REDUCING OUR ADJUSTED TOTAL COSTS(1) We completed the cost-reduction program we announced in 2006 by exceeding our cost-reduction target. By the end of 2008, we decreased our adjusted total costs(1) by $2.8 billion, when compared with 2006 costs, on a constant currency basis. We remain absolutely committed to streamlining our business further and creating a cost structure that gives us the most flexibility during these uncertain times.
ACHIEVING OUR ADJUSTED DILUTED EARNINGS PER SHARE(2) TARGET We were at the high end of our 2008 guidance range, delivering $2.42 in adjusted diluted earnings per share(2), an improvement of 11 percent over 2007.
IMPROVING R&D PRODUCTIVITY We are on track to achieve the R&D objectives we shared with you in March 2008. These are:
- 15 to 20 Phase III starts in 2008—2009.
- 24 to 28 new molecular entities or new indications in the Phase III pipeline by the end of 2009.
- 15 to 20 regulatory submissions from 2010 to 2012.
Our Phase III pipeline is the largest in our history and includes 12 programs focused on the high-priority disease areas of diabetes, oncology, inflammation/immunology, Alzheimer’s disease, psychosis and pain. You can learn much more about Pfizer’s current pipeline of new compounds and indications by visiting www.pfizer.com.
I know it’s difficult to talk about keeping our commitments in operating performance when Pfizer’s share price hit a 10-year low in the first quarter of 2009. The fact that nearly all public companies faced a crushing loss of investor confidence is of little comfort to the millions of people who hold Pfizer shares. No one in Pfizer is satisfied with the company's share price. We recognize that to build shareholder value, we have to continue to keep our commitments year after year. Operational success will, over time, drive up the value of the company.
While it is not reflected yet in the share price, Pfizer is very solid financially and will be exceptionally well positioned in the global health care marketplace. We manage our cash conservatively and have moved strongly to deal with serious problems that threaten our growth. Meeting our commitments in such a tough environment is testimony to the more than 80,000 Pfizer colleagues who serve patients and many other customers in every important health care market around the world. They performed superbly, not only in making sure that we kept our 2008 commitments, but also in embracing the reality that we must lead the change in our industry and not just follow it.
Becoming More Entrepreneurial—and Accountable
In late 2006, when I became CEO, I said that one of Pfizer’s biggest immediate challenges was to simplify an organization that had grown too complex and cumbersome. One colleague, in an e-mail to me, put it best: "Get the bureaucracy out of our way. Give us the tools to do our work and the authority to make decisions. Then hold us accountable for the decisions we make."
Making Pfizer work better meant changing both the culture and the structure of our organization. In 2008 we took a dramatic step to reshape Pfizer into a more flexible, entrepreneurial and, yes, accountable organization. We completely reorganized our global market-leading Pharmaceutical segment into customer-focused business units devoted to Primary Care, Specialty Care, Oncology, Emerging Markets and Established Products.
We then took this concept an extra step, putting the late-stage development of new compounds under the control of each business unit leader. This means there is one person accountable for the life cycle of a new medicine, from after proof-of-concept until the time Pfizer loses market exclusivity for that medicine. Even after the loss-of-exclusivity, the Established Products unit can gain additional value from that medicine in a number of important markets around the world.
Our new approach enables us to move forward with the entrepreneurial zeal inherent in small businesses, backed by the scope and strength of a global enterprise. This review will give you more details on our new organization, including the key offerings and strategic approach of each business unit within our Pharmaceutical segment, as well as the operations of our Animal Health segment, which is also a leader in its market.
Accelerating Innovation
In this review last year, we reported on our drive to open a second front in the search for new cures and vaccines. We organized the Biotherapeutics and Bioinnovation Center, which is both independent of, and interdependent with, Pfizer Global Research & Development. Just over a year into that transformation, we are excited about the progress made by both research groups, their ability to collaborate as alliances are formed with other research organizations, and their potential to "supercharge" our pipeline with medicines and vaccines that address some of the world's most pressing medical needs.
In 2008 we completed a plan that largely brings all of the discovery scientists working on a specific therapeutic area under one roof. This sounds counterintuitive in the age of the Internet, but we believe that personal interaction is what energizes scientific inquiry. We've focused our discovery efforts more intently on areas where the world desperately needs new treatments—Alzheimer's disease, cancer, infections and inflammation, to name some of the prominent therapeutic areas where we are making good progress. We also created a Target Generation Unit that will use advances in human genetics and systems biology to overcome one of the biggest hurdles in biopharmaceutical research—the attrition of compounds at each stage of the clinical process.
Investing in truly cutting-edge science, in 2008 we launched Pfizer Regenerative Medicines to build on the growing understanding of how stem cells work. Pfizer is the first biopharmaceutical company to have a unit dedicated to stem cell therapeutics, one of the most exciting disciplines in bioscience.
We believe that the great work of scientists at Pfizer can be multiplied through collaborations with experts outside our company. In 2008 we saw continued progress in striking a variety of new research and development alliances. We entered into an agreement with Medivation to develop a compound, Dimebon, for treating Alzheimer's disease and Huntington's disease. We created a partnership with Entelos, a physiological modeling company, and with academic researchers, on a three-year project to better understand diabetes and other endocrine disorders. We also added to our key research partnerships with outstanding academic institutions, among them the University of Pennsylvania, the University of California, San Francisco, Washington University in St. Louis and the Broad Institute of MIT and Harvard University.
