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Maelstrom Envelops New CEOs

At Bristol-Myers and Pfizer, just-appointed leaders are expected to answer the tough questions.

During the upcoming days, investors of two big drugmakers will be hoping their new CEOs are prepared to offer forecasts of a brighter future.

One of the companies is

Pfizer

(PFE) - Get Pfizer Inc. Report

, where

Hank McKinnell was eased out of the chief executive office in July. The other is

Bristol-Myers Squibb

(BMY) - Get Bristol-Myers Squibb Company Report

, whose former boss

Peter Dolan was pushed out in September.

"The new guard understands that they must improve earnings or suffer a similar fate," says Barbara Ryan of Deutsche Bank Securities, in a research report.

Jeffrey Kindler is now running the show at Pfizer, and James Cornelius is Bristol-Myers Squibb's interim CEO while the company seeks a permanent leader. Both men are under at least some pressure to show early on that they have no intention of repeating the runs of their predecessors because long-term stockholders of Pfizer and Bristol-Myers have been suffering for years. Shares of both companies are down for the decade.

Pfizer delivers its third-quarter financials on Thursday with Kindler, who already has announced a

top-management restructuring, in the driver's seat. (McKinnell will remain as chairman until February).

The consensus Wall Street opinion for Pfizer, according to Thomson First Call, is for third-quarter earnings of 45 cents a share, excluding special items, on revenue of $11.4 billion. For the same period last year, Pfizer earned 49 cents, excluding items, on revenue of $11.3 billion.

On Oct. 26, Cornelius will present Bristol-Myers Squibb's numbers. Analysts are looking for a profit of 20 cents, before items, on revenue of $4.2 billion. For the same period last year, the company earned 31 cents a share, again stripping out items, on revenue of $4.77 billion.

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Kindler will likely face questions about his plans for fending off generic competition, for accelerating sales of new products, such as the inhaled insulin Exubera, and for making good on McKinnell's promises about key products.

Early in 2006, Pfizer executives said they expected Lipitor, the cholesterol drug, to achieve

more than $13.3 billion in sales this year compared with $12.2 billion in 2005. McKinnell agreed with analysts that the goal was "aggressive." By midyear, Pfizer was saying full-year Lipitor sales would be "about $13 billion."

Many analysts don't expect Pfizer to reach its goal. Lipitor, the world's biggest-selling prescription drug, faces competition from other branded cholesterol drugs, as well as from generic versions of

Merck's

(MRK) - Get Merck & Co., Inc. Report

Zocor and Bristol-Myers Squibb's Pravachol.

Ryan, who has a buy rating on Pfizer, predicts Lipitor's full-year sales will be only $12.3 billion, although she says the number may be conservative. She doesn't own shares, but her firm does, and seeks to do business with companies covered in research reports.

JPMorgan's Chris Shibutani predicts Lipitor could produce $12.6 billion, as the drug's sales appear more resilient than some of his peers believe. At the moment, there is only one generic version of Zocor, but by late December, there will be multiple options, which will exacerbate the downward pressure on prices.

Despite the concern over generic cholesterol drugs, "new product launches and prudent uses of cash and solid execution by new management should bolster shares over the near term," says Shibutani in a recent research report maintaining an overweight rating. He doesn't own shares. His firm has had recent investment banking relationships with Pfizer and Bristol-Myers Squibb.

Shibutani is neutral on Bristol-Myers Squibb, saying the stock price is propped up by a high dividend yield, takeover speculation, several good existing drugs and other promising newcomers.

Bristol-Myers Squibb continues to be plagued by the continuing impact of products losing patent protection and the lingering uncertainty related to the

bungling of a patent challenge involving Plavix, an anticoagulant that's the company's biggest-selling drug.

In a complex deal that has spawned a probe by the Justice Department and objections by states attorneys general, the company and

Sanofi-Aventis

(SNY) - Get Sanofi Report

, which grants the U.S. marketing rights to Plavix to Bristol-Myers Squibb, tried to negotiate an agreement with the Canadian generic-drug company

Apotex

.

But the arrangement fell apart, and Apotex sold about three weeks' worth of generic Plavix in the U.S. before being blocked in court from shipping any more. The Plavix makers are now suing Apotex for patent infringement, and the case is set to go to trial in January.

Bristol-Myers Squibb and Sanofi-Aventis have both

revised downward their full-year earnings-per-share projections because of the Apotex fiasco.

"Uncertainty remains regarding the inventory levels of generic Plavix," says Shibutani in a recent research report. "Comments made by Bristol, as well the drug distributors, suggest there is enough generic supply to last until the end of the year, if not longer."

Shibutani, who doesn't own shares, predicts there's enough generic Plavix to be sold through the first quarter of 2007.