Pfizer chief to re­sign af­ter snub­bing board’s plan for deputy

The Pak Banker - - Company& -

NEW YORK: Jef­frey Kindler re­signed as Pfizer Inc.'s chief ex­ec­u­tive of­fi­cer af­ter he re­fused to name a head of op­er­a­tions as part of a plan agreed to by se­nior man­agers in Septem­ber, said a per­son fa­mil­iar with the pro­ceed­ings.

Kindler, 55, quit hours be­fore a spe­cial board meet­ing was sched­uled on Dec. 5 to dis­cuss his fu­ture, the per­son said. Ian C. Read, 57, was named to re­place him. Se­nior ex­ec­u­tives had agreed Read should be named chief op­er­at­ing of­fi­cer, said two peo­ple who asked not to be named be­cause the de­lib­er­a­tions were pri­vate. That ap­point­ment never hap­pened.

Kindler in re­cent months lost sup­port of ex­ec­u­tives frus­trated with his man­age­ment style, one of the peo­ple said. While New York-based Pfizer faces com­plex pol­icy de­ci­sions, Kindler was fo­cused on smaller mat­ters and mi­cro­manag­ing his ex­ec­u­tives, ac­cord­ing to the per­son. Kindler, whose re­tire­ment was ef­fec­tive im­me­di­ately, didn't re­turn calls to his home.

Pfizer, the world's largest drug com­pany, has been deal­ing with the U.S. health-care over­haul, law­suits from share­hold­ers al­leg­ing that se­nior ex­ec­u­tives failed to stop il­le­gal mar­ket­ing of drugs and a stock that un­der­per­formed its peers. The shares have dropped 35 per­cent since Kindler, for­merly Pfizer's gen­eral coun­sel, was named CEO on July 28, 2006.

"In­vestors have not been happy about the stock price," said Les Funt­ley­der, a port­fo­lio man­ager at Miller Tabak & Co. in New York, in a tele­phone in­ter­view. "Could he have done bet­ter? Yeah. He could have fo­cused on buy­ing more in­no­va­tive, smaller com­pa­nies."

In Septem­ber, se­nior ex­ec­u­tives at Pfizer at­tended a meet­ing to dis­cuss a suc­ces­sion plan, one of the peo­ple said. Dur­ing that ses­sion, they de­cided Read would be named chief op­er­at­ing of­fi­cer, ex­pand­ing his re­spon­si­bil­i­ties as a can­di­date to be­come the next CEO, the per­son said.

Pfizer spokesman Ray Kerins de­clined to com­ment on the board's de­lib­er­a­tions. Pfizer de­clined to make Read avail­able.

Read, a 32-year vet­eran of the com­pany, has been head of Pfizer's global phar­ma­ceu­ti­cal op­er­a­tions since 2006, con­trol­ling 85 per­cent of rev­enue. Read's man­age­ment style is well-known to Pfizer di­rec­tor and for­mer CEO Wil­liam C. Steere since Read ran op­er­a­tions in Latin Amer­ica and Europe while Steere headed the com­pany from 1991 to 2000.

Steere didn't re­turn calls for com­ment. Con­stance J. Horner, a board mem­ber, cited Read's ex­pe­ri­ence in emerg­ing mar­kets in the com­pany state­ment an­nounc­ing the change.

Read "has brought to prod­uct devel­op­ment a fo­cus and com­mit­ment to ad­vance only medicines that have clear value to our cus­tomers," Horner said in the state­ment. "To­day's busi­ness lead­ers need to un­der­stand global mar­kets, drive change and in­no­va­tion, and move quickly to adapt to com­pet­i­tive pres­sures. Ian's track record through­out his ca­reer has demon­strated these ex­act strengths."

Pfizer shares rose 9 cents to $16.81 yes­ter­day in New York Stock ex­change com­pos­ite trad­ing. The stock has de­clined 9 per­cent in the past 12 months.

Pfizer has un­der­per­formed its ri­vals over the 4 ½ years of Kindler's ten­ure. Pfizer's priceearn­ings ra­tio for the past year is lower than 91 per­cent of phar­ma­ceu­ti­cal in­dus­try peers and be­low 97 per­cent of com­pa­nies in the Stan­dard & Poor's 500 in­dex, ac­cord­ing to data com­piled by Bloomberg.

Kindler fin­ished at a low point: Pfizer's 2010 priceearn­ings ra­tio was 7.3 as of Dec. 3, the last day of trad­ing be­fore Kindler stepped down, lower than the an­nual av­er­age for each year he has been in charge.

Dur­ing his time as CEO, Kindler faced some of the tough­est chal­lenges of the in­dus­try, in­clud­ing the loom­ing loss of Lip­i­tor's patent pro­tec­tion and the fail­ure of one of the com­pany's most promis­ing drugs, a choles­terol pill that was slated to re­place Lip­i­tor, the world's best-sell­ing medicine.

Months af­ter Kindler took the helm in 2006, Pfizer halted devel­op­ment of the choles­terol drug, torce­trapib, af­ter the pill failed to ben­e­fit pa­tients in a study. To cut costs since, Kindler has fired more than 14,000 work­ers and closed re­search labs and man­u­fac­tur­ing plants.

"They're a big com­pany and it takes a lot to turn this ship," said David Maris, a New York-based health care an­a­lyst at CLSA, a unit of Credit Agri­cole SA, in an in­ter­view. "While we think Kindler was do­ing a good job, in­vestor frus­tra­tion was ris­ing, mostly over the stock price."

The board pub­licly sup­ported the pur­chase of Wyeth in 2009 for $68 bil­lion, as well as Kindler's cost-cut­ting mea­sures. Read takes over the CEO's job as the com­pany pre­pares to face generic com­pe­ti­tion to its top-sell­ing choles­terol treat­ment Lip­i­tor, which had $11.4 bil­lion in sales last year.

Over the next five years, Pfizer faces generic com­pe­ti­tion to prod­ucts with $20 bil­lion in an­nual sales, or al­most a third of the com­pany's an­nual rev­enue. While the drugmaker moved to make up for the ex­pected losses un­der Kindler by ac­quir­ing Wyeth, it also has had five set­backs this year in de­vel­op­ing its ex­per­i­men­tal drug pipe­line.

In March, the com­pany said its ex­per­i­men­tal Alzheimer's drug Dime­bon, which an­a­lysts said could have gen­er­ated $5 bil­lion in an­nual sales, failed to help pa­tients in a late-stage test. That same month, Su­tent, ap­proved for kid­ney and stom­ach can­cers, failed in two stud­ies to shrink breast tu­mors, and the ex­per­i­men­tal drug fig­i­tu­mumab didn't help lung can­cer pa­tients.

Last month, Pfizer and Bris­tol-My­ers Squibb Co. halted a trial of their ex­per­i­men­tal blood thin­ner, apix­a­ban, af­ter an in­crease in bleed­ing out­weighed ben­e­fits for pa­tients who re­cently suf­fered a heart at­tack or se­vere chest pain. -Bloomberg

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