Catching up with PGM Senior VP Tony Maddaluna after Pfizer's restructuring plans were revealed
In our March 2010 issue, I spoke with Anthony J. Maddaluna, Strategy and Supply Network Transformation for Pfizer Global Manufacturing (PGM), about the company's changing philosophies toward mega-mergers and the impending announcement about Pfizer’s post-Wyeth manufacturing network. Pfizer revealed its plans for closings and consolidations two months later, so Tony and I caught up to discuss some of the ramifications of the new strategy, as well as the potential fallout of Pfizer’s recent recall of licensed products made by Claris Lifesciences. —GYR
Contract Pharma: Now that your post-Wyeth restructuring plan has been announced, how would you characterize the new shape of PGM’s manufacturing network?
Tony Maddaluna: With the addition of the supply capabilities from Wyeth and the need to serve a more diverse internal customer base, PGM is moving more rapidly to a globally competitive supply network with a mix of internal and external manufacturing. We are striving to be a fast, flexible and innovative supply organization that is network driven and commercially focused. We have refocused our Vision — which has guided and driven our past success — to our changing business needs. We’ve implemented a detailed balanced scorecard approach that is totally aligned with our Vision and is designed to both measure our performance and ensure that we maintain our excellent track record of best cost, quality and supply reliability. We’re also transforming our Global Logistics and Supply organization to more closely align with the needs of our customers and to ensure we are achieving the best value in each area of our business. The concept is to foster a high degree of mutual accountability to achieve our mission to be a competitive advantage for Pfizer.
CP: In the announcement about the manufacturing restructuring, it was referred to as the “first phase” of the post-Wyeth overhaul. Is there a second wave coming for the manufacturing network?
TM: Not in pharma -- that said, it’s an ongoing process and as in-depth studies of other manufacturing areas are completed additional recommendations will follow. In the very near term, for example, we expect to roll out our Animal Health Network. [Editor’s Note: Pfizer announced its reconfigured Animal Health Network on June 21.]
Future studies include the Nutrition and Emerging Products networks.
CP: So “first phase” doesn’t refer to a followup phase in global pharma manufacturing?
TM: It refers to the continually evolving process of the overall Network Transformation, and the significant milestones achieved thus far.
CP: And is Consumer Health part of the first phase, or will that be treated separately?
TM: The network reconfiguration around Consumer Health-care products was included in the pharma announcementin May.
CP: As part of PGM’s restructuring, you’re closing several biopharma sites. The Wyeth acquisition was driven partly by the desire for its bio-infrastructure, so why rationalize that part of the network? Are those closings due to excess capacity, obsolete technologies, or other factors?
TM: Our vision — to be a globally competitive make or buy supply network — informs and guides our overall plant network strategy and the bio infrastructure is shaped to that vision. We remain competitive by looking for opportunities to optimize the network and capture cost savings, by, for example, simplifying manufacturing processes and consolidating the supply chain around multi-step/multi-site vaccines. Staying ahead of the technological curve is key. In addition to anticipating the improvements and efficiencies and the types of capacities we’re going to need down the road as new products are approved, we have to streamline the network to enable an agile response to changing business conditions.
As senior vice president, Strategy and Supply Network Transformation for Pfizer Global Manufacturing (PGM), a division of Pfizer Inc, Tony Maddaluna has overall responsibility for PGM’s supply network transformation strategy. Under Tony’s leadership, PGM will focus on plant network strategy, capturing global advantage, agile/lean operations, business process redesign, technology and innovation, and other enterprise-wide initiatives.
CP: What assessments have you made about outsourcing commercial manufacturing as part of the “selection” process?
TM: In my view, being totally open to all possibilities is necessary in order see what is missing. Then and only then it is possible to understand the needs and guiding principles going forward. Our current view is that the mix of internal and external manufacturing needs to be flexible in relation to the current business conditions. Our internal manufacturing needs are driven by the changing dynamics of three primary factors: supporting speed-to-market of new product launches, collaborating with R&D to co-develop manufacturing processes and get them right the first time, and sustaining and advancing the technological areas where we have a distinct competitive advantage. This triad must be continually explored and adjusted as needed in relation to our customers’ changing needs. For most products — assuming that the technical capabilities, quality and supply reliability aspects are met — we view external manufacturing as a normal part of our sourcing process.
CP: Are there any advanced talks on selling any of these facilities to existing CMOs or to management buyouts?
TM: We started working on the site exit process once all of the recommendations were endorsed. This includes an extensive review of each site to understand the value proposition that can be offered. Our desire is to exit as many sites as possible through sale with a high level of job retention, but we also need to balance this with our savings commitments. We have a well-established process for doing this that has been very successful in the past. The buyers certainly include CMOs and discussions have been initiated where appropriate, but it is too soon to comment on any specific discussion.
CP: So no announcements for us?
TM: We’ve had several multi-day meetings, going over every facility, and our process is to ask, “Is there a value proposition at the facilities that we’re exiting that makes them marketable?” We have a process for how to look at those value propositions, and how to get the information out to the right people. It depends on what the asset is.
CP: What portion of Pfizer’s Wyeth-integration cost-savings will come from the manufacturing restructuring, once the dust settles?
TM: PGM has significant financial targets to meet as part of the integration and we anticipate that approximately 1/3 of our savings will result from the restructuring of PGM.
CP: Of the 19,000 (or thereabouts) workforce reduction that Pfizer mentioned when it acquired Wyeth, how many are coming from manufacturing? I believe the statement announcing the Plant Network Strategy mentioned the restructuring leading to a reduction of around 6,000 jobs globally.
TM: We made an overall commitment to Pfizer in terms of synergy and we plan to deliver on that commitment.
CP: Have you changed the estimate on what percentage of total commercial manufacturing will be outsourced to CMOs?
TM: When we last spoke, the estimate was to move to 30% outsourcing on a cost of goods basis from around 24% currently. This, however, is on a larger cost base with the combined companies (about 2X) so the absolute amount of outsourcing will be greater.
CP: I know it’s all part of “external,” but can you give us a breakdown of that figure in terms of “true outsourcing” — that is, working with a CMO vs. Pfizer selling products manufactured by another drugmaker?
TM: Pfizer does co-market a few products manufactured by other companies. But, for the most part, we are involved in ‘true outsourcing’ — where CMOs make Pfizer products.
CP: Let’s talk about one of those co-marketing relationships. Pfizer recently issued a recall of several products manufactured by Claris Lifesciences, due to quality issues. Tell me how that transpired and how PGM is reacting to it.
TM: In terms of Claris, Pfizer saw a potential problem and responded immediately by stopping distribution of the Claris products under our control and then announcing a voluntary sub-recall (Claris was responsible for the recall of those medicines). Until we fully understand all the issues involved, I cannot comment further.
CP: Is this episode causing any introspection about the company’s reliance on external partners?
TM: We have partners in different parts of the world and we hold our all external supply network suppliers to Pfizer’s stringent quality standards. Our process for qualifying potential suppliers is rigorous, and once a working relationship is in place, product integrity and safety always come first. If there is an issue we address it and if it cannot be resolved to our satisfaction the working relationship will be ended.
CP: One last (rambling) question: in my Top Biopharma report, I characterize a biopharma company as one of that makes at least half its drug revenues from biologics, vaccines, and other large molecule products. Pfizer talks about wanting to become one of the world’s largest biopharmas. Do you think the infrastructure is in place for it to reach my admittedly arbitrary threshold?
TM: Although I don’t think Pfizer has ever professed a goal to realize that high a proportion of its sales from biopharma, of course Pfizer wants biotherapeutics to be a really significant portion of the company. On a revenue basis, we want to be a top player in biotherapeutics. But, given our absolute size, it would be very difficult to reach that target. We plan to be diversified in our new model.
Gil Y. Roth has been the editor of Contract Pharma since its debut in 1999. He can be reached at firstname.lastname@example.org.