Lewis Sees Exciting Times For Pfizer Animal Health, Despite Uncertainty

With speculation looming, Pfizer president remains hopeful.

Clint Lewis, president of U.S. operations for Pfizer Animal Health.

Ever since Pfizer Inc. hired J.P. Morgan in July to evaluate strategic options for its animal health business,  the unit has faced increased scrutiny and speculation. The parent company is considering divesting the unit to focus more on its core human health care business and please shareholders. Animal health contributed about $3.6 billion to Pfizer’s $68 billion in total revenues in 2010.

In an interview with Veterinary Practice News, Clint Lewis, president of U.S. operations for Pfizer Animal Health, said the company is excited about the future, whatever that may be. He also discusses a range of other topics, including Pfizer’s forays into diagnostics and generics and the economic challenges facing the veterinary profession today.

VPN:  With the announcement from Pfizer Inc. that it has retained J.P. Morgan to explore strategic alternatives for the Pfizer Animal Health unit, how is it to manage Pfizer Animal Health with employees and customers perhaps wondering about the future?

Lewis: It has been a mantra for us both inside the organization and outside as we engage with customers, partners and other stakeholders, that these are very exciting times. These are exciting times for Pfizer and Pfizer Animal Health specifically, even if the ultimate outcome of the various options is not final today. Obviously the corporation is committed to work through that process as expeditiously as possible, but it does not change the excitement and the enthusiasm for the future and our ability to continue to provide great products supported by great people and programs. Our messaging internally and externally is that these are very, very exciting times given Pfizer’s leadership in the animal health space both globally and in the U.S. We feel strongly that we are better positioned than any other company to deliver value to customers and to the animals which we serve. And we believe in the future, regardless of the outcome, we’ll be able to bring that much more value to customers and animals.

VPN: Can you tell me more specifically about Pfizer Animal Health’s vision for the near term and longer term?

Lewis: Our vision is to continue to invest, to focus on R&D, to bring new, differentiated products that meet the unmet need for customers. We see the desire to be a complete solutions provider for our customers. In the area of companion animals, to continue to meet the demand that pet owners and veterinarians alike have to bring more human-quality care to their pets and companion animals. In the area of livestock, we see the need and the opportunity to continue to help ensure the vibrancy, the vitality and the abundance of the global food supply and clearly to support those like farmers, producers and the like who work every day to protect the safety and wellbeing and welfare of the animals that are destined for the food supply. Obviously veterinarians are critical to that.

We are also, as part of being that complete solutions provider, continuing to invest into what we call complementary and adjacent spaces, things like diagnostics, areas of different services like labor management, veterinary practice management support, a number of different areas where we believe it can help further enable the great work that producers and veterinarians alike do to continue to enhance the health and the wellbeing and the productivity and performance of their animals or  companion animals.

VPN: You recently completed the acquisition of Synbiotics, which provides you various in-clinic tests and other diagnostic products. Is diagnostics an area you expect Pfizer Animal Health to expand in, not only in breadth of existing tests and services, but perhaps some other modalities, such as imaging? 

Lewis: For purposes of near-term strategy, it is disproportionately focused, and I mean that in a good way, in the area of point of care. We believe having the diagnostics at the area of point of care, whether that’s in clinic or in operation in the livestock setting that can help identify the pathogen, the disease or manifestation that allows a veterinarian to tailor the right treatment for the right pathogen at the right time is clearly a complementary extension to our core business in   biologicals and pharmaceuticals. As we look to provide more personalized or precision care, if you will, or individualized care, for the animal or it may be at the herd level, but again identifying the right disease, the right pathogen, so that we can identify the right intervention or solution or preventive and the role diagnostics play in that, then for us, the greater focus is less of  the instrumentation and more around the point-of-care tools that veterinarians and producers alike can use for quick assessment and also quick intervention.

VPN: You’ve mentioned research and development. Can you update the status of the Pfizer Animal Health product pipeline? How robust can we expect product launches to be in the coming years?

Lewis: As you know, a lot of times that has do with the regulatory approval times, but I think a couple of factoids are important. On an annual basis, Pfizer invests upwards of $300 million a year globally in R&D and that positions us as No. 1 in terms of investment for quality animal health companies. Pfizer invests more in R&D on an annual basis than any other company and even with the announcement of assessing strategic options for Pfizer Animal Health, I don’t see that in any way changing or fading in the near or medium term. We will continue that focus. Given the breadth of our species coverage, and we have the broadest species coverage of any of the animal health companies, naturally then you look at products in the pipeline across all the species areas, there are robust candidates that are at various stages of development and progressing regulatory approval timelines. So we are very optimistic on the future prospects of that productivity in R&D continuing as we move forward.

VPN: Can you break down where the R&D dollars go?

Lewis: If we look at it from the U.S.A. or even global, it is almost evenly split between companion animals and livestock. We look at our business globally. Outside of the U.S., more of the business is livestock than it is companion animal; in the U.S., it is more of a 50:50 split. But I would say when we look at the breakdown of our R&D dollars, they’re fairly evenly split around companion animals as well as livestock. And even further, it is fairly evenly split between a focus on pharmaceuticals as well as on biologicals.

VPN: You’ve mentioned the breadth of Pfizer’s species coverage, yet the food animal health and the companion animal health seem to be going in different directions, as the companion animal care becomes more individualized and closer to human care. Does it make sense for a company to try to broach both markets?

Lewis: We would say yes. A large part of that, it’s not from hubris, it’s not from being overly aspirational, but built from kind of a historical foundation. Pfizer Animal Health today has been the amalgamation of many legacy companies, from SmithKline Beecham to Pharmacia Upjohn    to Norden Laboratories to Fort Dodge, Alpharma and even most recently Synbiotics. So clearly the organization that we have both in the U.S. and globally is well built, supported and enabled  to be able to support both the current and future needs in the small animal or companion animal area. I include equine in that space as well, as well as the production animal side. Our historical track record is such that we have successfully led and outperformed the market and key competitors in those areas and we feel strongly about our ability to do that into the future.

Obviously with respect to future directions, while there has been some speculation, not from Pfizer but as people look to make their own interpretations of what the future for Pfizer Animal Health holds, there has been some speculation of spinning off assets. Just recently last week, Pfizer corporate has made it clear that we have no intention of breaking up or splitting off pieces of Pfizer Animal Health. We believe the value is really locked up in the entirety of the asset itself, regardless of how that is ultimately disposed.

VPN: Moving back to the idea of being a complete solutions provider, some industry analysts have really looked at Pfizer Animal Health as very well positioned to offer generic veterinary medications. Can you discuss what you may or may not be doing in that space?

Lewis: I like the way you phrase it, the same way that we phrase it ourselves. It may seem subtle, it’s not “the,” meaning the only solutions provider, but we believe based on the breadth of our portfolio, the scale of our operations, the reach both domestically and internationally, the caliber of our people, we believe and are well on our way to demonstrating that we can be a complete solutions provider to our customers.

We recognize today that while the breadth and the disproportionate aspect of our focus is to meet the unmet needs, to identify uniquely differentiated, value-added products to bring to the market. That’s the core of what we do and we will always continue to disproportionately focus on that. We recognize even with the reach that we have with our teams and our ability to interact with customers, we recognize we don’t have all the solutions. So in many cases while we have a very strong portfolio, there may be gaps in that portfolio where we recognize and a customer believes that because of the quality, let’s say, of our manufacturing processes, the integrity in which we operate, that a customer has said to us many times that “if Pfizer had access to this particular product that you don’t have today” and it becomes available because of  lost patent protection, that they would be willing, because of the other tangibles and intangibles that Pfizer brings to the table, that they would be willing to purchase that product or service from Pfizer. So it’s in that vein that we’ve looked at as a gap-filling area to identify particular products that are of relevance and of need to our customers and given the fact that we are already there supporting them in so many different ways that if there is the opportunity to selectively bring in some of these key products and they were available, then we would look to be able to do that as appropriate.

VPN: Have you brought any products like that yet or is that still in the future?

Lewis: In certain markets, in international markets, in Europe and in the emerging markets like Asia or India, we’re fairly early in the process but there have been some select products that we’ve done in some of the other markets. In the U.S., it’s still far earlier in the process. In specific answer to your question, the answer is no.  However, part of that and again it’s somewhat serendipitous, was that some of the areas have been in the medicated feed additives and that was a business we used to be in significantly years ago and had gotten out of the business but are fortunate to get back in that business with the acquisition of Alpharma. In some cases, some of the products that Alpharma has have actually filled that gap because again we have more infrastructure or more capabilities than the legacy Alpharma had itself an ability to deliver to customers.

VPN: You mentioned meeting unmet needs. Would you consider more affordable veterinary medications an unmet need?

Lewis: I would say clearly there’s an opportunity for veterinarians, and I think that they would recognize that themselves, to better communicate the value of their services and obviously the value of the products. In human health, in many cases the patient is not bearing the brunt of the cost because they have some sort of third-party payer insurance, whether that be private insurance or government-provided insurance like Medicaid and Medicare. So in many cases the patient on the human health side is not exposed to the full cost of the service and/or the products.
We know that it is different in animal health. So I think the starting point is that veterinarians need to recognize that their ability to advocate the treatment direction for the pet to the client or pet owner, the better they’re able to explain and help to demonstrate the value of that intervention. Clearly research shows the pet owner or client better understands and is more willing to embrace and to recognize the benefit far outweighs the cost of that. Clearly pet owners in their own mind wrestle what’s the benefit relative to the cost. Each makes a more individual, personal and emotional decision as to what they do in that regard. By and large, if we look at the value, oftentimes we think about the cost of sickness, the cost of treatment. We need to do an equally good job of demonstrating the value of being well and being not sick or shortening that time to wellness. The better we do a job in helping to support veterinarians in that regard and the better job veterinarians can do, I think pet owners will continue to see the value and the benefit of things like wellness visits, preventive visits and the appropriate care at the appropriate time. Many may differ with the lay public that says that we need more help with cheaper, more affordable products. Again, I think that often means that we’re not spending enough time talking about the value of the service that the veterinarian is providing, of which products are only a small piece.

VPN: What about the role of products in the veterinary practice, specifically pharmaceutical products? Obviously there is a lot of pressure from outside and non-traditional sources, whether the Internet, Target, etc. Should the practice be working on ensuring that the actual product sales themselves are not a critical portion of their business model?

Lewis: The reality is today we know product sales, not just medicine product sales, but product sales–even if it is the chews, the toys, the treats, the food, everything–product sales make up a good amount of the operating profit of any veterinary practice. We’re talking more in the companion animal, small animal arena, but also livestock, obviously. So a number of veterinarians make a good amount of their operating profit from the products that they sell. It is Pfizer’s position, and I know there is a lot of discussion out there with different strategies being employed by different companies, but Pfizer has always been clear, has always been steadfast that we believe the best person or entity to both diagnose, treat, to prescribe and where appropriate to transact with these products and services is the veterinarian.

We don’t have any intention to be opening up or exploring  alternative channels outside of the veterinarian. In fact, Pfizer is working actively to help the veterinarians continue to compete and win, if you will, in the area of emerging channels. Now it also stands that our product portfolio—yesterday, today and to the future–is still largely prescription based. We don’t have a big part of our portfolio in over-the-counter medications. But even those few that are, we still feel very strongly about a viable, vibrant veterinarian-patient-client relationship. We believe in the sanctity of that. We don’t believe in simply transacting the products somewhere else, and we believe that takes place  under the watchful eye and supervision and appropriate involvement of the veterinarian.

Pfizer is clearly committed to preserving that and sustaining that and growing that as best as we can. At the same time, veterinarians, many cases are small business owners, and as a small business owner you recognize at any one point, at any time, there will continue to be competitive market forces that challenge you to make sure that the services that you are offering are relevant, that they have impact, and the benefit of those services far outweigh the cost of delivering that. So I think in time, just as we see more and more practices competing for animals and clients, vets continue, no different than any business, they look at their service mix and how they price and deliver that. We believe that to a certain degree is healthy. But disintermediating the product piece from the veterinarian is not a strategy that Pfizer is or contemplates employing.

VPN: Any insight into any services that are being under-offered or over-offered at practices, primarily companion animal in the U.S.?
Lewis: I don’t have a view that much in terms of over-offered, but I do believe as we see the trends and pet owners continued to acquire what we call in some cases almost more human quality type care for their companion animals, that in many cases, and understandably so, see them as extensions or even members of the family, so the greater desire to provide the best quality care as possible I think is going to continue to fuel the opportunity for veterinarians to explore more services.

Diagnostics is one great example. The ability to better assess, to do a differential diagnosis, and to make sure that the right treatment plan can be appropriately customized for the particular animal or particular situation or disorder. I think it is going to continue to be an opportunity and I think vets themselves are recognizing that that may be something underutilized today that I think could be more of a driver of growth and profitability for veterinarians. We clearly see the medicalization rates are not where they need to be across dog and cat populations. So clearly the opportunity to focus more on preventive care, to focus on wellness visits. The industry, and I think with great data, [can] drive at least two wellness visits a year and we know today what that looks like actually is sub-optimal. If we look to our cousins in human health, we can see in the primary care model in human health a lot more focus on wellness, prevention being the ability that it solves, delays, prevents or minimizes the catastrophic impact of the cost of care. So I think clearly that another area of underutilization is the importance of wellness, the importance of preventive care and preventive services and again helping the client or pet owner understand the real tangible economic value, not to mention the health benefit value, of their doing so.

VPN: Do you have any data on the economic value of wellness visits to the pet owner?

Lewis: That is something that I think is an emerging space. So there are a number of cohorts, one most recently the Partnership for Preventive Pet Healthcare. It has a number of stakeholders, and  Pfizer Animal Health is one of the founding members. I think there is a growing ecognition among the profession, the vet profession, of the importance of wellness in the profession. Clearly we have access to some data and clearly having Pfizer participate in some of these broad industry coalitions like this most recent one, clearly there are a good amount of data and modeling about the valued impact of early diagnosis, early treatment  as well as again well documented preventive measures like heartworm check, which I think is very clearly an opportunity to say   the better we can assess that, we can clearly avert mortality and morbidity that is clearly avoidable.

VPN: What do you see, and I’m sure you’ve touched on some of them already, as the biggest challenges and opportunities facing the profession and industry today?

Lewis: Looking at it broadly, the economy [is a challenge]. When you have higher unemployment, you have issues around the mortgage and savings, less discretionary spending, we see increases in things like fuel prices and food and other consumables that are seen as basic necessities. As we see the cost of those things continue to increase, obviously that carves into the disposable and discretionary income that people have. The impact of that in terms of clients and pet traffic into the vet practice continues to be challenging. That has been an anomaly that the companion animal space has seen for the better part of the last couple of years. Clearly when we saw the significant downturn in the economy in mid-2008 and the first half of 2009, that was really the first time in a long time many people looked at the companion animal marketplace so quickly to say that is was recession proof. Clearly the numbers would dictate that the moderation we saw in traffic and in transactions [shows] that the companion animal market is not recession proof and it is as prone to recession dips as some of the other sectors.

And while the economy—debatable—is slightly better than it was in, say, 2008 and 2009, I think all would agree that it is still very much in a fragile state. What that does in terms of people looking at things like preventive care, wellness visits, people will look to cut back and save in any way  they believe prudent even if ultimately it may not be the best thing for the health and well being of their animals. So focusing just on must-do care as opposed to need-to-do care, focusing on more acute exacerbations as opposed to things that may be subclinical, that might over time emerge as  something bigger. Clearly these are trends that we’ve seen that have challenged the revenue, profit of the veterinary profession.

On the livestock side, clearly the trends are for food, safe food, secure food, and greater demand being placed on exports. The U.S. is becoming more of a net exporter in many cases than importer of meat protein. I think that bodes well for U.S.-based customers, U.S.-based producers, but equally we see that as boding exceedingly well for veterinarians who focus on large animal or the food-producing sector because clearly the desire for greater transparency in food production, greater safeguards and secure. Again, I strongly believe, and it’s documented, the U.S. is by far the safest and most secure in the area of meat production but at the same time the demands by the public for greater safeguards and security,  especially as we start to export more, continues to bode well for veterinarians, who are very integral and are already very involved in the production animal side of the profession. I think the trends there continue to bode well, especially in some cases we see shortage of veterinarians tracking for the production animal area.

VPN: Has Pfizer’s Commitment to Veterinarians program been going as expected and what can we expect from it in the future?

Lewis: I think it is a great question and it brings us full circle back to questions about even with the announcement that Pfizer Inc. is going to be assessing strategic options for Pfizer Animal Health. To be clear, the real goal here I would say is twofold.  It’s what option   allows the animal health business to realize its full potential, so as successful as we’ve been, what option allows the animal health business to achieve its full potential in the marketplace? And the second is, as a public company, what option ultimately maximizes the return for shareholders? But we believe that with what we’ve done today and the plans we have for the future, we clearly are signaling the important role that the veterinarian plays across all of the species areas. Based Where there are continued forces that try to disintermediate the veterinarian from bonafide vet-patient-client relationships, Pfizer seeks to continue to strengthen the bond the veterinarian has with the animal and the pet owner, and continue to find ways to help veterinarians best understand the drivers in their practice, and help them identify ways to drive  greater levels of productivity and profitability.

In production animal areas where there is a shortage of veterinarians, we want to continue to provide incentives and to help enable schools of veterinary medicine and others to see the tremendous opportunities there are for veterinarians in the food animal sector. Clearly, our continued focus on research and development requires that we have the best and the brightest involved in every aspect of discovery and development in the research area. We’re very focused on scholarships and internships and in various philanthropic efforts to continue to have a vibrant and vital vet profession. Clearly that is central to Pfizer’s success now and into the future.

VPN: Any final thoughts?

Lewis: I am not going to control your pen, but at a time when there is understandable speculation about the future of Pfizer Animal Health, my hope is that even without a final decision being made, you can relay both in your written word and in between the words, that the president of the U.S. business and as a member of the global leadership team for Pfizer Animal Health, that we are very confident and very optimistic about the prospects for the future, even though the final decision has not been made. Clearly one of those options is the potential for a spinoff of the animal health business. And while some want to quickly jump to “sale,” or some sort of breaking up, where Pfizer said we have no intention of breaking up, that one of the viable options is a spinoff to a separate standalone entity. We’re not talking about a company that’s ranked fourth, fifth or sixth in the industry.  This is the No. 1 company in the industry on the animal health side, so we’re clearly operating from a position of strength. The mere fact that one of the viable options is a spinoff to a separate standalone company I think bodes exceedingly well for our ability to continue to do what we do, but also quite frankly for the animals and customers,  veterinarians and producers alike, that benefit from that. We see this as an exciting opportunity for us in the future.

VPN: I would presume one of the options is for Pfizer to keep the animal health business?

Lewis: Congratulations to you, my friend, because somewhere along the line that’s missed. That may not be as sexy a news story as Pfizer chooses to break up animal health, but yes, one of the viable options is that at the end of the process, we may say that, “You know what, the best decision for the near term or the long term may be for Pfizer Animal Health to stay exactly where it is, which would be great from our vantage point as well.

We’ve enjoyed a lot through the benefit of being a part of the broader Pfizer. It has allowed us to get where we are today. And should that continue, we think that’s great. We believe that if the ultimate decision might be some sort of spinoff to a separate standalone entity, we see that as great all well. We can be 100 percent focused on our own destiny and I think that’s fantastic as well.

VPN: As a global company, how concerned are you with the debt ceiling standoff? (Note: this interview took place in the days before Congress and the president passed legislation elevating the debt ceiling and S&P lowering its credit rating for the U.S.).

Lewis: I’m very concerned about it, [Not raising] that debt ceiling, for the rating agencies to somehow lower the sanctity and the ability for the U.S. to meet its obligations both here and abroad, clearly those have significant consequences to the industry in a broad way. Clearly again, for customers, whether they be pet owners or producers who have to put their hard-earned money out there, only for that to buy less, makes it a challenge, and makes them that much more reluctant to invest, to build, to expand and to do the things that they need to do to continue to win in the marketplace. Obviously that then has direct benefit as we look to engage them with products and services. So I think, without being overly melodramatic, that it could have catastrophic consequences to the industry, to customers and stakeholders. So I, like everybody else, would like them to get about the business of finding some solution that makes everyone happy to some degree and allows us to raise the debt ceiling limit within an appropriate timeframe.



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