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Pfizer's CEO makes big play with $68 billion Wyeth deal

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TRENTON, N.J. -- Jeff Kindler took over as chief executive of drugmaker Pfizer Inc. (NSYE: PFE) in August 2006, just in time to sign off on his predecessor's $16.6 billion deal to sell off all its iconic consumer health brands, from Listerine to Sudafed -- to become a pure pharmaceutical company.

After 2 1/2 years of layoffs, paring research operations and other restructuring, Kindler's first bold step -- an answer to investor demands to take action ahead of a 2011 revenue crash -- is to spend four times as much to rediversify the company by acquiring rival Wyeth.

With it come a trove of vaccines, biotech drugs, veterinary medicines -- and consumer health products, many as well known as those it gave up, including Wyeth's Chap Stick, Centrum vitamins and Advil and Anacin pain relievers.

"He's done a lot of things in his short tenure," said Edward Jones analyst Linda Bannister, from creating stand-alone business units with more accountability to restructuring research and development to get out of areas where Pfizer doesn't have a competitive advantage.

"He's taken the steps that he needed to take internally to get the right structure in place" to make the big deal, she said.

Kindler, a 53-year-old Harvard Law School graduate and former legal clerk to U.S. Supreme Court Justice William J. Brennan Jr., has an unusual pedigree for a pharmaceutical CEO.

He worked as a partner at law firm Williams and Connolly, as General Electric's (NYSE: GE) top lawyer and as a vice president for McDonald's Corp. (NYSE: MCD), where he was general counsel and then president of some of its restaurant brands, including Boston Market and Chipotle Mexican Grill. He became Pfizer's general counsel and an executive vice president in 2002, moved up to vice chairman and head of corporate affairs in 2005, and then was tapped as CEO in July 2006.

By then, investors were starting to look ahead to the "patent cliff" when generic competition would hit Lipitor, the cholesterol treatment that is the world's top-selling drug and the source of $1 out of every $4 that Pfizer makes. That's now expected in November 2011, and six other drugs with sales totaling more than $4 billion are expected to face generic competition that year and the next.

Acquiring Wyeth will get Pfizer past the Lipitor loss and was the right choice among large pharmaceutical companies, said David Heupel, health-care portfolio manager at Thrivent Large Cap Growth Fund.

"It was a moderate-risk, high-probability-of-success type of deal," he said. Heupel would rather have seen Kindler show "longer-term vision" by buying technology-driven biotech companies with greater growth prospects than Wyeth.

Monday's news obscured "dire" numbers in Pfizer's quarterly earnings reports, from a big net income drop and weak profit forecast to a slashed dividend and huge layoffs, noted Heupel.

"We won't know whether it's a good deal until we get a few years out and see how well they've integrated," Heupel said. "That's what we're going to have to grade him on a year or two down the road."

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