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How Pfizer's Breakup Plan May Explain Sudden Exit of Former CEO

Is it any coincidence that Pfizer (PFE) CEO Ian Read (top) proposed breaking off 40 percent of the company just weeks after former chief Jeff Kindler left the company without warning on a Sunday night last December?

Kindler was responsible for Pfizer's largest acquisition, the $68 billion takeover of Wyeth, in addition to its most recent, the $3.6 billion buyout of King Pharmaceuticals. Read's plan -- to sell or spin off all the bits of the company that aren't directly developing new prescription drugs for humans -- is the polar opposite of Kindler's.

Whereas Kindler hoped to acquire his way through the impending loss of Pfizer's biggest product, the $13 billion-a-year-selling Lipitor, Read wants to unwind much of that work, jettisoning the generics and consumer products that came to the company through Wyeth and King.

We will probably never know why Kindler resigned suddenly on a Sunday evening in December as he and the company signed a pact of silence that prevents either of them from discussing each other. But consider the timeline:

  • January 2009: Pfizer acquires Wyeth for $68 billion, making Pfizer the largest drug company on the planet.
  • October 2010: Pfizer acquires King for $3.6 billion.
  • 2006 through December 2010: PFE falls from $28.04 to $17.02 during Kindler's tenure as acquisitions dilute Pfizer stock and drain the company of cash.
  • Dec. 6, 2010: Kindler resigns suddenly over the weekend because the job was "extremely demanding on me personally." Insider Ian Read is appointed CEO immediately.
  • Feb. 2, 2010: Read says the company's R&D budget will shrink.
  • March 14, 2010: Read floats plan to rid Pfizer of its consumer, animal health, generics and Capsugel pill-making businesses.
How likely is it that Read developed his spinoff strategy from scratch in that short December-March timeframe? He would have had to analyze the company, run some numbers, decide on a spinoff strategy, present it to the board and other important stakeholders, and get their buy-in. The plan, if executed, would essentially be a repudiation of everything Kindler stood for.

One is tempted to speculate that Read's sudden, friction-free assumption of the corner office at Pfizer and the consequent break-up plan were being worked on prior to Kindler's departure.


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