Wednesday, April 8, 2009

Another Sign of Big Pharma’s Demise?

I couldn’t let this one go by. Andrew Jack wrote an article in the February 6, 2009 edition of the Financial Times about how scientists don’t lead pharmaceutical companies anymore. Andrew pointed out that only Lilly’s (NYSE: LLY) CEO, John Lechleiter, had trained as a scientist. He did note that Daniel Vasella, Novartis’ (NYSE: NVS) CEO had been a doctor.

Now, am I the only one who’s drawing a connection between the dwindling pipelines of large pharmaceutical companies? After all, what are professional managers all about? Optimal solutions. Squeeze every cent out of everything that you’ve got and don’t a cent anywhere else unless you have to. Doesn’t lend itself to developing many new drugs does it?

Remember Jack Welch? Hopefully, it hasn’t been that long. And, while I’m not a complete fan of the man, give the devil his due, he knew how to get results. Anyone care to remember Jack’s academic background? A doctorate in chemical engineering from the University of Illinois. Doesn’t sound very sexy does it? But, Jack sure got his money’s worth when he rose to head GE Plastics and made his career there. The rest is history as they say.

I believe that there are two things at work here. First, only scientists can truly appreciate pure research and development and understand what can be done. Next, only scientists can understand the values that pure science can bring to society. This is my opinion, I have no empirical data to back this up. If anyone from the Harvard Business School is reading this, they’re cringing. Now, I know what everyone is saying, Guy’s a Marxist. He’s going soft on capitalism. But, wait, just hear me out.

Anyone remember Bell Labs? When it was a true scientific establishment and developed things like lasers and transistors? Or, how about when Big Auto was run by engineers and designers and hung around with manufacturing types? Bill Gates was a college drop out. (OK, it was from Harvard, but, you get my point.)

The Industrial Revolution wasn’t started by a bunch of quant’s from business schools. They didn’t even graduate from high school! Some were even home schooled! It was all about a bunch of guys, sorry ladies, this was a long time ago, who saw that things could be done better and did something about it.

OK, the baton had to be passed. Even Edison could only go so far without calculus. Pure science and research was made possible funded by the early successes. Somewhere along the way, we lost our way. No one solves problems anymore, no one stretches, and, that’s why Big Pharma will follow Big Auto onto the dustbin of history. (With apologies to Trotsky.)

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

Sunday, April 5, 2009

Where’d Everybody Go?

I know that I’ve been a little distracted lately and been off the wire a bit, but, when I resurfaced I was surprised at how quiet everything had suddenly become in the life sciences sector, Big Pharma especially. I e-mailed Larry asking where everybody had gone (except for Mike Huckman, who’s out in LA chasing a story on Dendreon. Check it out at .). He replied with his characteristic wit and insight asking that wasn’t this supposed to be my job? Larry did have a point.

A short while ago, everyone was talking about Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP), and Johnson & Johnson (NYSE: JNJ); Roche (SWX Europe: ROG) and Genentech (NYSE: DNA); Pfizer (NYSE: PFE) and Wyeth (NYSE: WYE); and, Abbott Laboratories (NYSE: ABT) and Celera (NYSE: CRA). Now, nothing.

OK, the wise guys out there may say, ‘Isn’t this enough?’ (I won’t get into that maybe it was too much. I’ve flogged that poor horse too much already.) One day, we’re all merging and going to dominate the industry. The next, there’s not enough players around for a pickup game of stick ball. Something’s up.

The media aren’t really covering these deals or other possible outcomes presently. Maybe the other news stories are pushing Big Pharma into the back pages, or, off altogether. I have to admit last Sunday’s purported story about President Obama calling General Motor’s (NYSE: GM) CEO, Rick Wagoner, at home and firing him made for a heck of lot better copy than the purported value of Schering-Plough’s pipeline. The stock market’s recent rally has certainly been another distraction, probably, also throwing some deals economics into question. Finally, Treasury Secretary Timothy Geithner’s plans for toxic bank debt haven’t hurt neither has his rock star boss’ concert tour of Europe.

My point, the markets and the media are digesting a lot of new news. Much of which will change the rules that Big Pharma had been playing by until recently. First, share prices will rise. Those deals won’t be looking so good to shareholders. Next, government is getting more involved with American business management. Industries and their companies should be expecting their own phone calls from Washington if they get into trouble. Or, maybe executives’ pay will just seem too exorbitant when politicians are just trying to make more drugs more affordable to more people who can’t afford them. Finally, Big Pharma has nothing new to say. As Larry and I have blogged repeatedly, this is an industry that could be the next Big Auto.

So, where has everybody gone? I believe that they’ve gone to ground looking for cover. First quarter earnings are due out soon. Annual shareholders’ meetings will be taking place. I still don’t think that there will be much good news. You can only get away with saying that you’re doing better than General Motors for so long.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin