Brian O'Connell
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In case you haven't heard, Jeffrey Kindler, Pfizer's general counsel, is replacing long-time CEO Henry "Hank" McKinnell as
the new head of the company. There is a long-range strategy in naming a lawyer to run a drug company and I'll get to that
in a moment.
But first, it's worth noting that McKinnell had a target on his back ever since Pfizer revealed his Trump-worthy retirement
package, which amounted to a choice between a lump sum of $83 million or an annual pension of $6.5 million.
The wailing and gnashing of teeth reverberated from one of end of Wall Street down to the other, with investors piping hot
over giving such a generous package to a CEO who presided over a period of time when Pfizer's stock fell 40%. Over that same
period the American Stock Exchange Pharmaceutical index was down about 13%. Pfizer shares have traded in a 52-week range of
$26.98 to a low of $20.27 since last December—a black mark against not only the management of the company, but on the highly-paid
CEO who investors hold responsible for it.
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As one investment wag put it, "It's the equivalent of paying a .220 hitter $10 million a year."
KINDLER'S LIST
McKinnell also leaves at a time when the cupboard is bare, from a commercial drug point of view. In June 2006, Pfizer's patent
on Zoloft expired. The antidepressant drug became a household name across America and it became a cash cow for Pfizer, generating
$3.3 billion in 2005 sales. The company is also losing patent protection on two other blockbusters: blood-pressure treatment
Norvasc, which had $4.7 billion in 2005 sales, and allergy drug Zyrtec, with $1.3 billion in sales that year.
While new drugs like Exubera and Sutent could eventually reach the billion dollar mark in sales (analysts think they both
will) they may not reach the mega-drug status that Zoloft and Zyrtec did, and that could translate into a big drag on the
company's bottom line come 2007 and 2008, when generic drug makers make off into the night with much of Pfizer's customer
base.
Can naming Kindler as CEO change all that? It's hard to say. Wall Street views Kindler, an ex-McDonalds executive (he ran
the hamburger titan's Boston Market chain restaurant unit) as a strategic thinker who can tackle the thorny problems of a
lackluster drug pipeline and mount legal battles over patent issues surrounding Lipitor and painkiller Celebrex. That's only
going to help.
Kindler's legal background should come in handy on numerous fronts, too. Before going off to the private sector, Kindler made
his legal bones at the Federal Communications Commission and then clerked for a judge and for US Supreme Court Justice William
J. Brennan, Jr. His first foray into the legal sector came at General Electric, where he was Jack Welch's right-hand legal
man. Kindler squashed a price-fixing indictment involving GE and diamond seller De Beers, with the presiding judge tossing
out the case a mere six weeks into the trial after Kindler made mincemeat out of the prosecution's witnesses on the stand.
GE insiders say it was one of Jack Welch's favorite moments during his highly prominent tenure as CEO at GE.
That's crisis management at its best—a trait that the Pfizer board must have surely considered before tapping Kindler to the
post. After all, crisis management is one of the first "red flags" that shareholders look for in an effective CEO. And pleasing
the shareholders is, fairly or unfairly, job Number One for any CEO—from biotech companies to ball bearing makers.
