Man in a Hurry - Pharmaceutical Executive


Man in a Hurry
Bureaucratic? Bayer? Not if you ask Arthur Higgins. In just over two years, the head of Bayer HealthCare has proved that pharma can be a quick and nimble business.

Pharmaceutical Executive

Use Acquisitions Strategically—Not for Scale

Perhaps the biggest change at Bayer in Higgins' tenure is the acquisition of Schering AG, a $20 billion deal—the largest in Bayer's history—which was approved by Schering's stockholders last month.

The deal was one Bayer had in mind for a number of years, Higgins explains. The main attraction was Schering's success in specialty drugs. "There are very few companies that had a higher percentage of their business coming from specialty," he says. "Most companies of that size are primarily driven by primary care products. That wasn't the case with Schering. If people were to look at companies with revenue between three and six billion—a number where Bayer could consider making an acquisition—Schering was far and away the best opportunity available."

Schering brings to the prospective Bayer-Schering Pharma its strengths in gynecology and andrology (its Yasmin is the top selling birth control pill), oncology, diagnostic imaging, and multiple sclerosis (led by its best-selling product, Betaferon/Betaseron [interferon beta-1b]).

"We were looking for a company that would significantly improve the percentage of our business coming from specialty pharmaceuticals," says Higgins. "With this transactions we will have over 70 percent of our revenues coming from specialty products, which is one of the highest percentages in the industry. The combined company will have nine specialty products with annual sales of over $200 million, and those products last year grew at a very impressive 20 percent, when the pharmaceutical industry as a whole was growing at 7 to 8 percent. We have put in place a strong foundation for building one of the world's premiere specialty companies.

Look to the Future

Early in his career, Higgins was put through the exercise of looking into the future—not just short term, but mid- and long-term as well. It became a habit with him, and as he copes with today's market forces (many of which were part of the picture he and his colleagues created close to 20 years ago), he's looking forward. Here's what he sees:

"In the short term, one to two years," he says, "I think you'll still see a lot of concern about the sustainability of the business model. I think that that is going to increase. You're going to see significant pressure here in the US to bring in measures that are not industry friendly. Medium-term I see further consolidation despite the fact that no one really believes that it is the answer.

"And then in ten to fifteen years you will see people spinning out their businesses, and obtaining value by spinning out their cardiovascular business, their oncology business. They're just no longer able to deal with the complexity.

"I believe you'll see smarter healthcare delivery in ten to fifteen years. There will be better examples of personalized medicine and a phenomenal increase in information as a value driver in healthcare delivery. A lot of us will have a situation where you can do your glucose testing or blood pressure with your portable phone, and results will go into a data management system.

"Information technology will play a tremendous role. The technology's already here. It's just the players don't have the financial incentive to make it work. It's a little bit like the car industry. We could have had a more efficient engine, but what was the financial incentive to do that?

"What will make change inevitable is just the same issue we saw twenty years ago. The appetite for health is insatiable, and the number of people growing older will consume more and more. It means we're just going to have to come up with a different business model."


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