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Pfizer Chief Says Growth Is Imminent

The world’s largest drug company, Pfizer, has handled mergers badly, invented too few drugs and left its reputation in disrepair after two criminal cases.

And that is the assessment of its own chief executive.

But Jeffrey B. Kindler, Pfizer’s chief since 2006, says the pharmaceutical giant is poised to enter a new period of growth from its $68 billion purchase of Wyeth six months ago — the largest acquisition in the nation last year — and, paradoxically, by dividing itself into nine semi-autonomous business units meant to diversify the company’s products.

Jeff Kindler, Pfizer Chairman and CEO
AP
Jeff Kindler, Pfizer Chairman and CEO

“The key to all this,” Mr. Kindler said in a rare interview Wednesday, “is speed and decisiveness.”

Business analysts say important tests are looming: can Pfizer capitalize on new customers from the health care overhaul in the United States and emerging markets overseas? Will the company fall into a sales trough after the November 2011 patent expiration for Lipitor, the cholesterol fighter and world’s top-selling drug?

And then what? More products, Mr. Kindler said, but none of them accounting for more than 10 percent of sales. Last year, Lipitor brought in $11.4 billion of Pfizer’s $50 billion total revenue.

“When I got this job, we were looking at the Lipitor cliff,” said Mr. Kindler. “We went from being ‘the Lipitor company,’ which was not frankly a sustainable business model, to a much more diverse business.”

But analysts are not sold yet as Pfizer eliminates jobs, trims office sites and searches high and low for new opportunities.

“They’re going down the path of diversification, but what does that mean?” said Catherine J. Arnold, a drug industry analyst at Credit Suisse. “I don’t think they know yet.”

As for the merger with Wyeth, Ms. Arnold added: “Kindler’s legacy has not been defined yet. Doing the deal is not enough.”

Most of all, analysts say, Pfizer has to deliver new drugs.

It may seem an obvious goal for a drug maker. The New York-based Pfizer, however, has grown into a giant over the last decade not by discovering new blockbusters but by buying three competitors and their product lines.

Pfizer acquired Warner-Lambert and Lipitor for $90 billion in 2000, and Pharmacia and its painkiller Celebrex for $60 billion in 2003. The takeovers, Mr. Kindler said, did not go smoothly. Stock analysts panned the results.

But Mr. Kindler says the Wyeth deal gives it a new start in areas where Pfizer was weak. Wyeth held the world’s top-selling vaccine, Prevnar 13, and co-owned the top-selling biologic drug Enbrel for arthritis. And unlike in past mergers, important executives in the target company were given top positions at Pfizer.

“No one at Wyeth expected this to be a pleasant experience, myself included,” Geno Germano, the former president for Wyeth’s United States and pharmaceutical business units, said. “But it was much more positive than that.” Mr. Germano is now president of Pfizer’s specialty care business.

Two former Wyeth senior executives joined Mr. Kindler’s 12-person executive leadership team. Pfizer also has two research chiefs, one from Pfizer for the chemical-based drugs that have been blockbusters in the past, the other from Wyeth for the biotech drugs that were its strength.

Pfizer, clearly, is still in a period of intense change, if not angst. Recently the company announced it would trim more than $2.5 billion out of the $11 billion research and development budgets of the combined companies by 2012.

“My whole point is bigger isn’t better,” Mr. Kindler said. “And by the way, we’re still at $8.5 billion. It’s a lot of money. Shame on us if we can’t be productive with $8.5 billion.”

Frank A. D’Amelio, chief financial officer, said Pfizer has banked more than $1 billion in savings from the merger to pursue opportunities. “We can go out and buy some late-stage assets,” he said, referring to drugs nearing approval.

Post-Lipitor, the company is looking for paydays in vaccines, Alzheimer’s and oncology. Pfizer plans to file this year for Food and Drug Administration approval of the infant vaccine Prevnar 13 to protect older adults against bacterial infections, pending the outcome of a trial involving 85,000 adults in the Netherlands. Pfizer also still hopes for a successful Alzheimer’s drug, though one crucial trial ended in failure last month.

Wall Street, however, is not enamored with Pfizer’s research prospects. “Some companies might be better at it than others,” said C. Anthony Butler, pharmaceuticals analyst with Barclays Capital.

Meanwhile Pfizer is trying to catch up with European drug companies in the fast-growing emerging markets, while adding generic drugs and consumer products that bring lower margins but higher predictability, Mr. Butler said.

“I think they’re trying to emerge as a diversified health care distributor instead of just a pharmaceutical company,” he said.

As Pfizer tries to move on, it is still dogged by federal criminal investigations and civil trials accusing it of illegal promotion of products for unapproved uses.

Warner-Lambert signed a corporate integrity agreement with the government in 2004, four years after Pfizer acquired it, for illegal marketing of the epilepsy drug Neurontin for bipolar disorder, migraines and pain. Pfizer signed another one last year over illegal marketing of the painkiller Bextra and other drugs; that plea bargain included a $2.3 billion fine, the largest criminal fine in the nation’s history.

Mr. Kindler said he intended to turn a new leaf on the legal troubles, too.

“I take this very, very seriously,” he said, adding: “When you acquire Warner-Lambert you get Neurontin, and when you acquire Pharmacia you get Bextra, and some of these problems came with the acquisitions. It doesn’t change the facts or our responsibility for them. It may add to the number of events. Let’s put it that way.”

Pfizer also inherited thousands of personal injury lawsuits over hormone replacement products from Wyeth. Whether that tarnishes the latest purchase remains to be seen.