Inside the world of business
Little surprise in Pfizer cut as patent issue starts to bite
Pfizer’s decision to shed 177 jobs at two Cork sites can come as little surprise to the staff affected. If anything, the surprise is that the company is not moving more swiftly to address the collapse of sales in Lipitor, its blockbuster cholesterol treatment, and the biggest-selling drug worldwide in recent years.
The loss of patent protection – in the United States last year and across Europe in the first half of this – has already knocked a significant hole in Pfizer’s revenues. Quarterly figures published last month pointed to a 71 per cent decline in sales of Lipitor in the first three months of Pfizer’s financial year.
As a plant working solely in the production of the active ingredient in the drug, Little Island and all its staff must have known they were exposed. Two years ago, Pfizer signalled its intentions with its decision to close the Lipitor tableting plant at Loughbeg, also in Cork – a decision that remains on course for the end of this year and will, in itself, lead to the loss of 200 jobs.
Pfizer has been very good for Ireland. It employs almost 4,000 people here across a range of sites and, with its acquisition of biotech group Wyeth in 2009, will hope to continue for many years.
The Government, and its predecessors, have known for years about the impending patent cliff and its likely impact on older plants in the Republic. It is precisely for this reason that IDA Ireland have worked so assiduously in attracting the newer generation of biopharmaceutical firms, like Amgen, to these shores, and in encouraging existing businesses to invest more heavily in research and development.
These efforts have met with considerable success to date. This week’s announcement of the inevitable at Pfizer merely emphasises the continuing importance of new foreign direct investment as we seek to drive forward our economic recovery
Atlantic can be rescued by a friend
Grafton has made no secret of the fact that its Irish retailing business – the Atlantic Homecare and Woodies DIY chains – have been suffering over the past four years.
Last month it told shareholders that turnover in this division was down 16 per cent in the first four months of this year.
Last year overall sales fell 4.7 per cent to €219.7 million. The business remained profitable, returning an operating surplus of €2.1 million, down from €2.4 million in 2010.
The High Court heard yesterday that Atlantic lost more than €11 million last year. It does not take a genius to work out that Woodies is profitable while Atlantic is not.
Atlantic is close to insolvency. Opting for an examinership, which will give court protection from creditors and allow breathing space for the examiner, Declan McDonald, to come up with a rescue plan, looks like the best way forward. The restructuring could result in the loss of 114 full- and part-time jobs. Another 234 jobs will survive, as will eight of 13 stores.
If the High Court confirms McDonald as examiner – his appointment yesterday was interim – he will need the support of at least one group of creditors, or a significant creditor, and possibly to bring in new capital.
Atlantic owes Woodies €13.3 million, around one quarter of its total debt of €53.7 million, making it a significant creditor. Woodies said yesterday it is willing to invest in its sister company. This indicates that McDonald can clear both hurdles. Given that some Atlantic stores have already been rebranded as Woodies, the logical conclusion is that the financially stronger group company will take over the financially weaker.
Early indicators are that Hollande is not one for tough fiscal discipline
Sometimes you wonder just how committed European governments are to recovery and responsible long-term economic planning across the trading bloc.
Four years into a crisis that has threatened to unravel the post-war European construct, the French – one of the pillar economies of the bloc – are already struggling to meet the budgetary discipline being sought by Brussels in an effort to persuade markets that the economies of the euro zone can act in the broader interest and in concert.
Yet, in one of his first major policy announcements, the government of François Hollande this week said it would cut the pension age for some long-time workers to 60, a measure that will reportedly cost €1.1 billion up to 2017 and €3 billion annually thereafter.
Last February, France’s Court of Auditors – a quasi-judicial body charged with reviewing public finances – said the government of Nicolas Sarkozy had last year taken only one-tenth of the measures required to keep its promise of balancing the public finances by 2016. It called for much tougher austerity.
Since then, of course, Mr Hollande has assumed control and the target for balancing the budget has been pushed out to 2017. But an internal government report, details of which were published earlier this week in Les Echos newspaper, said Mr Hollande’s government needs to cut spending by about €3.9 billion a year even to meet that target.
There seems a mismatch, especially as lowering pensionable age was hardly at the top of the priority list for French voters in the current climate.
Then there is the general picture globally on pension provision. The Pensions Board in Ireland will this morning outline new funding rules for defined benefit schemes that many believe will be the final nail in the coffin of such final salary programmes.
Increased longevity has already seen the Irish and others put back the age of retirement, in large part because the current age of 65 is seen as financially crippling for the State in an era when newborns have a decent prospect of living to be centenarians.
France’s action – replicating a broadly similar move by the last socialist government in that country – is financially unsustainable and does little to suggest Mr Hollande or his government have yet accepted the need for the sort of budgetary discipline that is a requirement if the euro zone is to have a future.
I do not think there was any ground or any statement of a quid pro quo for this
– European Central Bank president Mario Draghi on whether the outcome of the fiscal treaty referendum would strengthen the Government’s campaign to ease the burden of the bank rescue
TODAY:The Pensions Board announces new funding rules for defined benefit schemes
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