Take Me to Your Leader - Pharmaceutical Executive


Take Me to Your Leader
Turnover in the top 10 has new CEOs racing to reinvent the way their companies do business. But who has the courage to lead the industry itself back to greatness?

Pharmaceutical Executive

"The other interesting aspect of the turnover is a demographic challenge," Lindholst continues. "So many CEOs were—or are—facing retirement. And each company has to address succession issues." For example, GSK's Garnier has pitted three of his best and brightest against one another pending his exit next year. And Sanofi's Jean-François Dehecq has groomed Gérard Le Fur for the throne, though generational discord has lately emerged between the two over growth, with old-school Dehecq favoring a single major merger with BMS, while nouveau Le Fur wants smaller, strategic acquisitions.

Such clashes are a necessary aspect of turnovers. "New CEOs are brought on to be agents of change," says Fred Frank, vice chair and director, Lehman Brothers. "If you want to see where the action is in pharma, look at what the new guys are up to." He points to AZ's Brennan and Merck's Clark, who immediately set about doing some very un-Merck and un-AZ things. "Both companies had always relied almost solely on their own in-house R&D," says Frank, "but Clark and Brennan saw every reason to do collaborations, alliances, acquisitions—and to do them quickly and smartly."

Even the most aggressive acquisition of molecules, coupled with the most earnest efforts to streamline in-house development, can go only so far in upping productivity. That's why the new CEO needs to hit the ground sprinting. Life is short, but the art of innovative drug design is long.

The drug industry was humiliated last year by the ouster of two top CEOs. Following a foolhardy, failed deal to keep generic competition away from Plavix (clopidogrel), BMS' Peter Dolan was given the boot last September—but not before a federal investigation had the FBI searching his office and an accounting scandal tied the firm up for two years. A few months earlier, Hank McKinnell was thrown overboard after driving Pfizer's stock value down 43 percent in five years; his $83 million golden parachute triggered shareholder revolt and put pharma in the center of the controversy over executive "pay for failure."

Richard Clark CEO, chairman, and president, Merck & Co.
This new low in leadership seemed to mark the final bankruptcy of a way of doing business. "We don't have charismatic leaders," says Albert Wertheimer, founding director of the Center for Pharmaceutical Health Services Research at Temple University School of Pharmacy. "We have people who manage for the quarter. Their main concern is to make sure there is no trouble on their watch. They are terrified to make any bold moves."

Michael Russo, partner in the Bruckner Group, agrees. "There's not a lot of accountability or ownership. Many top managers know they'll be in the job for only a few years. Plus, they're constantly restructuring, moving people from place to place, so few people take the risk of starting anything, because they probably won't see it through. People keep their heads down."

Wertheimer traces this malaise to the mega-mergers of the '90s, when the scientists who ran drug companies got sidelined by "business people." Others blame the influx of lawyers. "Lawyers are paralyzing pharma," says Sander Flaum, CEO of Flaum Partners and founder of the Leadership Forum at Fordham Graduate School of Business. "Given the tight regulatory environment, they build walls to block communication between medical and marketing. They foster a climate of fear of doing anything new or different."


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