In announcing its acquisition of rival Wyeth--based on the other side of the Hudson River in Madison, NJ--Pfizer on Monday also provided details of a new cost-reduction initiative. As part of the initiative, Pfizer says it will reduce its global workforce by approximately 10%, or approximately 8,000 jobs. Reductions will span sales, manufacturing, research and development and administrative organizations, Pfizer states.
The company also intends to reduce the number of manufacturing sites from the current 46 to 41, as well as reduce its facilities square footage by approximately 15%, according to a release. During a news conference Monday at Pfizer's world headquarters, 235 E. 42nd St., Pfizer officials declined to identify where plant closings would occur, and a Pfizer spokesman did not respond to GlobeSt.com's requests for further comment.
It's too early to judge what the consolidation of the two companies means in terms of office space, CresaPartners' Robert Stella tells GlobeSt.com. "They're going to have some Wyeth people here" in Midtown, says Stella, EVP and principal with the tenant-rep firm. "How many is hard to say."
He notes that in addition to its headquarters space, Pfizer has 600,000 to 700,000 square feet on the market in Manhattan, some of it as a result of its $60-billion merger with Pharmacia in 2002. "Pfizer has a lot of excess space it needs to get rid of," says Stella. "So it would make sense to bring in people from New Jersey, take some of that space off the market and have it occupied, at least in the short term." However, with the closing of the deal not expected for several months, specifics of the Pfizer/Wyeth real estate plan are "up in the air."
In conjunction with its cost-cutting program, Pfizer expects to incur costs of approximately $6 billion on a pre-tax basis, of which $1.5 billion has been incurred. The program would be essentially complete by the end of 2010, with the full savings to be realized by the end of 2011.
All told, Pfizer and Wyeth expect to achieve about $4 billion in cost savings through combining their workforces. According to published reports, Pfizer and Wyeth expect to cut about 15% of the two companies' combined worldwide employee base of 130,000 after the deal closes, which is expected to occur in the fourth quarter of 2009.
With the patent on its market-leading cholesterol drug Lipitor due to expire in late 2011, Pfizer intends to position the combined company so that no single drug accounts for more than 10% of revenue. Lipitor currently provides approximately one-quarter of Pfizer revenue.
In announcing its acquisition of Wyeth--reportedly the largest deal since the $70-billion merger of AT&T and Bell South in 2006--Pfizer also reported that its Q4 earnings had fallen from $2.72 billion in Q4 2007 to $268 million in the last three months of 2008. Much of the difference was due to a $2.3-billion settlement with the US Attorney in Massachusetts over marketing claims.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
