When Arthur Higgins first announced that he was about to take the reins of the healthcare group at Bayer, in 2004, colleagues were surprised. Here he was, chairman and CEO of Enzon Pharmaceuticals, a small but rapidly growing company, about to move to a firm battered by dropping stock prices and the wave of lawsuits that followed the withdrawal of its ill-fated statin, Baycol (cervastatin). And though many people might regard that as a challenge and opportunity, there was also Bayer's reputation as a classic dyed-in-the-wool German corporation—straitlaced, slow moving, and utterly averse to making decisions. Higgins recalls, "They said, 'How can you live with the bureaucracy?'"
Quite easily, it turns out. Bayer, since 2001, had been remaking itself, partly with an eye toward making itself quicker and more responsive to the marketplace. The company moved to a holding-company structure, setting up its operating units as legally independent entities, and in a startling move for a relatively conservative company, spun off its chemical business—long a cornerstone of Bayer's identity—as a separate company.
Not bad for a supposedly slow-moving bureaucracy.
"When I think about what we have achieved, it stuns me," says Higgins. "I'm thinking, are we moving that fast? And the answer is yes, we are moving that fast. We've seen our revenues increase from just a little over 8 billion euros [about $10 billion] to a little over 13 billion euros [$16 billion] on a pro forma basis, and we've seen the contribution of healthcare to Bayer grow to more than 50 percent of revenues and income. The Bayer HealthCare stock has doubled in that two-and-a half-year period. Our momentum and confidence in our company are second to none. When I meet with my fellow CEOs, you know, I get a sense I'm having fun and they're struggling."
'We don't need this'
In the 1980s, Bayer was a top-five pharma. By the turn of the century, it was decidedly second-tier. The reason was a familiar one.
"If you think of Bayer in the eighties, the pharmaceutical business was the engine," says Higgins. "Bayer, like a lot of companies, believed that you could achieve sustainability through internal innovation. So they significantly increased their research and development and believed that the pipeline was always going to be their savior."