NEW YORK - Pfizer, the world's biggest pharmaceutical company, announced a major reorganization aimed at cutting billions in costs and boosting profitability.
The program calls for Pfizer to "sustain long-term growth through investments in innovative current and new medicines from its strong R and D (research and development) pipeline, while enhancing effectiveness and reducing operating costs," the firm said in a statement.
The major of blockbuster drugs like cholesterol-lowering Lipitor and erectile dysfunction treatment Viagra said the effort would hurt profits in the short term, requiring spending of between five billion and six billion dollars by 2008.
Hank McKinnell, Pfizer's chairman and chief executive officer, said that although Pfizer has a strong position in the industry, 2005 will be a transition year" because of the expiration of key drug patents and a murky outlook on the class of painkillers including Celebrex.
The company's net profit for 2005 is likely to fall to 8.6 billion dollars from 11.4 billion last year, the group said.
"We expect our performance to rebound quickly in 2006 and accelerate in 2007 as we increasingly realize the benefits of the continued growth of major in-line products, new product launches and productivity initiatives," McKinnell added.
Pfizer plans to invest some eight billion dollars in research in 2005, compared with 7.7 billion in 2004.
The overall cost-cutting plan, the outline of which was announced earlier this year, is aimed as saving four billion dollars in annualized cost savings by 2008, or about 12 percent of Pfizer's current cost base.
Pfizer also said it would take advantage of a special law that provides a lower tax rate for repatriated profits, by bring back more than 28 billion dollars in foreign cash in 2005. It will set aside 2.2 billion dollars for taxes on this sum.
"Pfizer has the financial strength to meet the challenges of the 2005-2007 period," vice chairman David Shedlarz said.
"Pfizer's strong cash flow will provide us with flexibility in leveraging the company's financial strength. For example, we will intensify our efforts to acquire new products and technologies to further strengthen our new product pipeline."
Pfizer shares rallied 80 cents or 3.08 percent to 26.73 in late morning trade.

04/05/2005 15:28 GMT