Dec. 6 (Bloomberg) -- Jeffrey Kindler’s refusal to name an operations chief in response to a push from senior managers cost him his job as chief executive officer of Pfizer Inc., according to a person familiar with the process.
Kindler, 55, quit yesterday hours before a special board meeting, the person said. Ian C. Read, 57, was named to replace him. Executives, including Kindler, met in September to discuss a succession plan and decided Read would become chief operating officer, taking over some CEO responsibilities, said the person, who declined to be named because the deliberations were private. That never happened.
Kindler in recent months had lost support of executives frustrated with his management style, the person said. At a time when New York-based Pfizer faces complex policy decisions, Kindler was focused on smaller matters and micromanaging his executives, according to the person.
The company has been dealing with a 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.”
Pfizer shares rose 9 cents, or less than 1 percent, to $16.81 at 4 p.m. in New York Stock Exchange composite trading. The stock has declined 9 percent in the past 12 months.
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. 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, an independent director, 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.’
Special Board Meeting
The board called the Dec. 5 special meeting sometime in the last week or two, the person said. Pfizer spokesman Ray Kerins declined to comment on the board deliberations. Kindler didn’t return calls to his home.
Pfizer has underperformed its rivals over the 4 1/2 years of Kindler’s 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 finishes at a low point: Pfizer’s 2010 price-earnings 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’s been in charge.
During his time as CEO, Kindler faced some of the toughest challenges of the industry, including the looming loss of Lipitor and the failure of one of the company’s most promising drugs, a cholesterol pill that was slated to replace Lipitor.
Months after Kindler took the helm in 2006, Pfizer halted development the cholesterol drug, called torcetrapib, after the drug failed to benefit patients in a study. To cut costs since, Kindler has fired more than 14,000 workers, 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 has 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.
While the drugmaker moved to make up for the expected losses under Kindler by acquiring Wyeth, it also has had four setbacks this year in developing its experimental drug pipeline.
Kindler served as CEO and chairman. The board will elect a new chairman, separating the two roles, at a meeting within two weeks, the company said in its Dec. 3 statement.
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