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Are Some Degrees Better than Others for Big Pharma Leaders?

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or medical degrees (although, not surprisingly, there are a number of chemists). Looking into the history of a number of these companies shows why business degrees were highly favored years ago. While we think of these organizations today as primarily focused on pharmaceuticals, many of them are (or in most cases, were) conglomerates in years past, with wide ranging business interests. These include selling a variety of over-the-counter health products, diagnostics, animal health products, as well as cosmetics, raw chemicals, and consumer foodstuffs.

American Cyanamid’s Lederle division (which was absorbed into American Home Products, then Wyeth, then Pfizer) developed both tetracycline and methotrexate, useful drugs that are still prescribed today. As a conglomerate, however, American Cyanamid also sold Formica countertops, Old Spice aftershave, Breck shampoo, and Pine Sol cleaner, along with numerous agricultural products and industrial dyes and chemicals. Cosmetics manufacturer Elizabeth Arden used to be a part of Eli Lilly, American Home Products (now part of Pfizer) sold Chef Boyardee canned pasta products for over 50 years, and GlaxoSmithKline sells fruit and energy drinks. Thus, it’s not surprising that former leaders of these types of companies were more business focused than pharma focused: medicines made up only a part of their product portfolio. The majority of these companies have divested themselves of these side businesses in recent years, or the pharmaceutical component has been sold off (e.g. Abbott’s spin out of Abbvie).

Acquisitions also make it hard to evaluate innovation. In the last 15 years Pfizer has gobbled up Warner-Lambert, Pharmacia, King Pharmaceuticals, and Wyeth, and these companies in turn had already acquired Upjohn, Sugen, Parke-Davis, Agouron, and Searle among others. If you’re having trouble innovating, you can certainly buy innovative drugs across a widely varied pharmaceutical landscape. This process is still in progress today, a recent example being Amgen’s acquisition of Onyx Pharmaceuticals.

In summary, it seems pretty clear that the idea that scientists led Big Pharma companies during their most profitable (and possibly innovative) period is false. Most Big Pharma CEOs today are not scientists, but that was true in 1980, 1990, 2000, and 2010 as well. However, in a business that spends one of the highest percentages of all industries on R&D (up to 20 percent of revenues), CEOs must work closely with their research heads and Chief Science Officers if they truly want to be running innovative companies. An excellent example here is the relationship between Regeneron CEO Leonard Schleifer (MD-PhD) and his CSO George Yancopolous, as detailed in a Forbes story on the company’s remarkable recent run of success.

Biopharmaceutical companies are not struggling today because scientists are no longer running them. They are in serious trouble because they have failed to adapt well to a changing scientific, business, and healthcare environment. As Charles Darwin has been paraphrased as saying, “it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.”

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  • Bernard Munos

    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

    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

      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

    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.