During Kindler’s tenure the stock price of Pfizer went from $49 to $17 a share. The article talks about how smart Kindler is graduating with high honors from Harvard Law School and all of his prestigious positions before joining Pfizer. Kindler’s management style was aggressive and blunt. He often left angry voicemails late at night to other employees. From reading the article you get the sense that Kindler really didn’t trust anyone at Pfizer except himself. The HR department at Pfizer also seems dysfunctional. Mary McLeod was the head of human resources and was fired from Schwab for trying to remove rivals and claiming she had had the CEO under her thumb. She no longer works at Pfizer and due to poor rankings from her subordinates.
When Kindler took over there were two promising drugs Pfizer had. One drug was intended to increase good cholesterol, but this flopped when there was an increase in deaths compared to the control group. Another drug was Exubera which would allow diabetes patients to inhale their insulin through an inhaler. Between these two drugs Pfizer spent over $2 billion dollars and many years developing drugs that didn’t pan out. The average cost per drug approved for Pfizer between 2000 and 2008 was $6.7 billion. I really don’t blame Pfizer for this since the FDA puts burdensome regulations on drugs companies. Kindler tried to drastically cut research and development costs, however two people on the board who were doctors told him no. A drug CEO trying to cut research and development doesn’t make any sense since that is where nearly all their profit comes from.
Before Kindler took over the CEO was Henry McKinnell who ran Pfizer from 2001-2006. McKinnell had a strategy of putting more funding into research and development since drug companies are in the business of innovating. One problem with McKinnell is he was not in the office much. He was off funding charities in Africa and wrote a book about health care reform. McKinnell was ultimately fired because the stock price for Pfizer was down 46% since he had taken over. I am surprised McKinnell couldn’t create shareholder value considering he had a PhD in finance from Stanford.
At the end of the day the CEO takes responsibility for the performance of the company. However, I would argue though that the FDA has more control over the profitability of drug companies than any CEO. The FDA can reject a drug or ask for more clinical data which makes the company either write off their research and development costs or spend more on clinical research to try to get the drug approved.
I am becoming more skeptical that IQ, background, or educational credentials really tells you much about whether someone can run a business. Some people can be very bright but not practical or have business sense. People in business are paid for what they can bring to the future of the company not what they have done in the past.
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