Contract Pharma: How has Pfizer Global Supply's structure changed since we last spoke in 2011?
John Kelly: One of the most important things is that we've developed a fundamental value proposition for what PGS brings to Pfizer, to balance Quality/Compliance, Supply Reliability and Delivering Value, without ever compromising on Quality/Compliance. In Addition we're beginning to consolidate all of our small molecule manufacturing into a single operating unit. We had an organization that was more closely aligned with the commercial businesses: Primary Care, Specialty Care, Established Products and Emerging Markets. What we've done is to begin creating Pharmaceutical Manufacturing Operations, or PharmaOps, to organize a network of small molecule manufacturing sites.
CP: When was that change made?
JK: Beginning in December 2012. That team is organized into three groups: API plants, solid oral dose, and sterile injectables.
CP: What was the rationale?
JK: We want to tie our technologies more closely together. Having these in the same team brings a different perspective to the discussion about the technology, the size and the shape of the network.
They used to be organized geographically, when we had many more plants. Then we moved to a business-facing model, and now we're looking at a technology focus.
The driver was to put common technologies together. As we look to drive efficiencies, we have teams that speak a common language about their shared technologies, working together.
We have plans to roll Emerging Markets plants into the PharmaOps group. That will put all small molecule manufacturing operations into one group. Eventually, there'll be three operations groups: small molecule, large molecule, and consumer. That's the model we're looking to build.
We're trying to bring more of the strategy function within my team. The strategy component of Network Performance, which is there to drive operational efficiencies across our network, now reports to me.
CP: Congratulations! But tell me, how do you define strategy?
JK: It means different things to different people, doesn't it? One thing it's not is a tactical, "What do we need to deliver here and now?" quick punch. What my team tries to do is to balance what we need now — what we need to deliver this year and in the next few years — with a longer-term view, beyond a multi-year horizon. Now, that's not so easy in this industry, but the reality is, you need to take that perspective.
It might involve a projection of the network that we're going to need, because it takes time to shape the network for the future. In the case of Network Performance, we need to consider the opportunities to use different tools across our sites that may take time to implement. I'm talking about tools that could set up our plants for success in the longer term.
Some people will tell you that their strategy is simply to get through the year, and that might hold up, depending on the circumstance. But we're looking at the longer term. How can we use our fundamental value proposition to deliver value to Pfizer, Inc.?
CP: How has your group been involved in doing that?
JK: We had two major strategic projects in the past two years: we spun off our Animal Health business and divested our Nutrition business.
The Animal Health move took a long time to prepare, because it was a very integrated business, at all levels. I’m talking about shared facilities, integrated processes, and more. Pfizer is very good at integrating businesses; that makes it a challenge to separate them.
As part of the Zoetis [Animal Health] spinoff, we separated 25 manufacturing facilities that were largely dedicated to Animal Health. We carved out some additional sites that were essentially two facilities on one property.
We had acquired Nutrition as part of the Wyeth purchase, and we had five manufacturing sites dedicated to that business. We divested that to Nestle in November 2012.
Those are corporate projects for Pfizer, Inc. that we supported from a strategic point of view.
CP: And how do you prepare for something like Pfizer, Inc.'s potential split into two companies, branded and generic?
JK: We have a very flexible manufacturing network that can be adapted to whatever strategy the company takes in the future. Having that network flexibility is one of our key goals. Whatever the future direction of the business is, PGS is going to be there to support the company and add value going forward.
CP: What are the deciding factors in what facilities you keep or divest?
JK: Certain parts of our business clearly have technology that is in demand. Their volume and capacity utilization is high. Take sterile injectables: that's a very heavily utilized network, and we're making investments in it.
Then take our API and solid oral dose facilities: as you look at products that are going off patent and the new product pipeline, we see a different mix both in terms of the volumes required for API and the dosage units. So that's where most of our focus has been. A lot of the sites that have exited the network have come from reviews of our API and solid oral dose needs.
It's about understanding demand five-plus years down the road. Where will the volume be and where is the business going? Given the nature of our patent-protected business, we can be fairly certain as to when it will happen. You can circle the date on the calendar.
CP: Did you have many single-product facilities in the network?
JK: The majority are multi-use facilities. We had a dedicated Lipitor plant in Ireland. That was a high-volume site dedicated to making those tablets. It could potentially have been used for other purposes, but our other sites were able to handle multiple products already.
CP: Where are you headed in the short term?
JK: We have five focus areas for this year:
- Optimizing our supply performance and inventory management. It's critical to have the right products in the right places at the right time.
- Managing our external partners. I foresee the day when we'll be looking at our internal network and our external partners on a very even playing field.
- Deploying our Network Performance platform across our supply network. How can we increase our performance and effectiveness across the network. When we identify a plant that's strategic going forward, we want to invest in that plant to achieve the highest levels of operational effectiveness.
- Accelerating the transition to a future state of supply network. Changes take time, because of tech transfer, regulatory process, and other reasons. We want to get to that next state (not necessarily an "end state") more quickly.
- Embedding an "own it" culture. We want colleagues to take ownership of the business, in terms of what we do and what we deliver. It may seem obvious, but with 22,000 supply colleagues around the world, there has to be an effort to create a culture of ownership.
CP: When Pfizer Inc. is reviewing its long-term strategy, how much does it tap PGS as a consultative resource?
JK: With Tony Maddaluna being part of the executive leadership of the company, we're part of the discussion. It's incumbent on us to contribute from that role. We're involved in nearly every strategic initiative that the company undertakes.
CP: We last spoke when you were just starting in this job in 2011. What have you learned in the two years since you took on this role?
JK: As we've reshaped our network, it's been a challenge. The value that a manufacturing and supply network can deliver has become very apparent to me. Delivering on it is a challenge. Exiting sites, whether through sale or closure, is difficult; you're separating colleagues who've been with the company a long time.
It's not a case of getting rid of underperforming sites. These sites deliver, so that's not an issue. Some of them are award-winning facilities, but because of the changing mix of our products, it necessitates that we reshape the network. That's why we make a significant effort to sell sites where we can, to retain jobs and continue operating in their communities. That's a challenge, because the market for facilities has changed. It's not that easy to sell a manufacturing site anymore. There needs to be a "win-win" value proposition for buyer and seller. We work very hard to find that sweet spot, where we can sell a facility and keep it an ongoing operation.
But in some cases there isn't a market for certain sites, usually because of overcapacity in the industry.
CP: What's the proportion of closures to sales?
JK: It's approaching 50/50. Given what we've seen in the past few years, we knew we were in a tough market. Being able to sell half our transitioning sites was a very good outcome.
CP: Is most of that interest from CMOs?
JK: It's generally split between CMOs and smaller pharma companies that are trying to enter a particular market although there is at least one example where we sold a site to a big pharma company.
CP: What types of sites garner the most interest?
JK: We've divested a consumer manufacturing site and a solid oral dose site recently. We also sold a clinical scale biologics site. It's a diverse range. What seems most effective is if we have a value proposition that includes some level of a trailing supply agreement.
It's incumbent on the buyer to have a plan to bring in new business, of course, and not rely on that supply agreement too extensively.
CP: When we spoke two years ago, you were dealing with a network of almost 500 suppliers. How has that changed?
JK: When we spun off our Animal Health business, 200 or so CMOs were supplying that group. So that by itself pared down our external network, allowing us to focus on around 200 or so suppliers. It's still a couple hundred suppliers, and that's a large number. We want to identify that handful or so that we can work with more closely in a partnership.
CP: What’s involved in that sort of partnership? Early, you mentioned the notion of a level playing field between internal network and external supply.
JK: It takes a fair amount of trust, and a level of transparency for both parties. We need to understand their full capabilities and utilize that in our decision-making when we source products.
I should say that the notion of a level playing field is in regards to our key external partners. Not all of our 200 suppliers have the capability to work with us in this way and deliver value.
Given the geographic and technology needs of our business, certain partners bring certain attributes and capabilities that might drive us to work with them more extensively.
CP: What are you looking for in those potential partners?
JK: That'll be based on their supply performance, their regulatory performance, their geography, their technology and other factors.
CP: Can you tell me anything about those forward-looking metrics you mentioned earlier?
JK: It's based on that notion that past performance is no indicator of future results. It's about looking at trends and developing new metrics that we hadn't looked at before that might be more predictive of performance. It's not ready for prime time yet.
John F. Kelly is vice president of Strategy and Transitioning Sites for Pfizer Global Supply (PGS). Mr. Kelly joined Pfizer in 1982 as Plant Services Engineer at the Brooklyn, NY site. In 2011, he was appointed vice president, Strategy and Transitioning Sites for PGS in New York. His responsibilities include driving PGS strategy and global sourcing, and leading the Transitioning Sites Operating unit.
Prior to his current position, he held assignments in New York (Technical Services, Plant Network Strategy) Brooklyn (Engineering, Manufacturing), Barceloneta, PR (Manufacturing, Quality Operations) and Vega Baja, PR (Site Leader).