Pfizer's New Chief Faces Challenges

In naming Jeffrey B. Kindler as chief executive officer, Pfizer Inc.'s directors are bringing a fresh face to the helm of the pharmaceutical giant, but one whose skills to fix Pfizer's problems are little known outside the company.

As chief executive, Mr. Kindler, who had been a vice chairman and general counsel, faces several urgent challenges, from emerging questions about the company's highly anticipated new cholesterol medicine, torcetrapib, to relations with the investment community, where some have become disenchanted with Pfizer's top leadership. He comes to the top job having limited operational experience and only four years in the pharmaceutical industry after joining Pfizer in 2002.
Mr. Kindler, 51 years old, was selected Friday, capping a highly visible 18-month contest for the CEO spot with two internal rivals. He succeeds Henry A. "Hank" McKinnell, who was forced to relinquish his CEO duties 18 months ahead of schedule. Mr. McKinnell is to remain chairman until February.
The New York company declined to make Mr. Kindler available for interviews over the weekend, saying he has a "very full agenda over the coming days," reaching out to employees, investors, corporate partners and other constituencies. Mr. McKinnell also was unavailable to comment.

In a statement issued late Friday announcing his appointment, Mr. Kindler, a former executive at McDonald's Corp. and a vice president at General Electric Co., pledged to "transform virtually every aspect of how we do business." Without providing details, he said he would aim to make the company more efficient and cost-effective.

Mr. Kindler's appointment "was a surprise," said Mike Krensavage, drug-industry analyst at Raymond James & Associates. "I'm not sure what to expect from him."
Matthew Paull, chief financial officer at McDonald's, worked with Mr. Kindler for about five years when Mr. Kindler was general counsel at the fast-food giant. "He was much more than a lawyer," Mr. Paull recalled. "He was very strong on strategy." Soon after he arrived, Mr. Kindler wrote a "lengthy white paper" urging that more company resources belonged away from headquarters and closer to the customer, Mr. Paull said. "It was exactly the right thing to do." The company adopted the idea.

Mr. Kindler also engineered McDonald's acquisition of the Boston Market restaurant franchise, then in Chapter 11 bankruptcy proceedings. The intent was to acquire real-estate sites for more McDonald's restaurants, but Mr. Kindler convinced the company that the Boston Market restaurants could still be a good business, said Mr. Paull, whom Pfizer helped make available for an interview. Mr. Kindler eventually became CEO of the business unit that ran the operations, restoring them to profitability.

Mr. Kindler takes Pfizer's reins in the face of patent expirations affecting some of its top-selling drugs and uncertainty over how well new medicines in its research and development pipeline will pick up the slack. In particular, Lipitor, its $12.1 billion cholesterol drug, is under pressure from generic versions of another statin as well as branded rivals such as AstraZeneca PLC's Crestor, while the antidepressant Zoloft just went off patent. (more about drug pipeline by pfizer and competitors at http://www.chartsbank.com/PipelineList.aspx )

Pfizer's best chance to return to a growth track is torcetrapib, an experimental drug that raises HDL, or good cholesterol, that some analysts think could eventually eclipse Lipitor in sales. The first major indication of the drug's prospects is expected to come with results of an important study in next year's first quarter.

But some excitement about the drug is muted by worries that it causes small increases in blood pressure. In addition, the impending trial is based on imaging to see whether the drug halts or regresses development of disease in coronary arteries. The Food and Drug Administration, especially in the presence of the blood-pressure concern, may want to see whether the drug prevents heart attacks and cardiovascular deaths, analysts say. That could push approval off at least until 2010. Pfizer says it believes any increase in blood pressure can be "easily monitored and managed clinically."
"Torcetrapib is the biggest bet in the pharmaceutical industry," Mr. Krensavage said.

Richard Evans, an analyst at Sanford C. Bernstein, said Pfizer has a similar compound that may skirt the blood-pressure problem, suggesting that one challenge facing Mr. Kindler is whether to ramp up development efforts on that agent in case the course with torcetrapib goes awry.

Another issue is the future of Karen Katen, 57, and David Shedlarz, 58, both vice chairmen and longtime Pfizer executives who were CEO candidates. Ms. Katen, heads the human health division, the company's most important unit and is long on operational experience where Mr. Kindler is thin. Mr. Shedlarz, a former chief financial officer, is well known on Wall Street where he is viewed as the architect of the company's financial strategy. The company hasn't indicated what their status will be under Mr. Kindler.

Stan Ikenberry, the company's lead director, said Mr. Kindler's experience outside of Pfizer was a factor that gave him an edge over other candidates. The board also views him as a "bright, insightful strategic thinker" and a "strong leader, a person who motivates and inspires colleagues."