Amgen CEO Kevin Sharer’s Report Card: C
Kevin Sharer will not go down in history as one of biotech’s most successful, or beloved, CEOs. But how well did Sharer really perform during his decade running the industry’s biggest company?
For those who missed it, Thousand Oaks, CA-based Amgen (NASDAQ: AMGN) said last week that Sharer, 63, will be retiring as CEO in May. In a move that didn’t surprise anybody, he will be succeeded by one of his deputies, Robert Bradway, the company’s president and chief operating officer.
Since becoming CEO in 2000, Sharer has lived through the ups and downs that go with the territory in this most volatile of industries. He graced the cover of Forbes magazine in January 2005 for leading the “Company of the Year,” getting credit for revitalizing a long stalled R&D engine. Two years later, Sharer was the industry goat, as Amgen lost $29 billion of its stock market value when safety concerns cast a cloud over its cornerstone products for the treatment of anemia. At various times, Sharer has been slammed in the press for being one of the nation’s most overpaid CEOs, raking in $21.2 million in total compensation last year.
Amgen’s official statement last week noted that the company had $3.6 billion in revenue when Sharer became CEO, and now has revenues approaching $16 billion. Vance Coffman, the chairman of the board’s nominating and governance committee said in the statement that during Sharer’s time, “Amgen grew significantly in every dimension and is well positioned for the future.”
Still, shareholders had little to cheer about the past decade under Sharer. Investors have gotten by with a 0.5 percent annual stock growth during his tenure, according to Bloomberg News. Even after giving in to shareholder demands to boost the stock price via share buybacks, dividends, and cost-cutting, investors have assigned Amgen stock a price-to-earnings ratio of under 15—not exactly a ringing endorsement of wondrous go-go days to come.
I’ve covered Amgen throughout Sharer’s tenure, and have interviewed him several times. While many executives in this industry come from geeky backgrounds in science or medicine, Sharer is a different kind of cat. A graduate of the U.S. Naval Academy, he got some of his formative experience working on nuclear submarines, and later in the telecom industry. He has the tall, upright bearing, silver hair, and poise that make him look like Hollywood’s idea of a Fortune 500 CEO. He also has a forceful voice that seems to contain no doubt, and sounds like it was born to bark orders and instill fear into subordinates.
Sharer seemed to relish the image of himself as a businessman with military discipline. He famously hung a picture of General Custer on his office wall, he has said, to remind himself of the dangers of overestimating his own abilities, and underestimating the enemy. Yet despite his serious and commanding demeanor, he could be charming: I remember him once calling me a few years ago on my cell phone with that piercing voice, “This is Kevin Sharer…” and I thought, “Oh boy, this could be nasty.” Instead, he wanted to let me know he liked something I had just written about Amgen, while also pointing to one line in the story he didn’t like. He ended by saying how he appreciated the interest and coverage of Amgen. Point taken, handled with class.
Evaluating anyone’s performance is an inherently subjective task, but to come away with a grade for how Sharer performed at Amgen, I’ve tried to look at how Sharer performed in some key areas that are important for leaders of all major biotech companies.
Company leadership: A great leader of a biotech company has to surround himself with stars from all kinds of disciplines—research, development, legal, lobbying, marketing, manufacturing. Amgen has long enjoyed a reputation for top-notch patent lawyering and political muscle, but one of Sharer’s most important early moves was hiring former University of Washington immunologist and Merck executive Roger Perlmutter to be his head of R&D. Perlmutter, who is stepping down in February, led a decade-long mission to improve R&D productivity at Amgen. He did have some success, although it will take a few more years to get a final verdict because of the long nature of product development cycles. But even more importantly, a great CEO has to pick a good successor. Bradway joined the company five years ago, has worked his way up from VP of operations, and will take over as CEO after a six-month transition process. Those are good signs that Sharer was smart enough to put an orderly succession plan in place. Most analysts are expecting no big strategic changes under Bradway. Grade: B+
New Product Development: Former Apple CEO Steve Jobs told his biographer that the company lost its way under CEO John Sculley because it focused too much on maximizing profits, and didn’t focus enough on first making amazing products. Sharer’s one big hit in the product development department was … Next Page »