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?
Jul 03, 2007

It's bittersweet being one of the leaders of an industry that is not sustainable," a top pharma CEO recently told Carolyn Buck Luce, Ernst & Young's global pharmaceutical sector leader. Bittersweet is a poignant word for a hard-driving exec to issue. But it offers a clue to the pathos that strikes even the guys making eight digits when they contemplate pharma's unprecedented pressures—and, in a certain sense, their own professional mortality. About the best any Big Pharma CEO can hope for these days is 10 years in which to clean up messes, pump up morale, and start breaking a path to sustainability. If he is very lucky, he might—might—get to see a beloved molecule graduate to approved drughood.

Pipeline and products are but two of the CEO's multitude of responsibilities today. "An industry leader needs a broad set of general management skills rather than deep skills in a functional area, as in the past," says Murray Aitken, senior vice president of corporate strategy at IMS Health. "Running a big pharma has become immensely complex, with an expansion on all fronts: globalization, diversity of business units, portfolios, and a broader set of stakeholders."

After interviewing almost 20 analysts, researchers, academics, and industry insiders, this reporter cannot overstate the magnitude and urgency of the CEOs' mandate according to these observers. Buck Luce put it best, calling the challenge "nothing less than reinventing the way business is done." How big a reinvention? Think of the photographic industry's move to digital imaging and the way the automotive companies developed financial-services offerings.

James Cornelius CEO, Bristol-Myers Squibb
Long flush with cash—and the vulnerabilities and vanities that great success breeds—pharma has woken late to the alarm. "Leaders who believe in their hearts that the business model has to be transformed can only do so much. The system won't let them move too fast," says Dr. David DeMarco, a leader with Ernst & Young's global pharmaceutical center. "What we are seeing now will result, at best, in initial incremental changes necessary for an industry-wide transformation. That transformation, if it succeeds, could take a decade or more."

Pharma's top firms have seen rapid turnover at the top in the past decade or so. Consider: Bristol-Myers Squibbs' James Cornelius was tapped in April, Pfizer's Jeffrey Kindler and AstraZeneca's David Brennan in 2006, Merck's Richard Clark in 2005, Schering-Plough's Fred Hassan in 2003, Wyeth's Robert Essner in 2001, GlaxoSmithKline's J.P. Garnier in 2000, Abbott's Miles White and Lilly's Sidney Taurel in 1999, Roche's Dr. Franz Humer in 1998, and Novartis' Daniel Vasella in 1996. (This trend is not unique to pharma, however. According to Booz Allen, annual CEO turnover jumped 59 percent from 1995 to 2006.)

FRED HASSAN CEO and chairman, Schering-Plough
"The one common denominator of these CEO changes is pipeline failure," says Kai Lindholst, who chairs the life sciences practice group of Egon Zehnder International. "When the pipeline is not delivering, the board and the investors understandably get very nervous.

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