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Incoming Pfizer CEO faces tough challenges

Analysts react favourably to Jeffrey Kindler's appointment, saying he will reinvigorate the global number one

Jeffrey Kindler, who replaced Hank McKinnell as chief executive of Pfizer on Friday, has promised to implement massive changes at the world's largest firm.

However, analysts have warned that not only will any turnaround take a certain amount of time due to the sheer size of the company but also that Kindler will face many tough challenges as Pfizer attempts to reignite profit and sales growth.

Kindler, 51, was selected ahead of internal rivals, David Shedlarz, vice-chairman, and Karen Katen, head of human health at Pfizer, both of whom have higher profiles outside the firm.

The new chief executive is not only a relative newcomer to Pfizer but to the pharmaceutical industry in general. He joined the firm in 2002 from fast-food group, McDonalds where he was general counsel.

The Pfizer board named Kindler chief executive with immediate effect, while McKinnell remains as chairman until February, when he is expected to retire.

Since Kindler's inception, Pfizer has shielded him from the press and declined to make him available for any interviews over the weekend saying he has a ìvery full agenda over the coming daysî meeting with employees, investors and corporate partners.

In a statement, Kindler said that in response to ìunprecedented changeî within the industry, Pfizer planned to ìtransform virtually every aspect of how we do businessî.

ìWe will make Pfizer more efficient and cost-effective, and reduce organisational layers to speed decision-making,î he added.

Stanley Ikenberry, a director at Pfizer, said the board was confident that Kindler would do a superb job in leading the company: ìHis respect for colleagues reflects one of Pfizer's most important values. Jeff is a leading advocate of change.î

Analysts have reacted positively to the appointment, saying that his status as a relative newcomer to the industry would actually stand him in good stead for the task of turning the company around. Tim Anderson at prudential Equity Group, said the infusion of new thinking and new management style ìshould be viewed favourablyî.

One of the most urgent challenges Kindler faces is how to deal with emerging questions over its highly anticipated experimental cholesterol drug, torcetrapib, which Pfizer hopes could eventually eclipse top-selling statin, Lipitor, in sales. There are concerns that tocetrapib can cause slight increases in blood pressure.

In the light of the blood pressure concern, The US Food and Drug Administration may want to see if the drug prevents heart attacks and cardiovascular deaths, pushing potential approval off until at least 2010.

Pfizer is also facing patent expirations of some of its top-selling brands, and its research labs are under pressure to produce new medicines to fill gaps in the pipeline. Lipitor, which currently rakes in $12.1bn a year, is likely to come under pressure from generic versions of other statins as well as AstraZeneca's Crestor.

While Pfizer has insisted that McKinnell's early ousting as chief executive (he was due to retire in 2008) was due to a need for new leadership to accelerate the company's transformation, there have been indications that the investor community had been unhappy with his tenure for some time.

Many became hostile after a 41 per cent drop in share value, despite McKinnell being the highest paid chief executive in the pharmaceutical industry.

ìUnfortunately for him, he oversaw the company in a difficult period, even though a lot of those pressures were not of his doing,î said Deutsche Bank analyst, Barbara Ryan. ìHe also didn't help his cause by being the type of leader that people would rally behind, that people would have tremendous confidence and respect for. He was caustic in his addresses to shareholders and analysts and often seemed unrealistic.î

She cited his statement that he would make Lipitor grow ìto the end of the decadeî as one such unrealistic promise.

McKinnell joined Pfizer in 1971 in Tokyo and worked in several international positions, including president of Pfizer Asia, before being named as chief executive in 2001. The year before he took the job, he was in charge of Pfizer's $116bn hostile takeover of Warner-Lambert. Three years later, he oversaw Pfizer's $60bn acquisition of Pharmacia.

30th September 2008

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