If Pfizer's acquisition of Wyeth is more than a merely stop-gap attempt to bridge the genericization of Lipitor -- and plenty of observers believe it is -- then it is in addition a tacit admission that its future will be patterned more on the value-based strategies of McDonalds and GE than the research-based Big Pharma model. The deal is the first step in creating a commercial organization which can cheaply add and sell a wide range of new products, with a range of margins. The moderate revenue growth provided by new products and new markets, thanks to dramatically slower growth in operating costs, will deliver what could be double-digit bottom line growth -- and do so with the kind of predictability of a large industrial business. Critical to the strategy: bolt-on acquisitions and licensing deals, allowing Pfizer to layer new products into existing infrastructure, keeping the growth of cost-of-goods and SG&A expenses as flat as possible. Gone will be the big growth spikes from major new products. But absent too will be the sharp drops that follow patent expirations. Pfizer, in short, is readying itself for industrial health care.
By Roger Longman
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