In a move designed to allay concerns about post-Wyeth integration challenges, Pfizer outlined on April 7 the leadership structure of the future entity.

With eight Wyeth executives joining the senior ranks of the Pfizer leadership team, the reorganization sends a clear message to employees that having an existing Pfizer business card alone will not necessarily translate into an advantage at the larger pharma.

While the April 7 announcement outlined high-level changes in both the commercial and R&D sides of the organization, much of the focus was on R&D.

In an effort to create a more flexible, nimble research outfit, Pfizer has decided to split R&D into two distinct groups: the Pharma Therapeutics Research group, headed by Martin Mackay, who currently runs Pfizer Global Research and Development, will focus on small molecule drug development; the BioTherapeutics Research Group, meanwhile, will concentrate on large molecules and vaccines with current President of Wyeth Research Mikael Dolsten at the helm.

Under Dolsten and Mackay, small focused teams of researchers led by empowered chief science officers will handle the nuts and bolts of discovery. Two newly named CSOs figured prominently in Pfizer's press release: Emilio Emini, current head of Wyeth's Vaccine Research, and Menelas Pangalos, Wyeth's Head of Discovery. In a move that was widely expected, Emini will continue to focus on vaccines, while Pangalos orchestrates Pfizer's neuroscience efforts (¹ Also see "Emilio Emini Is The Key To Wyeth Vaccines" - Pink Sheet, 9 February, 2009., p. 18).

"We feel very energized. We have built a unique model that brings pharma to the next level of R&D structures, taking the best of big pharma's scale and combining the entrepreneurship of small biotech-like units," said Dolsten in an interview on April 7.

On the commercial side, Pfizer will reorganize into nine business units, with individual business heads reporting to either Ian Reed, currently Pfizer's president of worldwide pharmaceutical operations, or Cavan Redmond, who now leads Wyeth's consumer healthcare business.

Post-merger, Reed will become group president, Pfizer biopharmaceutical businesses, while Redmond is to be group president, Pfizer diversified businesses. Both Reed and Redmond will report directly to Pfizer CEO Jeffrey Kindler.

In the case of Redmond, the appointment shows the importance of non-traditional pharmaceutical products to the reorganized Pfizer in an era when primary care blockbusters, to which Pfizer owes much of its current success, are rare (² Also see "Wyeth Nutritionals: Pfizer’s New MVP, Or Benchwarmer?" - Pink Sheet, 11 February, 2009.).

As in R&D, the changes in the commercial structure mirror previous Pfizer restructurings, with an emphasis on autonomy and ease in decision-making (³ [A#00700400013], p. 20).

Moreover the new structure preserves the primary care, emerging markets, oncology, and established products divisions, but broadens the specialty care group to also include vaccines, with Wyeth exec Geno Germano taking control of that specific business unit. Germano and the heads of the other biopharma business units will report to Reed.

Not Just Another Mega-Merger?

The elevations of Germano, Redmond, Emini, and other Wyeth execs reinforce the efforts Pfizer is taking to create a structure that takes full advantage of the knowledge contained in Wyeth. In a joint interview with Dolsten and IN VIVO Blog editors, Mackay took pains to note how important great people are to the Pfizer of the future. The recruitment of such experts so early on "is a sure fire sign that we are going to have just marvelous talent in this organization," he said.

[Editor's Note: To listen to Mackay and Dolsten's wide-ranging interview with IN VIVO editors, click on the podcast link at the ⁴ IN VIVO Blog .]

One outside observer noted that the four-page press release indicates considerable time and effort had been spent assessing which individuals were best positioned to be leaders in the combined company regardless of whether they came from Pfizer or Wyeth. Emini, for instance "is the vaccines guy." To appoint anyone else to that position "would have been stupidity," he said.

As such, the carefully orchestrated release seems designed to show that this $62 billion acquisition, expected to close in the third quarter of 2009, will be different from Pfizer's previous mega-mergers: the New York-based pharma's buy-out of Warner Lambert in 2000 and its purchase of Pharmacia in 2003.

The Pharmacia take-out proved particularly troublesome for Pfizer, and investors ultimately viewed it as a barrier to growth. Indeed, over the last two years, Pfizer has implemented cost-cutting initiatives to trim much of the scale the firm acquired through its acquisition of Pharmacia (⁵ [A#00690060013], p. 18).

When Pfizer and Wyeth announced their intended marriage in late January, they made a point of emphasizing the potential $4 billion in savings the deal could provide, as the entity trimmed up to 15 percent of the combined workforce and reduced costs associated with selling, information, and administrative functions (⁶ Also see "A Goliath Grows: Pfizer Buys Wyeth For $68 Billion" - Pink Sheet, 26 January, 2009.).

Still investors were less than excited given the potential red tape and bureaucracy almost certain to accompany the mammoth company, sending Pfizer's share price down 10 percent to $15.65 on the day of the merger announcement. Since late January, Pfizer's stock price has slid even further, closing on April 7 at $13.60.

Wholesale Changes In R&D

Both Dolsten and Mackay have weathered the upheaval that can come with a mega-merger. Thus, both were determined to create a working framework for the combined organization early on.

"We wanted to prepare ourselves so that once the deal is closed we can move very fast to put the final details in place," said Dolsten. Mackay agreed, noting that previous mergers with Pharmacia and Warner-Lambert had taught him three key lessons: the need to be decisive about the structure, the importance of speedy implementation on the close of deal, and the value of maintaining productivity at all costs.

The ultimate goal, Dolsten said, is "to make this the most extraordinary big pharma combination in modern times."

That's a big goal and both Dolsten and Mackay believe they've hit upon the right structure to make it happen. Post-merger, Pfizer's R&D group will be a matrix-like organization, loosely grouped around small and large molecules.

Skeptics might argue that the structure outlined April 7 does little more than bolt on valuable Wyeth programs including expertise in biologics and vaccines into a separate division that operates independently of Pfizer's entrenched programs.

Acknowledging the potential difficulties of managing a two-division structure, Mackay said the key to success will come down to "human things, such as do we have an aligned philosophy?" Dolsten seems fully on-board, promising the new Pfizer will not devolve into two silos. "We will collaborate across divisions," he said.

Critical to that collaboration will be the small teams of 80 to 200 researchers powered by CSOs such as Emini and Pangalos.

Although these CSOs will report to either Mackay or Dolsten, they will pursue both large and small molecule approaches to their respective therapeutic areas of interest. In addition, there will also be small research groups organized around specific technologies such as expertise in RNA interference or next-generation antibody capabilities.

Mackay, Dolsten, CSOs Will Map Three-Year Plan

The end result, says Mackay: CSOs acting as "highly empowered disease experts" with their own budgets related to internal and external projects. As a result, Dolsten predicted "a force around certain biological pathways resulting in even more opportunities for cross-fertilization" between the two R&D units.

Once the merger has closed, Pangalos, Emini and the other CSOs will meet with Mackay and Dolsten to map out a three-year strategic plan focused on developing molecules to proof-of-concept that can be delivered to Pfizer's business units.

If this federation style of research groups sounds familiar, it is. It loosely replicates the structure Corey Goodman put in place when he took the helm of Pfizer's San Francisco-based R&D group, the Biotherapeutic and Bioinnovation Center, in October 2007 (⁷ Also see "Pfizer Unveils New San Francisco-Based Biotech Center, R&D Leaders" - Pink Sheet, 4 October, 2007.).

Continuing Commitment To Bioinnovation Center

Curiously, the press release announcing the changes to Pfizer did not delineate the BBC's role in the new organization except to note that it will be part of the new, larger BioTherapeutics Research Group.

Dolsten confirmed "there is a strong commitment to the BBC" with this latest reorganization. "They are now part of a bigger family with additional expertise in protein, peptide, and vaccine technologies. We want to promote and strengthen a great concept - the BBC unit," he said.

Under the old structure, Goodman and the BBC had a high degree of visibility, helped by the fact that Goodman reported directly to Kindler. Dolsten declined to discuss Goodman's evolving role in the interview, noting that the April 7 announcement focused "only on the executive leadership team and the operating model." However, Dolsten did emphasize Goodman will continue to be a critical player at Pfizer and was one of the principal architects of this new structure.

In many ways, the structure outlined April 7 also recalls GlaxoSmithKline's efforts to manage its size with its Centres for Excellence in Drug Discovery. In an admission that even the CEDDs were unwieldy, GSK further reorganized in July 2008 to create smaller drug performance units (⁸ Also see "GSK’s Witty Looks To Biotech Model In R&D Retool; Mini Labs Will Bid For Project Funding" - Pink Sheet, 23 July, 2008.).

Dolsten acknowledged the apparent similarities between the two models, but emphasized the numerous differences, especially the ability to empower Pfizer's individual units to take responsibility for all stages of early drug discovery from target identification to proof-of-concept.

Moreover, while the DPUs seem to compete for funding from internal sources, Dolsten emphasized "the collaborative spirit" at the new Pfizer. "Each unit has its own expertise and responsibilities and a unique role within the organization. Cross competition would be harmful," he said.

- Ellen Foster Licking (e.licking@elsevier.com)

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