Please answer the question based on the case study below !

1. what are the most important strategic benefits that Pfizer derives from it's vertical Integration strategy?

2. over the long term, how could the vertical scope of Pfizer operations threaten, it's competitive position and profitability?

3. why is a vertical integration strategy more appropriate in some in some industries than others ?

4. How well is the company's present strategy working?

5. What are the company's strengths and weaknesses in relation to the market opportunities and external threats?

Pzer Copyright Robins School of Business, University of Richmond Introduction January 201'? \"When Ian Read, an accountant and company lifer, took over as Pfizer's chief executive in December 2010, the drug firm was facing the impending patent expiration of Lipitor, the best- selling drug ever made, and the utter failure of one of the most lavishly funded research laboratories on the planet to develop much of anything. The stock was suffering, and Read's predecessorJeffrey Kindler, a bearlike lawyer hired from McDonald'shad just spent $68 billion to buy rival drug maker Wyeth in a Hail Mary strategy shift. Now Read had to make it wor .\" Company and Industry Background Pzer was established in 1849 in Brooklyn, New York, by cousins Charles Pzer and Charles Erhart with a loan of $2,500 from Pzer's father. Today, 16? years later, Pzer Inc. has international revenues of $49 billion, which makes it the second-largest pharmaceutical manufacturer in the world. Despite Pzer's success, the company has faced many challenges over the last few decades. The pharmaceutical industry is heavily inuenced by legal, political, and technological forces, and all indications are that the industry will continue to experience dramatic changes. Since the passing of the Food and Drug Act in 1906, the Food and Drug Administration (FDA) has had regulatory authority over drugs in the United States. The scope of its initial authority was limited and in 1938 President Roosevelt signed the Food, Drug and Cosmetic Act (FD&C) into law, which signicantly expanded federal oversight of drug manufacturing and marketing. In addition to granting the FDA authority to mandate pre-market review of drugs, the FD&C also allowed the FDA to regulate drug labeling and advertising. Then, in 1992, Congress passed the Prescription Drug User Fee Act, which enables the FDA to collect fees from drug manufacturers to aid in funding the pro-market review process for new drug approvals. The effect of these reforms was signicant increases in the time and cost for drug manufacturers to bring new drugs to market. In 2006, a study estimated the cost of bringing a new drug to market was between $802 million and $2 billion, depending on the type of drug being developed and the number of drugs being developed simultaneously. The study found that approximately 60% of the total cost of drugs was related to pre-market clinical trials required by the FDA. As ination, increased regulation, and other factors have affected the pharmaceutical industry, a 2012 study indicated that the cost per drug for the largest manufacturers has increased to over $5.5 billion. For Pzer, the total Research 8.: Development (R&D) cost for each drug that received FDA approval was $7.7 billion Exhibit 3: Pfizer Balance Sheets Consolidated Balance Sheets-USD ($) $ in Millions 2015 2014 2013 2012 2011 Assets Cash and cash equivalents $ 3,641 $ 3,343 $ 2,183 $ 10,081 $ 3,182 Short-term investments 19.649 32,779 30,225 22,318 23,270 Trade accounts receivable, less allowance 8,176 8,401 9.357 10,675 13,058 for doubtful accounts Inventories 7,513 5,663 6,166 6,076 5,610 Current tax assets 2,662 2.566 4,624 6,170 9,380 Other current assets 2,163 2,843 3,613 3,567 5,317 Assets of discontinued operations and other 76 5,944 assets held for sale Total current assets 43,804 55,595 56,244 64,831 60,817 Long-term investments 15,999 17,518 16,406 14,149 ,814 Property, plant and equipment, less accumulated 13,766 11,762 12,397 13,213 15,921 depreciation Identifiable intangible assets, less accumulated 40,356 35,166 39,385 45,146 51,184 amortization Goodwill 48,242 42,069 42,519 43,661 44,569 Noncurrent deferred tax assets and other 1,794 1,944 1,554 1,565 5,697 noncurrent tax assets Other noncurrent assets 3,499 3,513 3,596 3,233 Total assets $167 460 $167.566 $172,101 $185,798 $188,002 Liabilities and Equity Short-term borrowings, including current portion $10,160 $5,141 $6,027 $6,424 $4,016 of long-term debt Trade accounts payable 3,620 3,210 3,234 2,921 3,678 Dividends payable 1,852 1,711 1,663 1,733 1,796 Income taxes payable 418 531 678 979 1.009 Accrued compensation and related items 2,359 1,841 1,792 1,875 2,120 Other current liabilities 10,990 9,153 9.951 13,812 15,066 Liabilities of discontinued operations 21 1.442 1,224 Total current liabilities 29,399 21,587 23,366 29,186 28,909 Long-term debt 28,818 31,541 30,462 31,036 34,926 Pension benefit obligations, net 6,310 7,885 4,635 7,782 6,355 Postretirement benefit obligations, net 1,809 2,379 2.668 3,491 3,344 Noncurrent deferred tax liabilities 26,877 23,317 25,590 21,193 18,861 Other taxes payable ,992 4,353 3,99 6.581 5.886 Other noncurrent liabilities 5,257 4,883 4,767 4,851 6,100 Total liabilities 102,463 95,944 95,481 104,120 105,381 Commitments and contingencies Preferred stock, no par value, at stated value $ 26 $ 29 $ 33 $ 39 $ 45 Common stock 459 455 453 448 445 Additional paid-in capital 81,016 78,977 77,283 72,608 71,423 Employee benefit trusts (3) Treasury stock, shares at cost (79,252) (73,021) (67,923) (40,122) (31,801) Retained earnings 71,993 72,176 69,732 54,240 46,210 Accumulated other comprehensive loss (9,522) (7,316) (3,271) (5,953) (4,129) Total Pfizer Inc. shareholders' equity 64,720 71,301 76,307 81,260 82,190 Equity attributable to noncontrolling interests 278 321 313 418 431 Total equity 64,998 71,622 76.620 81,678 82.621 Total liabilities and equity $ 167 460 $167.566 $ 172,101 $ 185,798 $188,002Competitive Landscape Major Competitors The pharmaceutical industry invests heavily in research and clinical trials and relies on obtaining FDA approval and patent protection for its products to ensure prolonged profits while the next "miracle" drug is under research. There are high payoffs when a drug is successfully brought to market; but there also great costs, in the form of massive time and monetary investments for failures, if it is not. Among Pfizer's largest competitors are Merck, Novartis, Bristol-Myers, and Johnson & Johnson. Exhibit 4 contains some comparative financial ratios for these competitors. Exhibit 4. Comparative Financial Ratios Bristol-Myers Johnson & Pfizer Merck Novartis Squibb Johnson Research over Revenue % 15.74 16.97 17.73 35.79 12.91 Revenue INR Mil 48,851 39,498 50,387 16,560 70,074 Gross Margin % 80.3 62.2 65.5 76.4 69.3 Operating Income INR Mil 11,824 6,928 8,977 1,890 18,065 Operating Margin % 24.2 17.5 178 11.4 25.8 Net Income INR MI 6,960 4,442 17,783 1,565 15,409 Earnings Per Share INR 1.11 1.56 7.29 0.93 5.48 Dividends INR 1.12 1.81 2.67 1.49 2.95 Payout Ratio % * 82.7 48.4 77.7 139.6 55.6 Shares Mil 6,257 2,841 2,403 1,679 2,813 Book Value Per Share * INR 10.82 16.39 32.31 9.08 25.86 Operating Cash Flow INR Mil 14,512 12,421 11,897 1,832 19,279 Cap Spending INR Mil -1,496 -1.283 -3,505 -820 -3,463 Free Cash Flow INR Mil 13,016 11,138 8.392 1,012 15,816 Free Cash Flow Per Share * INR 2.22 1.65 3.97 0.64 5.3 Working Capital INR Mil 14,405 10,561 -863 2,398 32,463 Tax Rate % 22.2 17.44 13.6 21.47 19.73 Net Margin % 14.25 11.25 35.29 9.45 21.99 Asset Tumover (Average) 0.29 0.39 0.39 0.51 0.53 Return on Assets % 4.13 4.44 13.84 4.78 11.65 Financial Leverage (Average) 2.59 2.28 1.71 2.23 1.88 Return on Equity % 10.24 9.52 24.06 10.75 21.87 Return on Invested Capital % 7.11 5.74 19.28 7.83 17.55 Interest Coverage 8.48 9.04 13.16 12.29 35.78 Source: Morningstar.comMerck & Co. (MRK). Merck & Co. was founded in 1891 and had $39.5B in 2015 revenues, making it one of the largest pharmaceuticals companies in the world today. The cholesterol-lowering drug branded Zetia, which is Merck's 2nd largest revenue generator, is a direct competitor to Pfizer's drug Lipitor (patent expired in 2011). Zetia is selling at a rate of nearly $3 billion a year, whereas Lipitor is generating $1.86B. Major Acquisitions: 1993: Merck acquired Medco Containment Services, Inc. ($6B) 2009: Schering-Plough merged with Merck & Co. ($41B merger) 2014: Merck acquired Cubist Pharmaceuticals ($8.4B) Novartis AG (NVS). Founded in 1996 in Switzerland, Novartis AG is the pharmaceutical industry's world leader in sales, generating $50.4B in 2015 revenues. Novartis has several oncology products in the pipeline that will directly compete with Pfizer pharmaceuticals. Currently its best sellers are prescription treatments for cancer, multiple sclerosis, and macular degeneration. Major Acquisitions: 1999: Formed by merger with Ciba-Geigy and Sandoz Laboratories 2005: Acquired Hexal and Eon Labs ($8.29B) 2006: Acquired Chiron Corp. ($5.1B) 2010: Acquired Alcon ($39.3B) 2012: Acquired Fougera Pharmaceuticals ($1.5B)Bristol-Myers Squibb (BMY). Bristol-Myers Squibb was founded in New York in 1887 and had $18.8B in 2015 revenues. They produce the market-leading antipsychotic drug, Abilify, which is widely used for treating schizophrenia. Bristol-Myers Squibb, like the majority of pharmaceuticals companies, derives the bulk of its profits from a limited number of expensive specialty drugs or much wider market spread of cheaper drugs. Major Acquisitions: 2009: Acquired Medarex 2010: Acquired ZymoGenetics 2015: Acquired Flexus Biosciences ($1.25B) and Cardioxyl ($2B) 2016: Acquired Padlock Therapeutics ($600M) & Cormorant Pharmaceuticals ($520M) Johnson & Johnson (JNJ). Founded in 1886, Johnson & Johnson is an American multinational medical devices, pharmaceutical (40% by revenues) and consumer packaged goods manufacturer. Besides over- the-counter products for self-treatment and at-home medication, Johnson & Johnson produces high-priced specialty drugs used in the treatment of autoimmune diseases, prostate cancer, and HIV/AIDS. Major Acquisitions: 2006: Acquired consumer healthcare business of Pfizer ($16.6B) 2013: Acquired Aragon Pharma ($1B) 2014: Alios BioPharma, Inc ($1.75B)Vaccines were injected into the first human participants in the U.S. in early May. In July 2020, Pzer and BioNTech announced that two of the partners' four mRNA vaccine candidates had won fast track designation from the FDA. The company began Phase II-III testing on 30,000 people in the last week of July 2020 and was slated to be paid $1.95 billion for 100 million doses of the vaccine by the US government. The U.S. deal priced two doses at $39, and the company stated that it would not lower the rates for other countries until the outbreak is no longer a pandemic. Pzer's CEO stated the companies in the private sector producing a vaccine should make a profit. In September 2020, Pzer and BioNTech announced that they had completed talks with the European Commission to provide an initial 200 million vaccine doses to the EU, with the option to supply another 100 million doses at a later date. As of early May 2021, Pzer and BioNTech had manufactured at least 430 million vaccine doses, which have been distributed to 91 countries and territories. The companies have said they expect to manufacture nearly 3 billion total vaccine doses in 2021. Looking Forward Dr. Bourla has been at Pzer's helm for nearly three years as of November, 2022. With the patent expiration for Lipitor now ten years past, the best-selling drug in history is no longer contributing much to Pzer's bottom line. It is assumed that the majority of Covid-19 vaccines, from all manufacturers, have been delivered, and revenues from the vaccine are rapidly declining. Manufacturing capacity for Covid-19 vaccines for all major pharmaceutical companies is slowly being shifted to producing booster vaccines, including bivalents (and in Moderna's case, a quadrivalent) which are designed to boost immunity from the original Covid- 19 virus and subsequent variants, including the highly contagious Omicron variant and related versions. No timeframe has been given for changing facilities to produce other pharmaceuticals; this is assumed to be a preventive measure, as most of the world's leading virologists and infectious disease experts believe the world is destined to face new, but similarly developing viral pandemics in future years. Eventually it is assumed that facilities will be developed modularly, in order to more easily convert to producing needed drugs or vaccines with greater efficiency. Is the firm still capable of delivering a sustainable pipeline of profitable drugs, or are major changes to strategy and operations necessary? And is Pfizer's opportunity for significant inversions over with the failed takeover attempts of both AstraZeneca and Allergan? To add to these issues, drug pricing scandals and healthcare reform have created an environment of active political reform. How can Pzer navigate the upcoming challenges that growing societal discontent with \"big pharma\" and the rising cost of healthcare present? Do these threats also provide opportunities? How can Pzer best be positioned for growth and protability in this challenging business environment? transferred its research documentation to Pfizer the next day. A letter of intent was signed three weeks later, and the formal commercial agreement, a strategic alignment between Pfizer and BioNTech for the COVID-19 vaccine was signed in January 2021. In March 2020, Pfizer joined the COVID-19 Therapeutics Accelerator funding vehicle to expedite development of treatments against COVID-19. The $125 million initiative was launched by the Bill & Melinda Gates Foundation in partnership with Mastercard and Wellcome Trust, with additional funding announced shortly after from various private and governmental organizations and individual philanthropists. The following month, the Foundation for the National Institutes of Health announced the Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) public-private partnership to develop a coordinated research strategy for prioritizing and speeding up development of COVID-19 vaccines and pharmaceutical products. Pfizer joined the partnership as an industry "leadership organization", and participated as a collaborator in ACTIV-led clinical trials. As the scale of the COVID-19 pandemic became apparent, Pfizer partnered with BioNTech to study and develop COVID-19 mRNA vaccine candidates. Unlike many of its competitors, Pfizer took no initial research funds from the United States' Operation Warp Speed vaccine development program, instead choosing to invest roughly $2 billion of its own funds. Pfizer CEO Albert Bourla has said that he declined money from Operation Warp Speed to avoid government intervention, stating later that "when you get money from someone that always comes with strings. They want to see how we are going to progress, what type of moves you are going to do. They want reports. And also, I wanted to keep Pfizer out of politics, by the way." The Pfizer-BioNTech COVID-19 vaccine (INN: tozinameran), sold under the brand name Comirnaty, is an mRNA-based COVID-19 vaccine developed by the German biotechnology company BioNTech. For its development, BioNTech collaborated with Pfizer to carry out clinical trials, logistics, and manufacturing. Vaccine manufacturers normally take several years to optimize the process of making a particular vaccine for speed and cost-effectiveness before attempting large-scale production. Due to the urgency presented by the COVID-19 pandemic, Pfizer and BioNTech began production immediately with the process by which the vaccine had been originally formulated in the laboratory, then started to identify ways to safely speed up and scale up that process. BioNTech announced in September 2020 that it had signed an agreement to acquire a manufacturing facility in Marburg, Germany, from Novartis to expand their vaccine production capacity. Once fully operational, the facility would produce up to 750 million doses per year, or more than 60 million doses per month. The site became the third BioTech facility in Europe that produces the vaccine, while Pfizer operates at least four production sites in the United States and Europe. In May 2020, Pfizer began testing four different COVID-19 vaccine variations using lipid nanoparticle technology provided by Canadian biotechnology company Acuitas Therapeutics.Vaccines were injected into the first human participants in the U.S. in early May. In July 2020, Pfizer and BioNTech announced that two of the partners' four mRNA vaccine candidates had won fast track designation from the FDA. The company began Phase II-III testing on 30,000 people in the last week of July 2020 and was slated to be paid $1.95 billion for 100 million doses of the vaccine by the US government. The U.S. deal priced two doses at $39, and the company stated that it would not lower the rates for other countries until the outbreak is no longer a pandemic. Pzer's CEO stated the companies in the private sector producing a vaccine should make a profit. In September 2020, Pzer and BioNTech announced that they had completed talks with the European Commission to provide an initial 200 million vaccine doses to the EU, with the option to supply another 100 million doses at a later date. As of early May 202], Pzer and BioNTech had manufactured at least 430 million vaccine doses, which have been distributed to 9] countries and territories. The companies have said they expect to manufacture nearly 3 billion total vaccine doses in 2021. Looking Forward Dr. Bourla has been at Pzer's helm for nearly three years as of November, 2022. With the patent expiration for Lipitor now ten years past, the best-selling drug in history is no longer contributing much to Pzer's bottom line. It is assumed that the majority of Covid-19 vaccines, from all manufacturers, have been delivered, and revenues from the vaccine are rapidly declining. Manufacturing capacity for Covid-19 vaccines for all major pharmaceutical companies is slowly being shifted to producing booster vaccines, including bivalents (and in Moderna's case, a quadrivalent) which are designed to boost immunity from the original Covid- 19 virus and subsequent variants, including the highly contagious Omicron variant and related versions. No timeframe has been given for changing facilities to produce other pharmaceuticals; this is assumed to be a preventive measure, as most of the world's leading virologists and infectious disease experts believe the world is destined to face new, but similarly developing viral pandemics in future years. Eventually it is assumed that facilities will be developed modularly, in order to more easily convert to producing needed drugs or vaccines with greater efficiency. Is the firm still capable of delivering a sustainable pipeline of protable drugs, or are major changes to strategy and operations necessary? And is Pfizer's opportunity for significant inversions over with the failed takeover attempts of both AstraZeneca and Allergan? To add to these issues, drug pricing scandals and healthcare reform have created an environment of active political reform. How can Pzer navigate the upcoming challenges that growing societal discontent with \"big pharma\" and the rising cost of healthcare present? Do these threats also provide opportunities? How can Pzer best be positioned for growth and protability in this challenging business environment? between 199? and 2011. The steep rise in development costs has forced many large drug manufacturersincluding Pfizerto cut R&D budgets in an attempt to control rising costs. The reduction in R&D funding in reaction to expanding costs has led to stied innovation and revealed a crisis looming ahead for many large drug manufacturers in the industry. Not only have many drug companies' blockbuster drugs gone off patent in recent years, but the reductions in R&D spending have resulted in drug pipelines that have failed to produce anything of signicant value. The number of new drugs approved by the FDA per billion dollars of R&D expenditures has halved every nine years since 1950. The rapid increase in the cost of drug development and the reduction in the approval 'equency of blockbuster-level drugs has led many industry experts to largely consider the current, fully integrated business model of large pharmaceutical companies to be unsustainable. Business and Strategies Like most large pharmaceutical manufacturers, Pzer pursues a \"blockbuster\" business model that is heavily reliant on its R&D pipeline to consistently develop and launch high volume drugsdrugs with expected annual revenues of $1 billion or greater. In 2012, Pzer began restructuring its operations into a new commercial operating model. Pzer divested its infant nutrition business for $11.9 billion and spun-off its animal health unit, Zoetis. Additionally, Pfizer restructured its operations into two primary business segments: Innovative Products and Established Products. Pfizer's Innovative Products business is further divided into the Global Innovative Pharma (GIP) and Global Vaccines, Oncology, and Consumer Healthcare (VOC) businesses. Ian Read commented regarding the restructuring: \"This represents the next steps in Pfizer's journey to further revitalize our innovative core. Our new commercial model will provide each business with an enhanced ability to respond to market dynamics, greater visibility and focus, and distinctive capabilities.\" Exhibit 1 contains some useful financial comparisons between Pfizer's Innovative Products and its Established Products. Exhibit 1: Business Segment Financials Innovative vs Established Segments 2015 2014 2013 Innovative Established Innovative Established Innovative Established Revenues $26,758 $21,587 $24,005 $25,149 $23,602 $27,619 Cost of Sales 3,650 4,486 3,848 4,570 3,675 4,732 % of revenue 13.60% 20.80% 16.00% 18.20% 15.60% 17.10% Selling, informational, and 6,807 administrative expenses 3,572 6,162 3,903 5,520 4,714 R&D Expenses 3,030 758 2,549 657 2,154 Amortization of intangible 69 in 100 assets Restructuring charges and acquisition-related costs Other (income)/deductions-net (1.087) (150) (1.096) (265) (576) (216) Income from continuing operations before provision $14,264 $12,885 $12,472 $16,199 $12,765 $17,552 for taxes on income Source: 2015 Pfizer Annual Report.Inside Pfizer Management Team CEO, Ian C. Read. Ian C. Read was elected CEO of Pfizer in December of 2010 and Chairman of the Board in 2011, taking over from Jeffrey Kindler. Read has spent his entire career at Pfizer, starting as an operational auditor. Read's B.S. in chemical engineering and accounting experience set the groundwork for a successful career in pharmaceuticals. Some of his previous roles included CFO of Pfizer Mexico, Country Manager of Pfizer Brazil, President of Pfizer's International Pharmaceuticals Group, Executive Vice President of Europe, and Corporate Vice President. Read also serves on the boards of Pharmaceutical Research Manufacturers of America (PhRMA), which represents the leading innovative biopharmaceutical research companies. Executive VP Strategy Portfolio and Commercial Operations, Laurie J. Olso. Laurie Oslo oversees long-term strategy, execution of commercial objectives, and advises portfolio functions for R&D investment strategies. She started working for Pfizer in 1987 in Marketing Research. As an economics graduate from the State University of New York at Stony Brook and with a MBA from Hofstra University, her experiences span across domestic and global leadership positions in marketing, commercial development, strategy, analytics corporate responsibility, and operations. Her most recent role was Senior Vice President of Portfolio Management and Analytics, and within that role she was part of the task force that "redesigned Pfizer's R&D organization to strengthen its pipeline and improve efficiency." Executive VP Chief Development Officer, Rod Mackenzie, PhD. Rod Mackenzie received his PhD from Imperial College, London, after getting his chemistry degree from the University of Glasgow. As the co-inventor of Darifenacin, which was sold in 2003 due to regulatory issues, Mackenzie held various positions within Pfizer before assuming his current position. His role oversees "the development and advancement of Pfizer's pipeline of medicines in several therapeutic areas." He serves on the Portfolio Strategy and Investment Committee and sits on the Board of Directors for ViiV Healthcare. Executive VP Business Operations and CFO, Frank D'Amelio. Frank D'Amelio joined the company in September 2007 and oversees finance, business development, and business operations. He has been ranked as a top CFO for various years by Institutional Investor magazine. He has led the organization in many mergers, spin-offs, and sales, such as: Pfizer and Wyeth merger, sale of their nutrition business, and the spin-off of Zoetis. His experience comes from his many leadership roles at Alcatel-Lucent, including Senior Executive Vice President of Integration and Chief Administrative Officer, and his experience as COO of Lucent Technologies. Frank earned his MBA in Finance from St. John's University and his bachelor's degree in Accounting from St. Peter's College. Representing Pfizer, he currentlyserves on the Board of Directors for many organizations. They include, Humana, Inc., Zoetis, Inc., the Independent College Fund of New Jersey, and the Gillen-Brewer School. Major Shareholders Pzer is a publicly traded company with approximately 6.2 billion shares outstanding at December 31, 2015. According to Yahoo Finance, among Pzer's primary shareholders are institutional investment companies Vanguard Group, Inc., BlackRock histitutional Trust Company, and JPMorgan Chase 3.: Co., who own 6.32%, 4.95%, and 1.89% oftotal outstanding shares, respectively. Additionally, Pfizer's only major non-institutional shareholders are all executive-level leadership within the organization. Human Resources Human resource efforts are led by Charles H. Hill 111, who has been the Executive Vice President of Worldwide Human Resources since December 2010. Prior to that assignment, Hill was Senior Vice President of Human Resources for the Worldwide Biopharmaceuticals Businesses from 2008 through December 2010. On December 31, 2015, Pzer employed approximately 97,900 employees across the globe. In 200?, Pzer Global Manufacturing, a global manufacturing site in the U.K., was recognized for their Explorer training program. The Explorer program was a year long and covered team dynamics that included purpose, leadership, motivation, meetings, and the environment, among other topics. For each of the four training segments, there were pre-workshop activities, two-day workshops, post-workshop assignments, and a follow-up workshop. Pfizer also uses traditional techniques to develop their personnel. Employees are expected to collaborate with their direct leaders to create individual development plans. They have also implemented a tool called Mentor Match. It is designed to allow employees to volunteer as a mentor or search for mentors with certain characteristics. Managers are encouraged to give frequent and in-depth performance appraisals in lieu of the standard annual review process. Pfizer also uses short-and medium-term job rotations or projects to help further the development of their employees. Organizational Culture Upon taking charge of Pfizer in 2010, Read soon discovered that many of the processes in place at Pzer were broken. The process for FDA drug applications was so bad that the FDA sometimes refused to even review submitted applications. Read demanded answers, and the only answer he received was that everyone knew the application didn't meet the required quality standards, but nobody was willing to speak out about it. Read's response was to hand every employee a gold coin with the words \"Straight Talk\" on one side and \"O'WNIT!\" on the other side. It was Read's way of empowering his employees to speak up to their boss when they believe they are wrong, but above all, to create accountability. Since then, OWNIT! has become ingrained in Pzer's culture. Mission, Purpose, and Values Pzer's mission is: \"To be the premier, innovative biopharmaceutical company.\" Pzer's purpose is: \"Innovate to bring therapies to patients that significantly improve their lives.\" Pfizer' s core values are: \"Customer focus; Community; Respect for people; Performance; Collaboration; Leadership; Integrity; Quality; Innovation.\" Operations 8: Supply Chain Each of the Innovative Products and Established Products businesses is led by a single manager responsible for both commercial productivity and research and development activities that meet proof-of-concept requirements. The Innovative Products Business is tasked with development and commercialization of new medicines and vaccines. The Established Products Business focuses on branded generic medicines and legacy brands that have lost or will lose market exclusivity in the short term. Both businesses have geographic footprints that span developed and emerging markets. Pzer has a truly global supply chain network with 64 internal manufacturing facilities, over 200 supply chain partners, and 134 logistics centers in 2015. Pzer claims to have over 850 major product groups. Due to the high demands for traceability, Pzer employs a serialization program across its supply chain. Pzer also uses their Highly Orchestrated Supply Network (HOSuN) to connect inventory, transportation, logistics and its associated security, compliance, environmental health and safety, and other functions into a truly integrated system. They also use HoSuN for business continuity risk assessment and resolution. Manufacturing pharmaceuticals can be extremely complex. For example, the vaccine known as Prevenar 13 was produced for the one-billionth-time in 2015. According to Pzer, manufacturing Prevenar 13 includes the participation of 1700 employees, 678 quality tests, 400 different raw materials, and 580 steps in manufacturing, over 2 years. Pzer earned 56% of its 2015 revenue from operations outside the United States, which represented $22.1 billion. Japan is the second largest market, behind the United States. Marketing and Distribution Pzer promotes its products within the global biopharmaceutical business to healthcare providers and patients. Pzer's marketing organization is responsible for educating a wealth of stakeholders regarding product approved uses, benets, and risks. Pzer employs a direct-to- consumer advertising campaign in the U.S.; this provides similar information and suggests that interested customers have discussions with their doctor. Pfizer's \"Global Consumer Healthcare business uses its own sales and marketing organizations to promote its products and occasionally uses distributors in smaller markets.\" Television, digital, print, and in-store media are all used to advertise to consumers. In the U.S., all products must be approved by the FDA prior to any marketing campaigns. The FDA oversight includes \"regulations that govern the testing, manufacturing, safety, efcacy, labeling and storage of our products, record keeping, advertising, and promotion.\" There are also several federal and state laws that were enacted to prevent fraud and abuse, including false claim and anti-kickback laws. Pzer encounters \"similar regulatory and legislative issues in most other countries.\" Pzer has been criticized in the past regarding some of its foreign marketing practices. In August 2012, the U.S. Securities and Exchange Commission ned Pzer $45 million dollars for violating the US Foreign Corrupt Practices Act. In order to secure regulatory approval, sales, and increased prescriptions, several subsidiaries of Pzer had been bribing foreign officials. The bribes had been concealed under marketing and promotion expenses in the accounting records. Pfizer reported the violations voluntarily in 2004 and subsequently implemented anti-corruption training. From a distribution perspective, prescription pharmaceutical products primarily are sold primarily to wholesalers. In 2015, the \"top three biopharmaceutical wholesalers accounted for approximately 34% of our total revenues (and 74% of total U.S. revenues).\" Pzer also does some direct shipments to retailers, hospitals, pharmacies, and clinics. For its vaccines, Pzer \"primarily sell[s] directly to individual provider offices, the Centers for Disease Control and Prevention and wholesalers.\" Financial Condition Over the past ve years, Pzer's revenues have been steadily decreasing, reducing net income to a five-year low of $6.96 billion. A decrease in revenue from continuing operations is the primary cause of the decrease in revenues. The spin-off of Zoetis had a compounding effect on both the decrease in revenues and cost of sales post 2013. Current assets were steady over the past three years; however, there was a recent dip in short-term investments. Goodwill is increasing, reecting the premiums paid for acquisitions in recent years. Pzer's short-term borrowing has increased almost twofold in the past five years. Overall, Pzer's balance sheet has been fairly steady the past two years, but Pzer's total liabilities are slightly higher and its total equity slightly lower in 2015 compared to 2014. Both of these years are lower compared to pre-Zoetis spin-off levels. Exhibits 2 and 3 contain detailed Pfizer financial information. Exhibit 2. Pzer Income Statements Consolidated Statements of IncomeUSD (Si) Shares in Millions, $ in Millions 2015 2014 2013 2012 2011 Income Statement [Abstract] Revenues $ 48,851 $ 49,605 $ 51,584 $ 58,986 $ 65,259 Costs and expenses: Cost of sales 9,648 9,577 9,586 11,334 14,076 Selling, informational, 14,309 14,097 14,355 16,616 18,832 and administrative expenses Research and 7,690 8,393 6,678 7,870 9,074 development expenses Amortization of 3,728 4,039 4,599 5,175 5,544 intangible assets Restructuring charges 1,152 250 1,182 1,880 2,930 and certain acquisitio n-related costs Other 2,860 1,009 (5 32) 4,031 2,499 (income)7deductions net Income from 8,965 12,240 15,716 12,080 12,304 continuing operations before provision for taxes on income Provision for taxes on 1,990 3,120 4,306 2,562 3,909 income Income from 6,975 9,119 11,410 9,518 8,395 continuing operations Discontinued operations: Income from 17 (6) 308 297 350 discontinued operationsnet of tax Consolidated Statements of IncomeUSD ($) Shares in Millions, $ in Millions Gain} (loss) on (6) 5 5 10,354 4,783 1,304 disposal of discontinued operationsnet of tax Discontinued 1 1 48 10,662 5,080 1,654 operationsnet of tax Net income before 6,986 9,168 22,072 14,598 10,049 allocation to noncontrolling interests Less: Net income 26 32 69 28 40 attributable to noncontrolling interests Net income '5 6,960 $9,135 '5 22,003 $ 14,570 $ 10,009 attributable to Pzer Inc. Source: Pfizer Annual Reports