Jeff Kindler: ‘The New Pfizer Acts Decisively’
9 CommentsBy Ed Silverman // April 24th, 2008 // 9:54 am
There is a trend here. A drugmaker sees its stock plummet and its image battered and, suddenly, the ceo makes an appearance. In less than one week, Schering-Plough’s Fred Hassan and Merck’s Dick Clark emerge from their shells to give interviews. Now, Pfizer’s Jeff Kindler does the same. Jeff, you may know, is not one to glad hand the media. In fact, he generally avoids contact. But in a little chat with The Wall Street Journal he tries to bare his soul by fessing up to everything that has been going wrong. Such a list. Here is an excerpt…
WSJ: What are you going to say to get shareholders excited about your strategy?
Jeff: We have a very clear plan to position ourselves to continue to be a strong, growing and profitable company after the loss of Lipitor’s exclusivity. Clearly, in the year that we lose Lipitor that’s going to be a meaningful event. It’s the largest pharmaceutical product in history. But we’re putting together and already implementing the strategies that, in the period following that, we believe will generate substantial top- and bottom-line growth.
Our thought: Maybe so, Jeff, but you missed earnings and analysts are lowering their estimates. That doesn’t sound very exciting, does it?
WSJ: There’s been impatience on Wall Street to see results. How fast is too fast to expect them?
Jeff: You have to set a strong foundation before you can do much else. I think it would be foolish to try to accomplish a lot of things before you have the capabilities of doing them, and we needed to fix the foundation of this company in a whole host of ways. And I feel that we’ve done that. You have to have the right leadership team, right structure and right culture, and we’ve made enormous progress in that. The important thing is we have a very clear and strong plan that we have a lot of confidence in, but I fully understand that people expect us to deliver results from that plan and we’ll be judged on how well we execute.
Our thought: One analyst believes your long-term challenges are almost “unfixable.” Perhaps a big acquisition is the answer, but you keep saying no.
WSJ: The company has been through a lot of layoffs. Are you concerned about morale?
Jeff: There’s no question that the company has been through a lot of disruptive change over the last five or six years. People here don’t like reading articles about our challenges and certainly aren’t happy about the stock price, so it is very important to keep people engaged. One of the things I’m discovering (is that) people who have a passion for what we do and recognize the need to change how we operate to be successful, they really want to be here right now.
Our thought: People also have a passion for money. Take yourself, Jeff. Your pay package last year increasd by 10 percent to $12.6 million, even though earnings plunged. Do you think that has anything to do with morale?
WSJ: Have the unforeseen issues derailed your transformation at all?
Jeff: No. In fact, let’s take Exubera as an example. We made a clear and decisive action to end the marketing of that drug. The new Pfizer acts decisively and is focused on sound capital allocation and faces reality. And you know, I don’t know of a lot of examples that are similar to that in the past. So would I have rather Exubera been a great, successful product? Of course. But not everything is going to work in this industry - it’s by nature risky - and the key is to understand when it’s time to move on because we are entrusted with our owners’ capital, and they don’t want us throwing bad money after good.
Our thought: You were so decisive that you didn’t bother to tell your Exubera supplier in advance. Never mind the bad blood. Such moves may make others wonder whether Pfizer can really be a partner of choice.
WSJ: What’s a typical week like for you?
Jeff: I spend a lot of time on the road. I’ve gone on rides (with sales representatives). They don’t tell anyone who I am, so I get treated like everyone else. And, by the way, everyone is different. I can go out on a sales call and go to one doctor who will give us a tremendous amount of time and have a great interchange, and then we go to the next office and they say no reps allowed. Or the doctor is so busy that he or she can’t see us. It’s not one size fits all.
Our thought: Did you offer to pay for lunch?
Nathan
Ed,
The first two of your interjected thoughts represent a significant chunk of the problem with the pharma industry. We are doing research that takes literally a DECADE OR MORE. A change in strategy by the CEO is not going to have an impact on the bottom line for many, many years. You are doing our industry a disservice by perpetuating the myth the good quarterly earnings means that a company is healthy. The fact that Pfizer did or did not meet their earnings is frankly almost irrelevant to the success or failure of the company’s strategy to deal with the Lipitor loss. Are you really suggesting that another mega-merger is the answer? I’ve actually heard more speculation about the opposite — that the company may split into multiple smaller businesses. How many failed mergers does it take for people to realize that bigger isn’t better in this industry?
Ed Silverman
Hi Nathan,
Perhaps I’m not being articulate ehough today. I’m not attempting to suggest that quarterly earnings are the only way to measure progress. But the question was about excitement, and no one is excited when disappointments continue to arise, especially when companies offer some form of guidance in advance. In that context, the disappointments only magnify the situation.
As to deals, I wasn’t suggesting a mega-merger, but that meaningful M&A may be the only way out of a situation where R&D can’t do the trick. Other drugmakers are increasingly taking this route. Granted, a deal for the sake of a deal is no fix - prices and pipelines are quickly scrutinized by investors when a big drugmaker buys a smaller, but sizeable player. But Pfizer is largely on the sidelines at the moment.
Hope this helps,
ed
Troubled
I think this is Kindler’s ultimate strategy:
PFIZER TO CUT WORKFORCE 120 PERCENT
NEW YORK, N.Y. (AP.com) - Pfizer will reduce its workforce by an
unprecedented 120 percent by the end of 2008, believed to be the first
time a major corporation has laid off more employees than it actually
has.
Pfizer stock soared more than 12 points on the news.
The reduction decision, announced Wednesday, came after a year-long
internal review of cost-cutting procedures.The initial report concluded
the company would save $1.2 billion by eliminating 20 percent of its
108,000 employees.
From there, said a spokesperson, “it didn’t take a genius to figure out
that if we cut 40 percent of our workforce, we’d save $2.4 billion, and
if we cut 100 percent of our workforce, we’d save $6 billion. But then
we thought, why stop there? Let’s cut another 20 percent and save $7
billion.
“We believe in increasing shareholder value, and we believe that by
decreasing expenditures, we enhance our competitive cost position and
our bottom line,” he added.
Pfizer plans to achieve the 100 percent internal reduction through
layoffs, attrition and early retirement packages. To achieve the 20
percent in external reductions, the company plans to involuntarily
downsize 22,000 non-Pfizer employees who presently work for other
companies.
“We pretty much picked them out of a hat,”.
Among firms Pfizer has picked as “External Reduction Targets,” or ERTs,
are Quaker Oats, AMR Corporation, parent of American Airlines, Lockheed,
Boeing, and Charles Schwab & Co. Pfizer’s plan presents a “win-win” for
the company and ERTs, said Chris, as any savings by ERTs would be passed
on to Pfizer, while the ERTs themselves would benefit by the increase in
stock price that usually accompanies personnel cutback announcements.
“We’re also hoping that since, over the years, we’ve been really helpful
to a lot of companies, they’ll do this for us kind of as a favor,”.
Legally, pink slips sent out by Pfizer would have no standing at ERTs
unless those companies agreed. While executives at ERTs declined to
comment, employees at those companies said they were not inclined to
cooperate.
“This is ridiculous. I don’t work for Pfizer. They can’t fire me,” said
Kaili Blackburn, a flight attendant with American Airlines.
Reactions like that, replied the Pfizer spokesperson “are not very
sporting.”
Inspiration for Pfizer’s plan came from previous cutback initiatives,
said company officials. In January of 1998, for instance, the company
announced it would trim 18,000 jobs over two years. However, just a year
later, Pfizer said it had already reached its quota. “We were quite
surprised at the number of employees willing to leave Pfizer in such a
hurry, and we decided to build on that,”.
Analysts credited the short-term vision, noting that the announcement
had the desired effect of immediately increasing Pfizer’s share value.
However, the long-term ramifications could be detrimental, said Bear
Stearns analyst Beldon McInty.
“It’s a little early to tell, but by eliminating all its employees,
Pfizer may jeopardize its market position and could, at least
theoretically, cease to exist,” said McInty.
The spokesperson, however, urged patience: “To my knowledge, this hasn’t
been done before, so let’s just wait and see what happens.”
Melody
Troubled–
That sounds like a plan to me. If it were pursued by most of corporate America we might see a true paradigm shift in the way business is conducted. Employees would have no way to deny that their place in the organization is merely viewed as “labor units,” consumers would recognize that they are only “consumer units” and ultimately, shareholders and executives would recognize that without employees and consumers–they have nothing, they ARE nothing.
Maybe the (former) employees (now unemployed) and consumers (with nothing to consume) could form cooperative associations and tell (what’s left of) corporate to “eat cake.”
Jack2
Isn’t that what the USSR tried for 70 years. I forget how that ended.
-employee unit
a PFE rep
Maybe morale would be better if two partners with identical sales territories weren’t being credited with different sales achievement, resulting in loss of bonus and ranking for the lower one,who has done equal work. This is a problem across the field force, yet the VPs refuse to address it. Meanwhile, our CEO gets a 10% raise while our stock drops. Pfizer can BUY R&D. It can’t buy a motivated, loyal sales force.
Pfired
I might believe a Pfizer turnaround when “the elite” move the headquarters from the most expensive, highest taxed, part of New York city to the burbs.
Lisa Van S
Pfired,
You forgot to mention the not so cheap train tickets.
HorusCat
Pfired,
Lilly seems to do just find in affordable Indianapolis. When I used to work for Big Blue, I always wanted to go to HQ, but with a husband and 3 kids, we could never afford to live close enough to make the commute reasonable. They wonder why they can’t attract good female talent–it’s because married women with kids and working spouses can’t make the relocation to regional HQ and global HQ.