Pfizer Launches Plan to Save $4 Billion a Year

Faced with looming generic competition on many of its key products, as well as continuing uncertainty over its arthritis pain drugs, Pfizer has initiated a plan to trim annual costs by $4 billion within three years through such measures as plant closings, administrative cutbacks and sales force streamlining.

The annual cost savings of $4 billion by 2008 represents a 12 percent reduction in Pfizer's current cost base, company executives said during a presentation to analysts. Implementing the plan will cost Pfizer between $5 billion and $6 billion through 2008, the company said.

The financial impact of the cost-savings initiative will be modest in 2005 -- a year Pfizer describes as a "transition year" that will see flat revenues at the firm. Pfizer, however, expects double-digit earnings growth returning in 2006. The savings are expected to yield significant benefits in 2006 and 2007, Pfizer said. Savings will come from a number of areas, noted Hank McKinnell, Pfizer's chairman and CEO. These include streamlining procurement processes, eliminating duplication throughout the firm, improving and standardizing operations systemwide, and closing several manufacturing facilities.