Pfizer Case Study

Abstract

The current problem with Pfizer is one of corporate governance. On one hand, the company did exceedingly well from 1993 to the year 2000. William Steere was the CEO during this time serving from 1991 to 2001. On the other hand, the company did poorly ever since. This lack of successful performance is embodied in the company's stock. While Steere might have marginally contributed to the success of Pfizer during the latter half of the 90s, he undoubtedly caused the company's gradual decline during the last decade. Overall, notwithstanding if Steere was the direct cause of the company's awesome performance at the end of the last century, he should not have been allowed to exert as much influence as he did after he was no longer CEO. Different strategies should have possibly been employed by the company, and CEOs like Jeffrey Kindler should have been able to effectuate those strategies as they saw fit with the limiting oversight of Steere.

William Steere's contributions as CEO

William Steere cannot be given all of the credit for the great success of Pfizer during his tenure as CEO from 1991 to 2001. Although Pfizer had exceptional growth and profitability towards the end of his tenure, the result cannot be directly contributed to any significant contributions Steere made that made him any different from other CEOs. It seems as though he just happened to be head of the corporation during a time when profitable drugs were in the pipeline or being created by Pfizer such as Viagra -See Appendix Graphs 1 through 7. After analyzing the stock returns during his tenure, there were five dates where Pfizer stock rose substantially. Further analysis of these dates shows that most of these increases in stock price had little to do with Steere or major decisions he made. One positive impact he did have, however, is acquiring the pharmaceutical company, Warner-Lambert.

Pfizer's miracle drug: Viagra

Steere was fortunate to be CEO during a time when numerous drugs were in the final stage of development or in the process of being acquired. As seen in exhibit 1 below, three of the main spikes in stock price during Steere's tenure were between March 23 and April 20 in 1998. All of these spikes had a direct relationship with the drug Viagra. The March 23 spike was due to the Federal Drug Administration (FDA) being likely to approve the drug by the end of March. The April 16th spike was due to an initial sales report about Viagra that showed that it was likely going to outperform market expectations. The April 20th spike was due to an official sales report that showed how many sales Viagra had during its first week of sales in the United States. Unfortunately for Steere, these stock increases cannot be attributed to anything he did in particular. After reviewing the history of Viagra, it is clear that this drug was developed long before he was CEO. However, he happened to be CEO when the drug was patented and sales began. Steere's image is enhanced due to this drugs overwhelming success, even though he did not have any direct impact on its performance -See Appendix Tables.

Partnerships at Pfizer / Success of Viagra

Later in 1998, the stock price of Pfizer had its second largest increase during Steere's time as CEO. This time the stock price increased significantly because the 3rd quarter earnings reports for Pfizer were released. Although Pfizer did not reach the earnings level that people had hoped for, people still invested in the company. This was largely due to the fact that Pfizer had everything in place for continued growth. This activity ranged from partnerships with other drug developers that they would help market to the continued and expected success of Viagra. Again, the rise in stock price, however, was not directly attributable to Steere or a decision that he implemented.

Warner-Lambert and Lipitor: Steere's contribution to Pfizer

The greatest increase in stock price occurred in April of 2000. On this date, Warner-Lampert released its earnings reports. The data showed greater than expected earnings which were predominantly attributable to the success of its cholesterol-lowering drug, Lipitor. This day is also when it was announced that Pfizer would acquire Warner in the coming weeks. It is not hard to imagine that people now realized the strength that Pfizer would have when they acquired Warner-Lampert and opted to buy stock. The combination of Lipitor and Viagra under one pharmaceutical company would be an enticing opportunity for any investor given the success of these drugs up to this point, let alone the potential in each company. The acquisition of Warner-Lampert is the only decision made by Steere that had a direct and significant impact on Pfizer's stock price. One can conclude that although Steere was CEO during a period when Pfizer had significant expansion and earnings, it is not directly due to the management of Steere. He just happened to be in office when major "blockbuster" drugs were being released and strategic acquisitions occurred.

Jeffrey B. Kindler

To assess the performance of Jeffrey B. Kindler as Pfizer CEO we should take into consideration two important factors: the overall economic situation during his tenure and performance of the company when he became a CEO.

The state of the economy and its impact on the pharmaceutical industry

Jeffrey Kindler replaced Henry A. McKinnel as the CEO on July 31, 2006. At this period Pfizer's performance was already not as successful as it was in the 90s. Pfizer's stock price was generally decreasing since 2000, revenues in