Healthy Skepticism Library item: 14042

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Publication type: news

Pettypiece S.
Pfizer's Kindler Says He Inherited Inefficient Research Effort
Bloomberg.com 2008 Jul 28
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahyRxZ9sZ.gc&refer=home

Full text: Jeffrey Kindler, Pfizer Inc.‘s Chief Executive Officer, said that when he took over the world’s largest drugmaker two years ago today its $7 billion-a-year research operation was failing and needed to be reinvented.

``We’ve tried to dismantle this monolithic structure of R&D and create smaller therapeutic areas,’‘ Kindler, 53, said in an interview with Bloomberg Television. ``There absolutely needs to be more efficiencies in research and development across the industry, and Pfizer is no exception.’‘

The company inherited from former chief Hank McKinnell was saddled by slow decision-making, he said. Good projects couldn’t advance through management layers, and bad ones weren’t killed fast enough. The revamped drug discovery program may increase medicines in late stages of testing by 50 percent in 2009.

A lawyer whose only experience leading a company was at Partner Brands, operator of the restaurant chain Boston Market Corp., Kindler says steering Pfizer now, when its stock has been trading at an 11-year low, requires management skills more than industry knowledge.

``It is all about leadership,’‘ Kindler said in a July 26 interview, after Pfizer reported that profit had doubled in the second quarter, sending shares up 3.9 percent. ``I am not a scientist; I don’t pretend to be a scientist,’‘ he said. ``My father was a doctor and that’s as close as I’ll ever get to being a doctor. But I’ve learned to ask questions and listen.’‘

Change at the New York-based company is unavoidable as the company braces for generic competition in 2011 to the world’s best-selling drug, the Lipitor cholesterol pill, Kindler said.

Lipitor Losses

The drugmaker doesn’t have enough new drugs in development to replace revenue it will lose from Lipitor, with $12.7 billion in sales last year. Kindler has already eliminated 14,000 jobs, closed manufacturing plants, and increased the company’s sales outside the U.S.

Investor concerns over how Pfizer will replace Lipitor have sent shares down 30 percent since Kindler was named chief. Pfizer rose 8 cents to $18.89 on July 25 in New York Stock Exchange composite trading.

The number of drugs in the final stages of testing may rise to as many as 28 by the end of 2009 from 16 earlier this year, said Kindler, who previously served Pfizer as general counsel and board vice chairman.

Kindler was named chief executive in July 2006, replacing McKinnell, who was forced out after the stock fell 40 percent during his five years at the helm. McKinnell left with almost $200 million in severance, pension assets and performance awards.

New Units

Since Kindler took over, Pfizer has created smaller disease-based units to work on existing products and begun an independent biotechnology center and separate cancer division.

Pfizer’s competitors are pursuing similar strategies, said Kenneth Kaitin, director of the Tufts University Center for the Study of Drug Development in Boston.

London-based GlaxoSmithKline Plc, the world’s second- biggest drugmaker, has also set up small groups focused on targeted disease areas, basically creating ``an amalgam of many small companies,’‘ Kaitin said in a telephone interview. Novartis AG, based in Basel, Switzerland, set up a biotechnology center in Boston that operates like an independent company.

Improving research could help with the public perception of the industry, Kaitin said.

Forty-four percent of people said they had an unfavorable impression of the drug companies in a survey released this year by the Menlo Park, California-based Henry J. Kaiser Family Foundation. Only oil companies and health insurers had a worse approval rating.

Negative Opinions

The negative opinions were driven by the high cost of drugs and company profits. About 70 percent of people said drug companies are too focused on profits and 80 percent said medicines cost too much.

``The vast majority of drugs in the world were created by the private, innovative pharmaceutical industry. We have to do a better job of explaining that to people,’‘ Kindler said. ``When it comes to their health and money, a lot of people are frustrated about the prices and the fact that we make money. We at Pfizer are doing everything we can to improve that.’‘

Kindler defended the company’s prices, saying the cost to consumers reflects the time and money needed to support research operations. The Tufts center estimates it costs $802 million to develop a new drug.

``We are in a business that is about making money and returns for shareholders, and that is the only way we can innovate,’‘ Kindler said.