I continue to believe that with all the major problems that Merck faces, it should simply be sold in pieces. It used to be a great company, it still has some excellent scientists, and drug portfolio that has more value on their own than as part of Merck, a company that will spend more energy on lawsuits than on refining its business model. If Merck continues to pursue this flawed strategy, it will simply turn into another W R Grace.
Having said that about Merck, let us talk about Pfizer. For several weeks I have argued that Pfizer too has pursued a wrong strategy for Celebrex and Bextra. I sincerely hope that business leaders will learn from the experience with Vioxx, Celebrex, and Bextra and never sell a product that they know is dangerous. While it is early to say what will happen next week when both the FDA and the European Medicines Agency (EMEA) meet, but there is a strong likelihood that both drugs will receive strong warnings, if not banned outright. The (Australian) Therapeutics Goods Administration's decision to ban some Cox-2 drugs and put a strong black box warning on Celebrex is a good indicator of what to expect in the US and European Union.
In the meantime, Celebrex's share is falling rapidly, as the chart at the bottom shows. And as I had predicted, Pfizer is doing what Merck had to do: cutting costs to the extent of $2 billion. A polite way of saying that there is really no future for both Celebrex and Bextra. Even if the FDA and the EMEA do nothing at all, it is very unlikely that arthritis patients will rush to Celebrex and Bextra, not with all the bad publicity and the class action lawsuits. (Related article: Pfizer pursued a wrong strategy for Celebrex)
So it is very likely that people will soon start to ask if Pfizer will survive the strategic mistakes that it has committed even though it had a classic case study of Merck before it.
What can you do differently in similar situations?
- Do the right thing. You will get rewarded for it by your customers, shareholders, and employees - the three pillars of a business. Pfizer should have either recalled these drugs right away pending further research or at least voluntarily declared that consumers should be more cautious till more data is developed by Pfizer. While there would have been a short-term impact on sales, if what Pfizer is saying is true and was proved so within months/years, it would have turned out a winner in the long run. (Related article: Risk management frameworks)
- Manage your appetite for risk. Taking risk is not just about being bold and confident, risk has to be balanced with potential rewards. No matter how big the reward, you can not risk a company's future at any time. (Related article: Pfizer should have controlled its appetite for risk)
- Take a portfolio management approach to business. Indeed, some products will be stars, while others will need to be recalled. It is OK as long as you manage the portfolio well.
Recommended article: Lessons for business leaders from recall of Vioxx
