Pfizer is going to fire 2,000 salesmen, 20% of its domestic sales force. Lehman Bros estimated that the move could save $440 million a year.
The company’s reasoning would appear to be that as more of its drugs go “off patent” and generic competition for these drugs is allowed into the market, the revenue yield to the company will drop.
Pfizer’s annual revenue is about $50 billion. Its operating income last year was about $14 billion. Although the stock is down from about $38 in early 2004, at $27 it is very near its 52-week high.
As the market gets tougher, it is not unfair to assume that having a larger number of sales people in the market to keep share would make sense.
Since Pfizer is not electing to do that, the move may signal that its problem with generics and it new drug pipeline issues are worse than the markets think.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about
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