Transcript: Pfizer Trims the Fat

This is a partial transcript from "Your World with Neil Cavuto," April 5, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: Trimming the fat, Pfizer (PFE). No, we're not talking about a diet pill, but Pfizer is putting itself on a diet, the drug maker hurt by slumping sales of its arthritis drug Celebrex, looking to cut costs by at least $4 billion.

It is also predicting profits will grow by double digits next year, the stock jumping 4 percent, but it's still down 26 percent in the last 12 months.

So how is Pfizer going to do all this? Let's ask the guy who knows and decided to do all this. With us from Pfizer's headquarters, Dr. Hank McKinnell. He is Pfizer's chairman and CEO.

Doctor, good to have you.

HANK MCKINNELL, CEO/CHAIRMAN, PFIZER: Hello, Neil. Good to be back on my favorite news program.

CAVUTO: I like that. You're due back again with good remarks like that. But $4 billion in cost cuts. Those are some pretty big cost cuts. What's going to be cut?

MCKINNELL: Well, that was part of the news today. The earnings growth actually reflects cost reductions, which come from purchasing, manufacturing, rationalization and suggestions from 2,000 of our colleagues on how we can do things faster, better and cheaper. But it also reflects the confidence we have in the growth of our currently marketed products and the new products we're bringing in market.

CAVUTO: But $4 billion might in actuality be substantially below what this all pans out to be, right?

MCKINNELL: Well, we don't know that. We set targets of $3 billion to $4 billion, had a number of teams look at what reasonable accomplishments might be in the planning process, which is just ending. We came close enough to the $4 billion number that we set the targets at $4 billion, but this is an organization that delivers on its promises. We have a long record of exceeding these targets.

CAVUTO: You do have a good record on that. What worries some analysts, though, Hank, is the future. That I think by 2010, 10 or 11 of your prominent drugs will be off patent and you're kind of left naked in the woods. How do you respond to that?

MCKINNELL: Well, that's the nature of our business. We make enormous investments, a billion-and-a-half dollars over 10 years to bring a new drug to market. We have 10 years or so to earn back that investment and a return to our shareholders.

It is a very high risk but high reward business. We have done this successfully for 156 years now, and I suspect we'll survive a few years more.

CAVUTO: Are you troubled by not only how your industry group has been faring but the market in general? We've come off a lousy month, a lousy quarter. People not really optimistic about earnings this quarter when we have them all tallied. What do you make of what's going on?

MCKINNELL: Well, I'm chairman of the Business Roundtable, a group of the 160 largest companies in America. We survey the CEOs of those companies every quarter. And the last survey showed great confidence in the economy.

The economy looks like it's performing right about where it should be in this part of the cycle. But the concerns are rising interest rates and high oil prices. I guess that's what's holding back the market.

CAVUTO: But is Alan Greenspan aggressively raising the interest rates going to do anything to put a crimp on those high oil prices?

MCKINNELL: Obviously not.

CAVUTO: Should he stop?

MCKINNELL: Oil prices are driven by demand and the U.S. economy and the Chinese and other developing economies are booming and that's what sucking up oil demand.

CAVUTO: Would you tell Alan Greenspan cool it?

MCKINNELL: I think I would, actually. Not because of oil prices but because non-farm labor productivity increases have been in the 3 to 5 percent range for a number of years now. And that productivity plus the natural growth in the labor force says to me the non-inflationary growth targets could actually be higher.

CAVUTO: All right. Dr. Hank McKinnell, always a pleasure, sir. We wish you well on this restructuring. Thank you.

MCKINNELL: Thank you, Neil.

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