After steering Pfizer through nine years of selloffs, spinoffs, reorgs, drug launches, patent losses, dealmaking—and one big deal that didn’t—CEO Ian Read is stepping aside. He’ll yield his chair to innovative medicines chief Albert Bourla, who was named COO last year in a move that signaled his step toward the top.
Running a Big Pharma for nigh on a decade is quite a feat. Typical CEOs don’t last that long. But Pfizer has been in no hurry to lose Read; in fact, in March, the company handed Read an $8 million equity bonus to stick around at least till March 1, 2019, and turn down any job offers from rival pharmas for two years after that.
Not surprisingly, Read will hang around as executive chairman, and the handover will be official on Jan. 1, Pfizer said Monday in announcing the succession plan with great fanfare.
Read’s move caps off a CEO tenure that began with former chief Jeff Kindler’s sudden and dramatic departure in December 2010 and quickly kicked into gear with the selloff of its Capsugel unit, a slim-down deal that hinted at more to come. The years since have been marked by more of those asset hive-offs, megablockbuster patent losses (think Lipitor and Viagra), persistent megamerger rumors (including a very real failure to buy AstraZeneca), and a stepped-up push into oncology that yielded Pfizer its breast cancer star Ibrance and its more recently approved checkpoint inhibitor shared with Merck KGaA, Bavencio.
As Pfizer itself noted on Monday, Read has presided over 30 FDA approvals and total shareholder returns of 250%, plus a pipeline with two dozen or more new launches on tap through 2022.
But the most persistent theme through the years has centered on a single big question: to split or not to split?
Read and his CFO sidekick Frank D’Amelio pulled off some big deals that remade Pfizer from a slightly clunky drug conglomerate into a company tightly focused on human medicines, while ginning up cash for shareholders. The company sold Capsugel, which produces drug capsules, for $2.38 billion in April 2011; unloaded its infant nutrition business to Nestlé for $11.85 billion in December 2012; and hived off its animal health business Zoetis in 2013 in one of the most successful spinoffs ever.
But all that maneuvering wasn’t enough for many analysts, who salivated at the prospect of a big divorce. Advocated by Goldman Sachs analyst Jami Rubin and mooted by Read in a major reorganization in 2013, that wholesale split floated as a possibility for several years, until Pfizer announced last year it wouldn’t be happening.
That doesn’t mean the reshaping has stopped, though. After failing to sell off its consumer health business over the past year, the company separated those operations into a discrete unit in July, setting it up for a potential spinoff if a straight-up sale doesn’t materialize. That same reorg left the Essential Medicines business—previously called Essential Health—focused on older and off-patent brands, plus generics, in a move that revived analyst hopes of a sale or spinoff of that business.
Whatever the fate of those units, Bourla will obviously have a big job on his hands as CEO of the biggest U.S. drugmaker and second-biggest in the world at a time when drugmakers are facing unprecedented political pressure in the U.S. and unrelenting pricing pressure from payers. Among the challenges? Pfizer will need to keep Ibrance and clot-buster Eliquis pumping out revenue as its top-selling Lyrica falls off patent and blockbuster vaccine Prevnar shrinks; pull off successful launches, including the hotly anticipated heart medication tafamidis; and somehow prove that its $14 billion buyout of Medivation was worth the cash.
Bourla will take the reins a year to the day after moving into the newly created role of chief operating officer, where he was tasked with global product development, sales and strategy. And in announcing his CEO appointment, Pfizer noted that Bourla led its Innovative Health business to some impressive year-over-year growth last year and before that, boosted its oncology business threefold and its vaccines business by 50%.
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“I am humbled and privileged to be the next CEO of Pfizer, and I appreciate the confidence that both Ian and the Board of Directors have placed in me,” Bourla said in Monday’s statement, adding, “I welcome Ian’s continuing contributions as Executive Chairman. This is a dynamic time for Pfizer, and I look forward to working with our colleagues to deliver critical medicines to patients all over the globe, which remains the compass for all we do at Pfizer.”
That $8 million bonus is contingent on stock appreciation—25% return over any 30-day period through 2022—as well as the requirement that he stay on the roster. The board figured it would be a "compelling incentive for Mr. Read to continue his leadership of Pfizer," according to the company’s annual proxy filing.