Pfizer's latest corporate restructuring represents a shift away from its recent alignment of research & development and commercialization operations.

Under an ¹ organizational restructuring announced Aug. 15, Pfizer's R&D, regulatory and commercial operations are separated into three distinct entities. The units were previously components of the now defunct Human Health division, which was overseen by departing vice chairman Karen Katen.

In a ² memo detailing the restructuring, newly appointed Pfizer CEO Jeffrey Kindler indicates that he believes Pfizer no longer needs a fully integrated pharmaceutical business unit.

"The creation of Pfizer Human Health marked the establishment of a single, end-to-end pharmaceuticals business spanning the entire lifecycle of a product. It was an important and valuable step forward in focusing the company's strategy and resources on the priorities of our core business," the memo states.

"But," he continues, "there's no question that the world around us is changing rapidly....Our new organizational structure builds on the strength of our company while responding to the accelerating changes in the environment in which we operate."

Under the restructuring, a seven-person "Executive Leadership Team" replaces the three-person corporate executive committee - which included Kindler, Katen and Vice Chairman David Shedlarz - that was created by former CEO Hank McKinnell in 2005 (³ Also see "Pfizer Streamlines Upper Management; Katen Positioned As Heir Apparent" - Pink Sheet, 28 February, 2005., p. 20).

Under the former structure, Chief Medical Officer Joe Feczko, Pfizer Global Research & Development President John LaMattina and regional commercial operations heads reported to Katen. Now, Feczko, LaMattina and Ian Read, who will oversee the firm's global commercial operations, will report directly to Kindler.

Under McKinnell's leadership, Pfizer had been working to more closely align R&D, regulatory, sales, medical, marketing and manufacturing operations by therapeutic area in order to produce more "value" for customers, particularly payers (⁴ Also see "Welcome To Medicare: Pfizer Sees Part D As Key To Rebirth" - Pink Sheet, 9 January, 2006., p. 3).

Pfizer maintains the new reorganization is in line with the therapeutic area strategy and Kindler's memo says the firm will be "guided by the therapeutic area strategies."

However, in discussing the therapeutic area strategy, Kindler focuses on its implications for the firm's research efforts and does not discuss its relationship to the firm's commercialization activities.

With the apparent move away from tying together R&D and commercialization operations, Pfizer may be going against an industry trend, although returning to an older model.

For example, in January, Amgen highlighted its efforts enhance integration between R&D and its commercial units during an analyst meeting (⁵ Also see "Amgen Sizes Up Strategy: Small-Scale Acquisitions, Large-Scale R&D" - Pink Sheet, 30 January, 2006., p. 8).

The dissolution of the Human Health division is one component of Kindler's "One Pfizer" strategy to eliminate "unnecessary layers and speed decision-making."

Within days of assuming the post, Kindler pointed to eliminating bureaucracy as a key priority in his goal to bring "fundamental and sustained" change to the company (⁶ Also see "Pfizer Set For “Fundamental And Sustained” Change Under New CEO Kindler" - Pink Sheet, 7 August, 2006., p. 3).

"We need an integrated, leaner structure in which line management, functional experts, and a few centers of excellence work in close collaboration to advance our business objective," Kindler's Aug. 15 memo explains.

"Consistent with our objective of operations as 'One Pfizer,' we will be bringing together the previously separate divisional and corporate organizations in finance, human resources, information technology and others as appropriate."

"While the specific reporting relationships within these enabling functions are not yet finalized, colleagues in these areas will have clear accountabilities both to the line leaders they support as well as to their functional leaders," he explains.

Kindler, who previously served as vice chairman and general counsel, announced the reorganization just 15 days after ascending to the chief executive post.

By comparison, Merck CEO Richard Clarke waited until roughly seven months after his appointment to announce his restructuring plan (⁷ Also see "Merck Takes Cost-Cutting Therapy, But What Will The Side Effects Be?" - Pink Sheet, 5 December, 2005., p. 3).

In acting swiftly, Kindler may have been attempting to quell any disharmony within the organization accompanying his appointment; since the 2005 restructuring, Katen, Kindler and Shedlarz had been involved in a contentious succession race.

Following Kindler's appointment, there was broad speculation about Katen's and Shedlarz' future with the company after being passed over. Katen has decided to leave the company, while Shedlarz will be Kindler's second in command.

"To his new role as my principal deputy, David brings strategic insight, years of experience in our industry and many important accomplishments achieved during his distinguished career at Pfizer," Kindler says.

Under the new structure, Shedlarz' responsibilities have been expanded to include oversight of the firm's manufacturing operations, worldwide strategic planning, licensing and business development and technology. Chief Financial Officer Alan Levin will also report to Shedlarz.

Shedlarz' history of financial leadership may allow him to fill some of the potential gaps in Kindler's experience (⁸ [A#00680320002], p. 5).

"He is well known in the investment community, where he has been instrumental in building Pfizer's reputation for financial transparency and excellence in reporting," Kindler's memo notes.

Although investors have previously lacked confidence in Pfizer's management, Shedlarz has cultivated relationships with investors since joining the company in 1976 (⁹ Also see "Pfizer’s Product Parachute? Firm Could See Rally Around New Approvals" - Pink Sheet, 30 January, 2006., p. 27).

Shedlarz' reports include the newly created - but as yet unfilled - positions of worldwide strategic planning, worldwide licensing and business development and worldwide technology. Animal health, business services, worldwide investor development and internal audit fall under Shedlarz' authority as well.

Kindler begins his memo by announcing Katen's departure and thanking her for her contributions to the company. Katen was widely thought to be the frontrunner to succeed McKinnell.

"Karen has reflected on both her professional and personal goals, and she will be leaving the company to pursue other opportunities," the memo says.

"At my request, however, Karen has graciously agreed to put her personal plans on hold until early next year so that she can provide advice and leadership to Pfizer and to me over the next several months in several important areas."

Katen will become Chairman of the Pfizer Foundation and will continue to act as Pfizer's representative to the Pharmaceutical Research & Manufacturers of America, as well as representing the company on the U.S.-Japan Business Council and the Healthcare Leadership Council, until her departure.

The memo also notes that Senior VP-Science and Technology Peter Corr, who reported to Katen, will be retiring from the company.

Katen's responsibilities appear to be divided up between Feczko, LaMattina, Read and Shedlarz.

Read, who previously served as area president for Europe, Canada, Africa/Middle East and Latin America, will head the new Worldwide Pharmaceutical Operations unit, which includes country management and sales and marketing.

Former Senior VP-Global Pharmaceutical Finance Peter Brandt, who has been a prominent member of Pfizer's management in recent years, has assumed leadership of U.S. Pharmaceutical Operations, reporting to Read.

In addition to Feczko, LaMattina, Shedlarz and Read, the seven member leadership team includes public affairs and policy head Rich Bagger, human resources head Sylvia Montero and former Associate General Counsel Allen Waxman, who is replacing Kindler as general counsel.

Worldwide Talent Development and Human Resources has been consolidated under the leadership of Montero, who will "be responsible for the overall strategy and development of company-wide Human Resources policies, plans and practices," according to Kindler.

Bagger will head the company's Worldwide Public Affairs and Policy, previously Corporate Affairs. Among Bagger's reports are Worldwide Communications head Loretta Ucelli and Government Relations VP Anthony Principi.

“One Pfizer” Restructuring Initiative Divides R&amp;D And Sales Operations

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“One Pfizer” Restructuring Initiative Divides R&D And Sales Operations