Pfizer Inc. directors named Jeffrey B. Kindler, the company's general counsel and a former McDonald's Corp. executive, as chief executive, succeeding Henry "Hank" McKinnell at the helm of the world's largest pharmaceutical company. Mr. McKinnell will serve as chairman until he retires in February 2007, a year ahead of his planned retirement.
Mr. Kindler, who joined Pfizer in 2002, will be charged with returning luster and growth to the struggling company, which moved to dominance in the pharmaceutical industry in the 1990s when it became one of the world's most successful major corporations.
Mr. Kindler, 51 years old, beat out two other internal candidates for the top job: Karen Katen, 57, head of the company's human-health group, and David Shedlarz, 58, head of finance. All three were appointed vice chairmen and joined Mr. McKinnell in a four-person executive committee 18 months ago, a move that set up an intensely watched horse race for the corner office.
Earlier this year, the board had indicated it was satisfied with Mr. McKinnell's leadership and expressed confidence that the company would work its way through one of its worst periods in recent memory. But Pfizer's languishing stock price and internal strife resulting from the CEO contest were among factors that prompted the board to take action, according to several people familiar with the action. There also was controversy over Mr. McKinnell's compensation.
Mr. Kindler said in a statement it is a "privilege to assume responsibility" for leading Pfizer. Noting that the drug business is "undergoing unprecedented change, he said, "We will transform virtually every aspect of how we do business, focusing on actions that create and sustain value for our shareholders." Mr. Kindler was also elected to the board.
Mr. Kindler clerked for U.S. Supreme Court Justice William J. Brennan Jr., was a partner and litigator at Williams & Connolly and later took an in-house role as leader of litigation and legal policy at General Electric Co. In 1995, he jumped to fast-food giant McDonald's to become its general counsel. He later relinquished the legal reins there to become Chairman and CEO of Boston Market Corp., owned by McDonald's, and president of Partner Brands, also owned by McDonald's.
While at McDonald's, he was required to work in a McDonald's like other employees. "Of all my experiences in life, the most frightening thing I've ever had to deal with was to stand behind the counter of a McDonald's and see three school buses pull up," he said in an interview with The Wall Street Journal earlier this year.
He joined Pfizer as general counsel in 2002.
At most drug makers, legal battles have intensified in recent years over product liability and patents. On these issues, Mr. Kindler has been the architect of Pfizer's strategy, including the successful defense of patents for the blockbuster cholesterol drug Lipitor in the U.S. and United Kingdom.
For the task of reigniting Pfizer's growth, Mr. Kindler will have enormous resources: The company has a hoard of cash and has already announced plans to spend $17 billion on acquisitions and as much as another $17 billion on stock buybacks over 18 months.
But he will face daunting challenges -- including growing competitive pressure on Lipitor, its biggest seller -- and a fast-changing marketplace where both new science and pricing pressures are challenging the business model on which both Pfizer and its brethren had thrived until recently.
Moreover, the company's return to a growth track may depend heavily on something over which the new CEO will have little control: the fate of its experimental drug torcetrapib against cardiovascular disease. Some analysts believe the drug has a chance to eventually eclipse Lipitor in sales. Strongly positive studies could lead to approval in 2008, analysts say. But even a modest stumble could delay its coming to market until 2010 or 2011, they add, substantially prolonging current profit woes. Competitors loom as well.
Pfizer directors began their all-day huddle early Friday morning at the midtown offices of Cadwalader, Wickersham & Taft, one of the company's outside law firms. Though it wasn't a regularly scheduled meeting, the special board session had been arranged a month ago, one person close to the situation said late Friday.
"Nobody knew coming into the meeting today that [directors] would reach consensus on a candidate" nor reach consensus on the timing of Mr. McKinnell's departure, the informed individual said. Board members hadn't previously discussed the possibility of moving up his departure date, but directors quickly reached agreement, the person added. "There were no extended arguments."
Some directors favored Ms. Katen because she has more operational experience than Mr. Kindler, according to this individual. Other directors were eager for a decision because they had become increasingly perturbed by the protracted horse race launched in February 2005.
"Once you start the [succession] process, it gridlocks the organization," a knowledgeable person said. "You want to make it done as fast as possible. The only thing worse than that is making the wrong decision."
Pfizer named Mr. McKinnell as successor to CEO William Steere in January 2001. Mr. Steere remains a Pfizer board member and is also a board member of Dow Jones & Co., publisher of The Wall Street Journal.
The stock of Pfizer began 2001 at $41.19 and Friday was at $26.11 in 4 p.m. New York Stock Exchange composite trading, a decline of nearly 37%. Growth in net income at the company has slowed; Pfizer earned $7.79 billion in 2001 and $8.09 billion last year.
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