Monday, December 6, 2010

And So Ends The Reign Of [Another] Big Pharma Ex-General Counsel -- Jeff Kindler, You're "Auf!"

On Saturday, Ed Silverman, head-honcho over at Pharmalot carried what appears to have been an exclusive story (world-wide) on the settlement of the shareholders' derivative suits at Pfizer that arose out of the largest criminal pharma fine in US history (see legacy Schering-Plough Ex-CEO Fred Hassan's role -- aided by Carrie Cox -- in that matter, here).

By Sunday night, CEO Kindler -- a Harvard-educated lawyer, who studied just a few years behind Kenneth C. Frazier (named Merck's CEO just about a week ago, now), at that law school -- had been voted "Auf!" the Pfizer-edition Project Runway. I do not think that was a coincidence.

Indeed, I'd say Ed was the first to identify how significant that $75 million settlement would turn out to be -- even though it is a pittance to the world's largest pharma concern. It is likely the straw that broke the camel's back -- as to Kindler's run as Pfizer's CEO. Why? Because the settlement also contained one novel provision: starting today, Pfizer board members will have to personally oversee compliance committee efforts (read: personal liability for the board, in the event of even simply negligent omissions, or failures to act). That is, as Ed points out -- a sea change, in such settlements. Here is a bit of Ed's -- of this morning -- but do go read it all:

. . . .His sudden retirement is, of course, going to prompt tremendous speculation about the possibility of myriad issues plaguing the drugmaker and, in particular, the executive suite. Last year, for instance, Pfizer reached a $2.3 billion settlement for off-label marketing of several drugs, including a $1.3 billion fine that was the largest criminal fine in US history. No Pfizer execs were implicated, but the episode marred Kindler’s reign, especially given his legal background and that this occurred after the drugmaker was already operating under an earlier Corporate Integrity Agreement.

On a related note, Pfizer just last week agreed to settle derivate shareholder litigation by creating a $75 million fund that will be overseen by a new compliance committee comprised of board members who will monitor corporate governance. The lawsuit charged Kindler, Read, cfo Frank D’Amelio and the board with breaching their fiduciary duties by failing to detect and stop the illegal marketing. . . .

Ed's spot on here -- Kindler was almost certainly pushed. No board member wants to accept a new form of personal liability -- due to prior (alleged) compliance lapses -- especially where (as is true with both Merck and Pfizer), lawyers have advised the companies to plead guilty to crimes. So it goes.

My bet? Pfizer is likely to rise between $0.75 and a full-buck, on this Monday's NYSE open -- as a result of Kindler's departure. And that will be one cold New York wind, on the back of that particular lawyer's neck, as he carries his boxed goods to the street.

As the graphic at right indicates, though -- Pfizer is still several very long strides ahead of Merck, from a financial point of view -- just to keep it all in perspective, here.

1 comment:

Anonymous said...

And Pfizer laying off 1/4 of its scientists in Groton is a "good sign" that the revenue stream is flowing well...