Are Some Degrees Better than Others for Big Pharma Leaders?

9/9/13

Biopharmaceutical companies are under a great deal of financial pressure these days, and many are tinkering with long established business models. There can be no doubt that the industry is in flux as a result of pricing pressures from insurance companies, changing patent regulations and expirations, healthcare reform, and an increased focus on proving significant clinical benefits. Sadly, this is all taking place at a time when the largest biopharma companies have developed a black eye as a result of a seemingly endless series of ethical transgressions, including off-label drug promotions, hidden clinical trial outcomes, bribes and kickbacks for writing prescriptions, manufacturing breakdowns, and lawsuits tied to numerous medicines pulled off the market.

Have things really changed since the good old days in the industry? One notion that I heard voiced recently by industry consultant Bernard Munos is that some of pharma’s recent missteps (specifically, a decline in innovation) result in part from the fact that scientists are no longer leading these organizations. According to Munos, the old model was to turn scientists loose to follow their wide-ranging passions and interests, and innovative discoveries would come rolling out. This model was replaced about the mid 1990s by one where a culture of process was introduced by new leaders that focused company scientists in directions where innovation was desired, but where the science at the time was not necessarily up to the challenge.

One must be careful in interpreting how the term “leadership” is used; some use it to denote the person holding the CEO position, whereas others use it to mean any job where a person actually influences a company’s approach and decision-making. In addition, added complexity results when one attempts to compare traditional Big Pharma companies with biotechs, which I think are more likely than their much larger brethren to be run by PhD or MD scientists. David Shaywitz weighed in on this subject and suggested that company size may be a more important determinant of success in this industry than a CEO’s background, although he has identified a number of caveats as well. One of these is that luck can be mistaken for competency, at least in the short term, no matter what the CEO’s background is.

Neither of the thought pieces cited above included any significant data as to the backgrounds of past and present Big Pharma CEOs. This got me wondering if having a scientist leading a Big Pharma company really correlated with success in years past? Has the percentage of scientists who headed up these companies decreased in recent years, and if so, is this associated with pharma’s recent struggles? I set about answering these questions by looking up the biographies of the titans who ran this industry during a period when it was the envy of Wall Street, as well as more recent years when it has labored to find its footing. Let me share with you what my efforts revealed.

I decided to look back over a period of 30 years, since that should cover periods of huge profitability (80s and 90s) as well as more recent challenging times when these companies were merely highly profitable. CEO tenures vary widely, so I simply focused on identifying the CEOs that were heading these companies at the start of each decade. It wasn’t easy digging out their names and especially their academic degrees (if Google only covered the pre-Internet era in the same detail as more recent years!) It took time, but I was able to collect some background information on a reasonable sample size of these men (and they were all male) and assembled it into the table below. It shows who the CEOs were as well as their highest degree(s) achieved and the institutions that awarded them. Science and medicine degrees are highlighted in bold.

1980 1990 2000 2010
Merck John Horan, JD, Columbia John Horan, JD, Columbia Ray Gilmartin, MBA, Harvard Richard Clark, MBA, American U.
Roche Irwin Lerner, MBA Rutgers Irwin Lerner, MBA, Rutgers Franz Humer, MBA, Innsbruck Dr. of Law, Insead Severin Schwan, Dr. of Law, Innsbruck
GlaxoSmithKline Austin Bide, BS, Chemistry, London University Charles Sanders, MD, Southwestern Medical College JP Garnier, PhD, pharmacology, Louis Pasteur University. MBA Stanford Andrew Witty, BA, economics
Novartis pre-merger Ciba-Geigy Sandoz pre-merger Ciba-Geigy Sandoz Daniel Vasella, MD, University of Bern Joe Jimenez, MBA, University of California-Berkeley
Bristol-Myers Squibb Richard Gelb, MBA, Harvard Richard Gelb, MBA, Harvard James Cornelius, MBA, Michigan State University Lamberto Andreotti, masters in engineering, MIT
AstraZeneca Ulf Widengren, Astra Hakan Mogren, Astra, ScD in applied biochemistry, Royal Institute of Technology, Stockholm. PhD in technology, Royal Institute Tom McKillop, PhD in chemistry, Glasgow University David Brennan, BA in business administration, Gettysburg College
Amgen (not Big Pharma, a control) George Rathmann, PhD in chemistry, Princeton Gordon Binder, MBA, Harvard Kevin Sharer, MBA, Pittsburgh Kevin Sharer, MBA, Pittsburgh
Pfizer Ed Pratt, Jr., MBA, Wharton William Steere, Jr. BS in biology, Stanford Henry McKinnell, MBA, PhD business administration, Stanford Ian Read, BS in chemical engineering, Imperial College London
Eli Lilly Richard Wood, MBA, Wharton Richard Wood, MBA, Wharton Sidney Taurel, MBA, Columbia John Lechleiter, PhD, organic chemistry, Harvard
Johnson & Johnson James Burke, MBA, Harvard Ralph Larsen, BA in business administration, Hofstra Ralph Larsen, BA in business administration, Hofstra William Weldon, BA in biology, Quinnipiac University
Sanofi Jean-Francois Dehecq, engineering graduate of Ecole Nationale des Arts et Metiers Jean-Francois Dehecq, engineering graduate of Ecole Nationale des Arts et Metiers Jean-Francois Dehecq, engineering graduate of Ecole Nationale des Arts et Metiers Chris Viehbacher, commerce graduate of Queens U (Ontario, Canada), and a CPA.
Abbott Laboratories Robert Schollhorn, BS in chemistry, Philadelphia College of Textiles and Science Duane Burnham, BS in accounting, University of Minnesota Miles White, MBA, Stanford Miles White, MBA, Stanford
Novo Nordisk Knud Hallas-Moller, doctorate in pharmacy, University of Copenhagen Mads Ovlisen, lawyer and MBA, Stanford Lars Rebien Sorensen, MSc in forestry, Royal Veterinary and Agricultural University, Denmark Lars Rebien Sorensen, MSc in forestry, Royal Veterinary and Agricultural University, Denmark

 

My overall impression: I see no evidence of a trend towards the replacement of CEO scientists with MBAs and lawyers over the past 30 years. There were plenty of law and business degrees held by CEOs in the 80s, 90s, and 2000s. One issue I was not able to fully resolve was the exact subject of the engineering and technology degrees held by a number of these CEOs. These are clearly science degrees, but one might view the relevance (in the context described above) of a degree in chemical or bioengineering as distinctly different from one in mechanical or civil engineering. Non-scientists have always held a majority of the top leadership jobs in pharma in years past, just as they do now.

Perhaps the pharma companies that were acquired during this timeframe were more innovative and were headed by scientists, thereby leading to their acquisitions? This idea didn’t hold water either. I looked up other 1990 CEOs and found lawyers [American Home Products’s John Stafford, JD, George Washington U.; Schering Plough’s Robert Luciano, JD, U. Michigan], another business degree [American Cyanamid’s George Sella, MBA, Harvard], as well as pharmacists [Warner Lambert’s Joseph Williams, BS Pharmacy, U. Nebraska); Syntex’s Paul Frieman, BS Pharmacy, Fordham] and a chemist [Upjohn’s John Zabriskie, PhD Organic Chemistry, U. Rochester]. A mixed group once again.

Considering that this industry is focused on treating human diseases, at first glance it appears striking that there are so few leaders with biology … Next Page »

Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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  • Bernard Munos

    Stewart,
    This is an interesting study that needs to be done, but it really should start with a complete data set. Sampling every decade and looking at the highest degree is fraught with potential problems. For instance Roy Vagelos, MS (chemistry) and MD does not show up under Merck, although he took over from John Horan in 1985. Genentech and Art Levinson are omitted. Several MBAs have engineering degrees, including Dick Wood (Purdue), Gordon Binder (Purdue), Ed Pratt (Duke), and Miles White (Stanford). As for Roche, its situation cannot be appreciated without an understanding of the influence of the Hoffmann and Oeri founding families.

    While a scientific training helps run a pharma company, it does not guarantee performance. One does not have to go far to find scientists that are lousy CEOs or accountants that are good ones. But a scientific training — whether it’s basic science or engineering — equips a CEO with an understanding of how science works. It makes them comfortable with uncertainty and complexity. But there are other important traits and drivers of executive performance such as aptitude at taking risks, conceptual skills, and ability to sense the future.

  • Stewart Lyman

    Bernard,
    Thanks for you input. I agree it would be nice to have a full data set before reaching any final conclusions, but I’ll stand by my interpretation based on this admittedly limited data set. I only listed the highest degrees I could find (often the only ones listed on their bio’s), and it clearly is difficult to assess the degree’s themselves and how they would serve a CEO. For example, CEO that were in their jobs in 1980 may easily have gotten their undergrad degrees some 30 years earlier at a time pre-dating the determination of DNAs structure. A biology degree from the 1950’s may not be that valuable in understanding bioscience some 30 years later in one’s career. Where would a degree in Forestry fit (Lars Sorensen, Novo Nordisk) in the grand scheme of things? I agree that good scientific training would be invaluable for many pharma jobs, but many of us can name numerous people who have the degrees but seem not to have absorbed the lessons of how science is properly done.

    The jobs have changed over time and continue to evolve. I mentioned in the article that GSK sold fruit and energy drinks only to read that they sold that business today to Japan’s Suntory Beverage and Food for $2.11B. Looking up the degrees was pretty challenging, but even more so might be getting people to agree to a definition of what success and innovation looks like in this business. Finally, success and innovation often (appear) to arrive late in the biopharma game. Even in the Regeneron example that I used for a good relationship between CEO and CSO, I think few investors would be willing to be patient for several decades, which is the time it took the company to achieve financial successful. As I have written about before, no matter which storied biotech company one chooses to talk about (Biogen, Immunex, Genentech, etc), current investors have zero appetite for trying to reproduce this model in our current economic climate. These days, the virtual companies are the ones getting all the interest, even though they have little track record in producing new and innovative products for patients or their investors.

    • Bernard Munos

      Lyman,
      I would respectfully disagree with your assessment of the value of degree in forestry science. It may be somewhat removed from endocrinology, but still provides valuable training in molecular biology, biochemistry, microbiology, pathology, tissue culture, genetic engineering, statistics, trial design, etc. Scientific knowledge may be short-lived, but the ability to keep learning as science progresses is the real value of a scientific education. It is what stays with us when what we have learned in universities has become outdated, whether we started out as engineers, plant scientists, statisticians, or any other discipline..

  • Peter Boxer

    Stewart,
    An interesting analysis fraught with many issues most of which you mentioned. However, I would chose to take another strategy and look at a single company headed by a scientist and look at its success. I chose Merck because I have held the stock for a very long time and its business has been mostly pharmaceuticals. First a correction, John Horan was not CEO in 1990, P. Roy Vagelos M.D. was (I have the Annual Report to prove it!). He became CEO in 1985 and stayed there until 1994. During that time Merck was the “most admired company for 6 years” and the stock appreciated enormously. Just to prove that I looked at the appreciation in stock price from 6/1/85 to 6/1/94. It started at $107, but there was one 2:1 stock split and two 3:1 splits before ending at $30.5 in 1994. So multiplying the closing stock price by 18 to adjust for splits would give a closing value of $549, for a greater than 5X return. By the time it split again in 1999 the price has risen to around $150 or another 5X. Those are extraordinary returns (any VC would be thrilled to do that well) and is a valid measure of the “success” of the CEO. Hence my concern with your analysis is that it doesn’t assess whether the CEOs were successful and really increased the value of the company. Also, it is really the head of R&D – almost always a scientist – that is responsible for most of the decisions about which drugs move towards an NDA. Others have pointed out how difficult it is to assess the “success” of R&D heads, because the success or failure of drugs usually can only be evaluated after their tenure. Stock price to assess the success of a CEO has some of the same problems, although the stock price factors both current performance and future potential. Adding any type of success metric to the list of individuals you identified would be a major task and I doubt that there would be a real conclusion (nice project for an ambitious MBA). In conclusion I think for a company to be great (not just good) it does require a leader with domain expertise, in the case of a pharmaceutical company a scientific discipline. Certainly when you look at technology companies one thinks of Microsoft/Bill Gates or Apple/Steve Jobs, which have had dramatic growth like Merck/Roy Vagelos.