Closure highlights difficulty in finding buyers for production sites

 

Pfizer's failure to sell its production plant may arise from Ireland's high cost base, writes Arthur BeesleySenior Business Correspondent

PFIZER'S DECISION to eliminate 180 jobs from its Little Island plant in Cork underlines the threat to a further 300 jobs at its factory in Loughbeg, which is also slated for closure if no buyer can be found.

Although Pfizer says a number of parties have expressed interest in acquiring the Loughbeg site as an ongoing operation, an international company came very close to buying the Little Island plant only to walk away near the end of the sale process. If Ireland's high cost base dims the attraction of such assets, a surplus of manufacturing capacity in western Europe makes matters more difficult.

Pfizer had planned to use these factories to produce a new drug for cholesterol, Torcetrapib. Clinical trials for that experimental drug in 2006 proved it was dangerous so the project was scrapped. Pfizer had ploughed some $800 million (€519 million)into the development of Torcetrapib, which it considered a potential blockbuster with sales of $15 billion (€9.7 billilon) possible every year. The failure of the trials led Pfizer to put the two Cork sites on the market early last year and cut 65 jobs at another plant.

But there was a second aspect to the Torcetrapib setback, as the drug was designed to be used alongside another cholesterol drug made in Cork, Lipitor.

Pfizer had hoped Torcetrapib would support demand for Lipitor when it comes off patent in 2011, when rival firms will be able to sell generic versions. Torcetrapib's failure means that Lipitor's market share will fall further.

The upshot of all that is Pfizer now has much more manufacturing capacity than it can use in Cork. Having failed to find a buyer for the Little Island factory, the company has given itself just another six months to sell the Loughbeg plant.

While the clock ticks, Pfizer says there is no further threat under the current restructuring scheme to its other Irish workers.

The company employs a total of 2,200 staff here, 1,600 of them in Cork.

The failure to find a buyer for the Little Island plant represents a a big setback for the Government's inward investment strategy, which is specifically tailored to attract pharmaceutical multinationals such as Pfizer into Ireland.

While it seems highly likely that IDA Ireland would have dangled juicy grant packages before the eyes of any potential buyer of the Little Island plant, the company in question still opted not to bite.

That Pfizer itself has been here since 1972 illustrates that the presence of even the most resilient investors with the most advanced manufacturing operations can never be taken for granted.

It is a given that closure of the Little Island plant comes against the backdrop of a sharp economic decline, the pace of which has surprised many analysts.

With the Live Register at its highest point since 1998 and the prospects of a robust economic turnaround next year diminishing by the day, these job cuts at Pfizer are unlikely to be the last from the community of multinational investors on whom Ireland so heavily depends.