January 16, 2007
Exigencies
Two articles in the Wall Street Journal today combine to give me a sinking feeling.
The good news is an H-P breakthrough, using nanotechnology to build faster computers. I do like faster computers.
The bad news concerns Pfizer's reorganization and cost containment strategies expected from its new CEO.
As new Pfizer Inc. chief Jeffrey B. Kindler prepares to give the first details on his strategic vision for the company, his plan is likely to involve shedding more jobs and rethinking the way the drug giant develops, makes and markets medicines.Employees at the world's largest drug maker are bracing for deep cutbacks when Mr. Kindler presents analysts with some specifics on his plan to overhaul Pfizer on Monday, say people close to the situation. The job cuts could involve several thousand positions, these people say, including some in the European sales force. Mr. Kindler recently reshuffled some senior managers for the second time since taking the top job in July.
[...]
"I'd most like to see new drugs, but if he's able to revive the pipeline and R&D productivity, it'll take years. I'm sure he'll talk about it, but it's not much more than a promise," said Michael Krensavage, an analyst at Raymond James. "He's handcuffed to cutting costs. It'll be very difficult to change the direction of the iceberg with one meeting."
I don't think this is a Schumpeterian reorg, this is recognizing the exigencies of trying to develop innovative cures in an industry that will be more regulated.
H-P can raise capital and spend it on R&D in a free market, realizing that it might recoup those expenses many times over should it bring a valuable product to market. Of course, both H-P and Pfizer could lay a billion dollar egg, that's the marketplace.
But even if Pfizer develops something the public wants, its profit will be proportional to what Senator Schumer and Rep Franks think is fair compensation. Not surprisingly, investors are not lining up for that. The 110th Congress has not had a bill signed into law, but they have already changed the face of an important industry.
That's okay guys, I'm not sick or anything...