Marathon man.

CEO Bill Steere says there is more to Pfizer than its little blue pill, which has already outstripped Prozac as the fastest selling drug in history. A strong focus on applied research and a formidable sales force has vaulted the company to within breathing distance of Merck. The question is, can Steere go the distance?

Half a dozen years ago, Pfizer was said to be the ugly duck among the pharmaceutical swans. Wall Street had grown impatient with the drag on earnings caused by its heavy R&D investment. Many urged then CEO Ed Pratt to merge the company or resign. While Merck and Eli Lilly acquired distribution or managed pharmacy benefit companies, Pfizer gave the idea a pass. And when third-party distribution was said to be the wave of the future and a number of drag industry giants downsized their salesforces, Pfizer expanded its own. The $12.5 billion New York-based drugmaker and animal health care specialist also sat out the industry's consolidating M&A boom of the early '90s.

Now look who's quacking. With Merck turning in disappointing second quarter earnings, Glaxo Wellcome unveiling its worst results in a decade, and SmithKline, American Home Products, and Novartis still working out their mergers, Pfizer's market cap rose last April to more than $150 billion. That moved it temporarily past Merck and raised Pfizer to sixth place among all U.S. companies. At the end of June, its stock split two for one - the third such split since 1991 - marking 31 consecutive quarterly dividend increases. Last July, company shares traded at a 61 p/e, lower than Lucent's 114 or Microsoft's 68, but higher than Coca-Cola's 54 or GE's 35. Is it all Viagra madness or is Pfizer on a roll?

To be sure, the famous blue impotence pill, subject of countless Jay Leno and David Letterman jokes, helped boost second quarter earnings 38 percent from a year ago. The drug has already gained close to 98 percent of the erectile dysfunction market, and analysts say it is on track to become the biggest selling drug in history, with sales of more than $4 billion. Although bemused by the fact that Viagra has become a pop cultural phenomenon, William Steere, CEO since February 1991, is quick to point out that Pfizer is not a one-trick pony. Highlighting the initial success of Travan, the firm's new quinolone antibiotic; Norvasc, its hypertension and angina treatment; and Zoloft, its anti-depressant, Steere argues that Pfizer's pipeline is full. This year, the company will spend $2.3 billion on R&D, an all-time high.

But Pfizer also capitalizes on drugs that do not come from its own labs. In partnership with Japan's Eisai Co., which developed it, Pfizer launched Aricept, a treatment for Alzheimer's. And, in conjunction with Warner-Lambert's Parke Davis unit, which discovered it, the company launched Lipitor, which reduces cholesterol and triglycerides. In fact, before Viagra came on the scene, Lipitor was the industry's fastest drug launch. Next year, Pfizer plans to turn Celebra, an arthritis drug developed by Monsanto's G.D. Searle, into another blockbuster. Marketing others' products, once considered a sign of weakness, has been turned into one of Pfizer's key strengths, owing to its formidable 4,500 person sales force, the largest in the industry. "We're the partner of choice," grins Karen Katen, Pfizer executive VP and president of its domestic pharmaceuticals.

But not everything Pfizer touches succeeds - at least initially. In a surprising setback for one of its new products, the FDA recently rejected its antipsychotic drug Zeldox, setting back the product launch, which was originally scheduled for the last quarter of this year. That marked the second time in two years that Pfizer hit a wall at the FDA with a high-profile drug in development. In May 1996, the FDA turned down its arthritis treatment, Tenidap, forcing the company to end efforts to commercialize it. Steere argues that the reasons for Zeldox's rejection are mainly technical and says it will ultimately be approved.

Having successfully avoided fads, Steere nonetheless faces the challange of readying Pfizer for a changing market for health care. Gone are the days when drugmakers felt safe behind barricades of FDA patents. As companies find they must decrease product time-to-market, the pressure on pricing is increasing as managed care providers become ruthlessly cost conscious. This, in part, explains Pfizer's push into so-called "lifestyle" drugs, whose demand is less at risk from reimbursement policies. Steere, a former detail man who held a variety of marketing and management positions before becoming president of its pharmaceuticals group in 1986, wants Pfizer to become the nation's "premier health care company." But can Pfizer, as formidable as it is, truly knock Merck from its perch? Much depends upon management's recognition that, in the future, value creation will be defined more by consumers than providers. Health care is shifting from a focus on population to a focus on the individual, with the added dimension of IT-enabled customization of care. "By the time I retire in 2001," says Steere, "we should be the No. 1 pharmaceutical."

VIAGRA MOMENTS

How do you view the transformation of Viagra from a pharmaceutical product to a kind of cultural phenomenon?

The science behind Viagra is extraordinary, and we knew it was going to be a big product. We'd been looking for products essentially for quality of life, and especially with an aging population, especially drugs, perhaps, that wouldn't have to be reimbursed. People are more willing to pay for Viagra out of their own pocket than they are for antibiotics to cure a serious infection. But we were unprepared for the kind of cultural phenomenon that came from Viagra. I've been characterized at times recently as the chairman of the Viagra company, when it actually represents perhaps 5 percent of our sales - and about 95 percent of our publicity.

Before, nobody would talk about erections and impotence, sexual function, by and large, at most cocktail parties. Now that's all they talk about. And perhaps it was because there was nothing to treat it. At cocktail parties, or almost any kind of gathering, women come up and share their Viagra moments with me, to say either they've tried it or their husband has tried it or their significant other has tried it. I'm just amazed. I get up in the morning listening to "Imus in the Morning" talking about Viagra. I go to bed at night listening to Leno and Letterman talking about Viagra. It's been a phenomenon, but one that's started to ebb, however. Now we're starting to get the balance.

There have been a few number of deaths among those taking Viagra; although not directly caused by the drug, nonetheless, it sort of enters into the public image. How do you deal with that?

People, especially in my peer group, are particularly curious about the publicity of the deaths. It was bound to happen, because when any story that gets that much upbeat attention, anything negative is going to get the same amount of attention.

But in an epidemiological sense, there's a certain number of people from 50 to 80 who are going to die every day. It's kind of the background noise of deaths in a population like that - especially among the candidates for Viagra, many of whom have clogged arteries, clogged vessels, atherosclerosis, diabetes.

So you take somebody with an impaired cardiovascular system; they take a Viagra and have intercourse, perhaps for the first time in a long time, we would expect a certain number to die. Frankly, there are some people who feel Viagra is cardio-protective. So it's bound to happen just as background noise. I mean having sex is like running a quarter mile - it's strenuous.

Really?. A quarter mile? I never heard that.

Well, I guess it just depends how fast you do a quarter mile.

One thing about success of a product - it begets imitators. How much of a competitive headache will this prove to be?

Everybody is going to be in this now that it's been demonstrated it's such a good market. I imagine it's going to be years before anybody is going to come out with a better Viagra. Viagra is about 70 percent effective. It's safe. Side effects are all very minimal. A better Viagra in my view wouldn't be one that's safer, it would be one that's 98 percent effective instead of 70 percent effective. This is a very safe product.

How has your innovation process changed since you became CEO, and how might you change it further?.

We have 5,000 to 6,000 researchers on three continents, and they go and follow different leads, looking for drugs. If those leads don't work out they have to be pulled back and put on something else. Most science is dead-ended. Out of all these researchers, only 1,000, 1,500 will ever be associated with a drug that actually comes to market. So all these other thousands of researchers have to be satisfied with the science that they're doing. Because there are so many blind alleys that come during the research. But I think we manage that well. I think there's just kind of a culture of innovation, and people get rewarded and recognized based on innovative ideas.

How do you structure the interest level?

With the scientists, they have to be happy with the science. Obviously everybody wants to be associated with a winning drug, so they soldier on and hope that whatever lead they're on will ultimately become a winning product. But the probabilities are against them. So they do what they do and celebrate in the success in the company when something does come to market.

The small biotech companies give the scientists a piece of the action or options to sweeten their interests.

The very small companies bet the ranch on one idea; we're dealing maybe with 800 ideas. If that one idea is a winner, then those people are going to be rich. By and large most of those ideas are not winners. They're a brilliant notion, but in reality they don't work out. Also small companies don't have any money, so they can't pay really good salaries and have to pay their employees in stock with the hope that they can cash out someday.

THE EARLY YEARS

How was it in the early years, when you must have been hammered by Wall Street to do one thing or another?.

When I became CEO, boy, I tell you - there's no shortage of free advice. Everybody's got plenty of that for you. We were excoriated for everything.

When I first became CEO, people were buying generic companies. I didn't want a generic company. It wasn't what we do for a living. In fact, we had one, and the first thing I did as head of U.S. pharmaceuticals, was, I got rid of it. Terrible business.

Then they said managed care is coming along; you have to shrink your field. That's what Merck did. They said, to sell managed care you just need a small group of cognoscenti to go out and establish your product on whatever formula and you don't need these large armies of reps. Well, they're wrong. Once you get your product on the formulary, then that's what the reps do. They go out and pull the thing through the system. So when I saw other companies cutting the field for us, I knew we were in a good position.

But you were absolutely contrary to the industry. What were you telling your board at the time?

That we were right, that we had the better way. So I didn't do a merger. And now everybody's saying, "He's great." No generic company. No PBM. No merger. You can't be swayed by all these extraneous voices. You have to have focus. It's all very simple. Once you have focus, other things will come.

How did you avoid betrothal?

I think everybody's approached us on doing mergers. There's consolidation in every industry. Some of them are probably out of strength. But my personal view is that, in our industry, most of the mergers have been out of weakness. And the weakness has been a failed pipeline - your research lets you down for whatever reason, you're out of business and you have to search for a partner. It has to come through the pipeline. In the U.S. you lose 80 percent of your sales the first year, so you have to have a pipeline that keeps reinventing itself. So that when one big blockbuster patent expires you've got something to step in and take its place.

You've got $2.3 billion in R&D. You've got 150 distinct R&D projects and alliances, which appear to cover every pharmacological opportunity known to man. So how do you keep a project from becoming a real R&D black hole?

That's a problem. And especially, years ago, if we were working on antibiotics, we had one antibiotic working on one part of a bacteria, maybe a particular part of the calcium channel in a bacteria cell wall. Now, you look at some of these areas and there'll be maybe seven or eight different approaches to the same problem. How do you whittle those down to the winners? It's tough. You can't let these people go on and on or they just drain you dry. We have to somehow select, pick and choose, and see what, in our view, or science management's view, is going to be the winner.

On a personal level, what sort of things do you really care about?

I care about the company. I care about my family. I'm one of these unique guys that have had only one job and one wife - and I don't know how the other guys do it. With a bunch of wives and a bunch of jobs, I just don't know how they do it. It's been tough enough having one wife and one job. I just can't think of making it more complicated than that.

What would you like to be said of you when you step down?

Probably that I left the company in good hands. Perhaps I'll be remembered for focusing the company like I did. Or the kind of explosive growth we had. Maybe I'll be remembered for how much money we put into research. But I think I'd be most comfortable about leaving the company in good hands, well managed - especially considering how much stock I have.

VIAGRA-MANIA: THE LAST LAUGH

Did you hear about the first death from an overdose of Viagra? A man took 12 pills and his wife died.

A man at the pharmacy to pick up his Viagra prescription exclaimed over the $10/pill price. His wife, who was with him, had a different opinion: "Oh, $40 a year isn't too bad."

Have you tried the new hot beverage, Viagraccino? One cup and you're up all night.

How many doses of Viagra does it take to change a light bulb? One little tablet, and it's a whole new bulb.

The difference between Niagara and Viagra? Niagara Falls.

Men are being warned not to take Viagra with nitrates after five gentlemen in India did so and changed the balance of power in the region.

Men taking iron supplements are warned that taking Viagra may cause them to spin around and point north.

Let's see... "Micro" and "Soft." Needs Viagra!