Pharm Exec Q&A: Japanese Wedding - Pharmaceutical Executive


Pharm Exec Q&A: Japanese Wedding

Pharmaceutical Executive

Pharm Exec: What were the main drivers behind the merger?

Alexander: We think the merger was a lot about research and having sufficient scale to be competitive in the global marketplace. Both Daiichi and Sankyo had modest R&D budgets, but not large enough to be extremely competitive in the therapeutic areas they were in.

The other problem was that both companies had to license a lot of their products to other Big Pharma companies because the cost of development was just too high. We thought that retaining the value of our pipeline was really a critical issue, and that having larger-scale R&D could help us keep the key projects in-house and develop them ourselves.

What integration activities have taken place so far?

Priority Compounds
We began working right after the merger was announced at the end of September [2005]. Of course, it was a great concern to our investors that the R&D organizations combine certain aspects of those groups as quickly as possible. But it's like redesigning the plane as you're flying it. We had to combine the decision-making process as quickly as possible and prioritize the combined pipelines to determine the most important products (see "Priority Compounds").

But I think the secret to the success of the integration was forming teams from both companies. It is a true statement that most integrations are failures. The reason, I think, is that there is a lack of true blending of the organizations. After I was appointed to head the integration, we quickly set up a four-person leadership board, with two people from each company—two in Japan and two in the United States. That became like the executive committee for the integration.

On John Alexander´s bookshelf
The second step was to create a lower-level team. So we picked a senior R&D person from both organizations to be the team leaders, and then they organized a team to start discussing integration. And now there's many, many teams, and of course, many, many people.

What model did executives follow for the integration?

We looked at the reorganization that we did in Sankyo several years ago. After I joined, it was clear we weren't functioning as a global company, and our decision-making processes were quite difficult and cumbersome. What we learned with our reorganization teams is that a bottom-up process seems to work best. We try to reach consensus at lower levels. Management needs to set the broader vision and goals and then let the teams find the best answers. I recently read a book by Carlos Ghosn, who led Nissan out of near bankruptcy. What surprised me in the book was that the process he used was similar to what we did in the past with our R&D reorganization. And, of course, the outcome at Nissan was terrific.

When some people come to Japanese companies, they're concerned that this is going to be some kind of crazy nemawashi—the process of trying to reach consensus. It's quite a different process than the West, where it's more top down.


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