Pfizer to pick some contract manufacturers for new elevated role

Pfizer's ($PFE) "external partner management" process is not exactly "American Idol" and Pfizer's John F. Kelly is not exactly Simon Cowell, but this year the Pfizer Global Supply (PGS) unit will go through the exercise of turning a handful or two of its more than 200 contractors into stars.

"So what we are doing within that 200, we are are looking to partner in a unique way with a subset of them," Kelly, vice president of PGS strategy and transitioning sites, said during a far-ranging discussion. "We will have our internal network and we will have some strategic partners, external suppliers or contract manufacturers that we will look at on a level playing field when it comes to sourcing decisions, how we are going to manufacture products"

Pfizer's CEO Ian Read has been remaking the drug giant into a more efficient operation, selling off units and narrowing its focus to respond to the world it lives in since losing the patent on the all-time best-selling drug Lipitor. When discussing the year, Read said Pfizer was going to have to manage expenses and make sure plants are cost efficient to "respond to pricing pressures and our upcoming" loss of exclusivity on products.

PGS has 57 manufacturing sites and 130 logistics centers around the globe that must become more efficient. And it has more than 200 partners that manufacture about 30% of Pfizer's products by cost of goods, Kelly said. PGS has 5 initiatives for this year to help do its part toward realizing Read's vision, Kelly said, and one of those 5 is to select some partners which will be woven into the fabric of PGS and treated more like internal operating units than contractors.

He would not say which 5 to 10 partners are being scrutinized for this privilege, but he did say those selected most likely will have multiple sites with a "global reach." In some cases, there might be a partner picked because of a key technology. That is not to say Pfizer will change its ties with the 190 or so other contractors. It is just that with the ones it picks it intends to have a "true partnership where we have more transparency, more visibility from a systems point of view, whether in supply chain planning, replenishment. We would begin to view those sites in a similar way when it comes to sourcing our products as we do our internal sites."

In other words, that small group, Kelly said, will get essentially the same access to systems as any of the Pfizer-owned facilities. He said PGS is going through the process now and will have have it complete before the end of the year.

- here is a conference call transcript of Read's remarks