King Without the Crown

While most of pharma tries to convince the world that R&D is the number-one priority, one specialty company boasts that it has no lab.
Jun 01, 2006

The head of R&D is odd man out at King Pharmaceuticals—and not just for his disarming name. King Jolly has a Southern accent. Despite the company's Bristol, Tennessee headquarters, most senior executives are based in New Jersey, and sound like it. Jolly rides with a motorcycle club; his counterparts live and breathe hockey. And he patiently answers questions about the Christian fundamentalism of his former bosses, John and Jeff Gregory. Other King executives keep mum on the subject. Even so, the biggest difference between Jolly and the rest of the senior team is his background. He is a scientist. Everyone else is all business.

Clockwise, from top left: chief financial officer Joe Squicciarino; chief commercial officer, Steve Andrzejewski; executive vice president, business development and strategic planning, Adriann Sax; executive vice president, R&D, King Jolly. Squicciarino, Andrzejewski, and Sax were recruited to King by CEO Brian Markison, who was hired in 2004 to replace co-founder and CEO Jeff Gregory. Jolly has been with the company since 2000, the year King bought Medco to form its first-ever R&D group, now called King R&D.
Jolly joined King in 2000—not quite the company's low point, but getting there. The Gregory brothers had built their young company rapidly by acquiring cast-off drugs that were commercialized already—a strategy similar to the one employed by Forest, and not a bad way to go in a time of heavy merger activity. But by the time Jolly arrived, King was already in a downward spiral of lawsuits, bad debts, and SEC investigations that would bring it to the brink. Jolly, who came from the contract research company Quintiles, was brought on board to run something new at King—R&D.

It wasn't much as R&D departments go—a 10-person group acquired from Medco—but it let King shift its focus to new formulations and drug candidates in late stages of development. Today, the unit employs 62 scientists and spends $74 million a year on internal R&D, a huge amount by King's old standards, though still only four percent of revenues—and a fraction of what most pharma companies spend. The secret? King has no laboratories. It farms out all drug development activities to academic institutions, other pharma and biotech companies, or contract research organizations.

The Pain Deal
The industry has been taking a hard look at virtual R&D in recent years. While most have concluded that the strategy has only limited usefulness for a traditional Big Pharma company, the efficiencies King has achieved are too impressive to ignore. The jury may still be out on how well the strategy serves King in the long run, but so far, this hardheaded approach has done a lot with a little. Virtual R&D may not be pharma's next business model, but it already shows signs of being a worthwhile addition to any company's toolkit.

Born Again

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