Pfizer’s Kindler Said to Resign After Jilting Read
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 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.
‘Focus and Commitment’
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 fell 4 cents, or less than a percent, to $16.77 at 4:15 p.m. in New York Stock exchange composite trading. The stock declined 7.8 percent since the start of the year.
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 finished 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 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. The treatment was being tested to prevent heart complications in patients with a condition known as acute coronary syndrome.
Pfizer’s bosutinib treatment for leukemia wasn’t better than Novartis AG’s treatment Gleevec after a year, the company reported yesterday. The Pfizer-funded study of 502 patients is continuing.
Kindler served as both 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 statement.
Pfizer also said on Dec. 5 it was creating a $75 million fund and new compliance panel to settle shareholders’ lawsuits that charge top company officials failed to stop illegal marketing of drugs. Pfizer last year paid $2.3 billion to settle U.S. claims it marketed treatments for unapproved purposes.
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.
The dividend will probably increase by 10 percent a year through 2013, from 72 cents to about $1, Barbara Ryan, an analyst with Deutsche Bank in New York, said yesterday in a note to clients. She said Read’s appointment was “a logical one,” bringing “strong operational expertise and experience to the job.”
To contact the editor responsible for this story: Reg Gale in New York at Rgale5@bloomberg.net