Pfizer CEO Kindler Has His Work Cut Out for Him

Investors want a fresh perspective for post-Lipitor Pfizer, but they're not yet convinced outsider Kindler is the one to bring it

By Arlene Weintraub

Of all the new CEOs who have taken over major pharmaceutical companies since 2006, Pfizer's (PFE) Jeffrey B. Kindler is the odd man out. Unlike his rivals, who spent decades in the drugmaking trenches, Kindler was a Washington lawyer whose biggest corporate coup prior to joining Pfizer in 2002 was saving McDonald's Corp.'s (MCD) Boston Market franchise from bankruptcy (BusinessWeek, 5/14/01). When asked how it feels to be the ultimate outsider in the struggling pharmaceutical industry, Kindler pauses at first, then answers with confidence. "The industry as a whole needs a fresh perspective," says Kindler, in his first BusinessWeek interview since being named CEO in July 2006 (BusinessWeek, 8/3/06). "I hope I bring to the table the ability to challenge long-held assumptions and provoke people to think about things differently than they have in the past."

It's clear investors believe Pfizer needs a fresh perspective, but they're not yet convinced Kindler is the one to provide it. Since he has has been CEO, Pfizer's shares have fallen 34%, to around 17—a price the stock hasn't seen since 1997. In his short tenure, Kindler has already suffered a string of disappointments. In December 2006 the company had to pull the plug on Pfizer's experimental cholesterol treatment torcetrapib, which investors were counting on to replace lost revenues when Pfizer's blockbuster Lipitor goes off patent in 2011. Less than a year later, Pfizer stopped marketing Exubera, an inhaled-insulin product for diabetes that it once predicted would be a $2 billion-a-year blockbuster (BusinessWeek, 10/18/07). The company has cut 10,000 jobs to slash costs (BusinessWeek, 1/23/07), but with the Lipitor patent expiration speeding toward reality, the Street's pessimism is palpable. Even though Pfizer's price-earnings ratio of 11 has fallen below those of giant rivals GlaxoSmithKline (GSK) and Sanofi-Aventis, only 2 of the 12 analysts who cover Pfizer have upgraded their ratings of the stock this year. And even they stopped short of naming the stock a "buy."

Kindler hears the call for improvements loud and clear. He has spent much of the past year restructuring the company into business units, each of which has its own management team and profit-and-loss responsibilities. On Oct. 7 he added three units, which will handle specialty care, primary care, and emerging markets. (The other three business units are animal health, oncology, and established products.) It's a departure from the old Pfizer structure, which was largely run by geographic managers reporting up to top management in the company's New York office. The idea, Kindler says, is to allow different pursuits within Pfizer to operate as if they were small, independent businesses. "They have to have the authority to move quickly and to innovate, without someone here in New York telling them what to do," says Kindler, 52.