October 18, 2007

Pfizer to cease making Exubera in Terre Haute

600 employees at Terre Haute plant now on paid leave

By Howard Greninger

TERRE HAUTE — Low sales of Pfizer’s Exubera resulted in the company ceasing production of the inhaled insulin Thursday at its Vigo County plant, south of Terre Haute.

Pfizer employs 750 workers locally, of whom 600 work at the Exubera production center. Those workers, of which 400 were hired since March 2006, are now on paid leave until the company weighs its options on the production plant, said Pfizer spokesman Rick Chambers.

An additional 150 workers will continue to work at the Vigo County plant to produce two antibiotics.

Pfizer has invested $300 million in the Vigo County facility for Exubera, Chambers said. Pfizer said its third-quarter profit dropped because of a $2.8 billion charge to end its investment in Exubera.

“It is an example of the risks that a company takes when developing an innovative product. Sometimes the product succeeds, but sometimes despite the best efforts of everyone involved, they don’t,” Chambers said.

Frank D’Amelio, chief financial officer for Pfizer, said during a Thursday teleconference/Webcast that “our Exubera revenue to date has been disappointing.”

Worldwide revenues for Exubera were $7 million in the third quarter of this year and $12 million year-to-date. The writeoff of assets includes about $1.1 billion of intangible assets from the acquisition of the rights to Exubera from Nektar Therapeutics, $661 million of inventory, $454 million of fixed assets and $584 million of other exit costs, D’Amelio said.

The company will continue to provide Exubera to doctors for the next three months.

D’Amelio said Pfizer posted third-quarter 2007 revenues of $11.9 billion, a 2 percent decline from the third quarter of last year at $12.2 billion.

Jeffrey Kindler, Pfizer chairman and CEO, said Pfizer’s decision to halt Exubera “reflects our strict adherence to three fundamental principles which will continue to guide going forward.

“We will be realistic, we will listen to our customers and we will be very disciplined in how we evaluate both internal and external investments so that we can put our capital to work in support of our best opportunities to create shareholder value,” Kindler said in the teleconference/Webcast.

“Despite the best efforts of our sales, marketing and manufacturing colleagues, the product has simply not gained the acceptance of patients and physicians,” Kindler said. “We will redeploy those colleagues in sales, marketing, medical and research and development … to activities that are projected to generate higher returns.”

Kindler said there are “fewer opportunities for redeployment in manufacturing and we will explore alternatives for sites and employees in consultation with work councils and other appropriate bodies. We will, of course, carefully evaluate what happened here in order to ensure that we apply all the lessons learned to future product development and marketing.”

Workers stunned

Pfizer is among the largest taxpayers in Vigo County. The company’s assessed value in 2005 represented 1.8 percent of the county’s net assessed valuation. After inventory taxes were removed under state law, the company’s assessed valuation dropped from more than $33 million to more than $17.8 million this year, said Vigo County Auditor Jim Bramble.

Pfizer this year will pay $334,007 in county taxes, Bramble said.

Pfizer’s remaining 150 workers will continue to make the antibiotics Cefobid and Unasyn, Chambers said.

Employees in jobs related to the production of Exubera have been working two shifts at the Terre Haute plant— from 6 a.m. to 6 p.m., and 6 p.m. to 6 a.m. Rumors have been abounding for weeks about their job security because of slow sales of the insulin inhaler; still, those who showed up for the 6 a.m. start on Thursday were stunned at news of the production stoppage.

“We went in thinking it was a normal day,” said an employee who asked not to be named, before the employee and others were told about 7 a.m. to read an in-house e-mail by Kindler, which said Exubera was not meeting company expectations.

At 8:45 a.m., day-shift Exubera employees, estimated at a few hundred, met with plant manager Frank Foley. Foley himself seemed surprised and spoke apologetically to the workers, telling them the ceasing of operations was not their fault and reminding them they are still company employees. He dismissed them all from work until further notice, but told them they would be paid for their scheduled shifts indefinitely.

Employees were told to give their contact information to their supervisors before they left the plant, and were given a toll-free number to call on Monday for any updates on their job status.

“We’re hoping they’ll bring in another product that will keep us here,” the employee said, otherwise, that employee and many others will be looking for jobs.

Product fails

to gain acceptance

Ian Read, president of worldwide pharmaceutical operations for Pfizer, said in the teleconference/Web cast, that Exubera failed to gain acceptance among patients and physicians.

“When you look at the marketplace, there are two barriers, I think. We clearly underestimated the barrier to moving patients within the physician community earlier to Exubera. This is one of the major issues we underestimated, the resistance from physicians and patients to going onto insulin in any form earlier than they had been to date,” Read said.

“The second one is, per se, the burden that the Exubera technology represented to the practice … ,” he said.

The attraction was that Exubera would appeal to patients afraid to inject themselves several times a day. However, diabetes test needles are now thin, making pain minimal. Exubera is more cumbersome, requiring an inhaler that when unfolded is about the size of a tennis ball.

Plus it carries the risk of lung problems.

“We faced the combination of breaking through the barrier of conventional insulin therapy and the burden of the product on the medical practices, and this innovation was not accepted,” Pfizer spokeswoman Vanessa Aristide said to BusinessWeek.

Insurance companies also failed to respond, looking at the cost, which was at least 30 percent higher, causing patients to pay higher co-pays than for injected insulin.

Other Pfizer-produced drugs have been seeing a drop in sales because of increasing competition from generics. Sales of the antidepressant Zoloft fell 73 percent to $124 million and sales of Norvasc, a blood pressure drug, fell 47 percent to $640 million. Also, sales of the cholesterol drug Lipitor dipped 5 percent, to $3.17 billion, according to Pfizer’s third-quarter report released Thursday.

Pfizer, to counter that drop in sales, has been cutting jobs and closing facilities. Earlier this year, Pfizer said it would eliminate 10,000 jobs.

Since 2000, Pfizer has gone through two major acquisitions — acquiring Warner-Lambert for $90 billion in 2000 and Pharmacia for $60 billion in 2002.

Since those acquisitions, Pfizer has reduced the number of its worldwide manufacturing plants from 93 in 2002 to 48 in 2007, Chambers said.

Still, Pfizer “is on track this year to achieve roughly the same revenues as last year and better adjusted income than last year,” Kindler said. That growth is from cost-saving measures, plus sales from products such as Lyrica, which grew 37 percent to $465 million in the third quarter of 2007 compared with the same time last year.

Lyrica was approved in the United States in June for management of the chronic pain condition fibromyalgia. Also, sales of Celebrex, used to treat arthritis, rose 8 percent to $577 million in the third quarter of 2007, compared with the third quarter of 2006.



Howard Greninger can be reached at (812) 231-4204 or howard.greninger@tribstar.com.

By the Numbers

• 750 — employees, Terre Haute plant

• 600 — employees in Exubera production, Terre Haute plant

• $300 million — company investment in Terre Haute plant

• $334,007 — company will pay Vigo County in taxes, 2007

• $440,000 — company contributed to United Way in 2006 (21 percent of United Way’s total campaign)

• 93 — plants worldwide in 2002

• 48 — plants worldwide in 2007

• $12.2 billion — total company third-quarter revenue, 2006

• $11.9 billion — total company third-quarter revenue, 2007