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Pfizer CEO Quits After Stock Underperforms 97% of S&P

Former Pfizer CEO Jeffrey Kindler
Former Pfizer Chief Executive Officer Jeffrey Kindler. Photographer: Daniel Acker/Bloomberg

Pfizer Inc.’s chief executive officer Jeffrey Kindler left the top post at the world’s biggest drugmaker yesterday after the company’s stock underperformed its rivals over the 4 1/2 years of his tenure.

Pfizer’s price-earnings 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, 55, finishes at a low point; Pfizer’s price-earnings ratio in 2010 is 7.3, lower than the annual average for each year he’s been in charge.

The stock has dropped 35 percent since Kindler was named CEO just prior to a 2006 announcement that Pfizer’s most promising compound, the torcetrapib cholesterol pill, failed to help patients in a study. The company had spent $1 billion to develop the drug. Pfizer bought Wyeth in 2009 for $68 billion to add products to overcome lost sales when the Lipitor cholesterol pill, with $11.4 billion in sales, faces generic competition.

“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.”

Pfizer rose 9 cents to $16.81 at 4 p.m. in New York Stock Exchange composite trading. The stock had dropped 9.6 percent in the 12 months before today.

Read’s New Role

Kindler’s successor as chief, Ian C. Read, first joined Pfizer as an operations auditor in 1978, and has been the head of the global biopharmaceutical operations since 2006. Read, 57, must convince investors that the company can continue to internally develop innovative drugs with billions in annual sales, Funtleyder said.

Pfizer’s most promising experimental drugs include a pill for rheumatoid arthritis called tasocitinib and a treatment called crizotinib for a segment of patients with lung cancer. The drugs combined will have sales of about $2.3 billion by 2016, according to two analysts surveyed by Bloomberg. Pfizer is also partnering with Bristol-Myers Squibb Co. on an experimental blood thinner called apixaban.

Kindler’s “forte was not the pharmaceutical landscape, and I think with Ian Read, you get a pharmaceutical lifer,” said Manoj Garg, an analyst at Soleil Securities Corp.

Funtleyder and Garg said the change should be viewed favorably by investors.

Including invested dividends, Pfizer’s stock has declined 20 percent since Kindler was named CEO on July 28, 2006, compared with a return of 10 percent for the S&P 500 Pharmaceutical Index, according to data compiled by Bloomberg. Pfizer halved its dividend after the Wyeth acquisition.

Pfizer faces generic competition over the next five years on products with $20 billion in annual sales, or almost a third of the company’s annual revenue. To cut costs, Kindler has fired more than 14,000 workers, closed research labs and manufacturing plants.

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