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Pfizers Business Model

Author: Mikey Chai | Editor: Nichola Monroe | Updated August 16, 2020

Background


Being one of the first pharmaceutical companies to exist, Charles Pfizer and Charlers Erhart founded Pfizer in a red brick building in Brooklyn, New York in 1849. From humble beginnings in the Civil War Era, Pfizer has now become one of the top Big Pharma companies from its production of Advil, Viagra, Xanax, and Zolox. Today, Pfizer contends in the COVID-19 vaccination race with phase three trials underway, revolutionizing the world’s medicine.


Business Model


Because of Pfizer's successes in the pharmaceutical field, their main strategies rely on consistency in developing and launching high volume drugs - an expected annual revenue per drug at 1 billion or greater. In 2012, Pfizer revamped their enterprises into two categories: Innovative Products and Established Products. The innovative products segment is further split into two sections: Global Innovative Pharma (GIP), and Global vaccines, oncology, and Consumer Healthcare Businesses.


Global Innovative Pharma


Pfizer characterizes GIP to be focused on the development, registration and commercialization of novel, value creating medicines that significantly improve patients’ lives. In other words, the GIP sector focuses on creating new, innovative medicines. This branch has launched brands such as Xeljanz, Eliquis, and Duavee, and has released a large amount of medicines in inflammation, cardiovascular metabolic, pain and rare diseases.


Global Vaccines, Oncology and Consumer Healthcare Business (VOC)


VOC is more focused on marketing medicines on a global basis. For example, products such as Advil, Centrum, RObitussin, Nexium, and ChapStick are all products of the VOC initiative in which Pfizer hoped to launch globally.


Established Products Business


This segment focuses on products that will go off patent eventually becoming generic, including major brands such as Celebrex and Zyvox.


Pricing and Growth Strategy


Pricing Strategy


Pfizer has employed the most common method in gaining revenue and profit over the past decade: raising the price of older drugs, especially the ones with nearing patent expirations. According to Forbes, about 34% of Pfizer’s revenue growth over the past three years is a result from increased prices on existing drugs. Viagra’s price increased by 57%, Lyrica by 51%, and Premarin by 41%. Although this strategy may not necessarily be beneficial in other company aspects such as PR, and the general negative connotation surrounding Big Pharma, they have gained immense profits from it.


Growth Strategy


Similar to Amazon’s growth strategy, much of Pfizer’s growth originates from acquiring smaller competing companies. In 2000, Pfizer acquired Warner-Lambert for 90 billion, along with the rights to Lipitor. In 2006, Pfizer sold Johnson & Johnson for 16.6 billion. In 2009 Pfizer acquired Coley Pharmaceutical for 164 million for their portfolio of biotech, cancer, and vaccine drugs. Pfizer’s acquisitions are one of the main reasons for their success.


Conclusion


Pfizer has and will be a staple pharmaceutical company in the years to come. Due to their multi-pronged business plan, the company continues its successes in both the business and medical field. In current affairs, Pfizer has recently paired with Bio n Tech, focusing on its COVID 19 vaccination. As of the writing of this article Pfizer is one of the top competing vaccines, with trials already at phase 3. Results for these trials are expected to be released within a few weeks time. Pfizer has proven itself to be a valid company, and many expect more to come.


Image Citations:

https://www.barrons.com/articles/pfizer-stock-is-treading-water-but-director-ronald-blaylock-made-a-big-buy-51597411572

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