn be invested into R&D, it is important to focus on the “established products” as well. 

3. Recommendations 

Since Mr. Read is provided with the earnings and growth rates of the aggregate of the two areas, innovative and established products, it does not provide enough information to make important investment decisions.

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