Four New Pharmaceutical Chief Executives Speak Out

The CEOs of Pfizer, Roche, Eli Lilly, and Bristol-Myers Squibb address topics from dealmaking to the pharmaceutical industry's image problems

Seven new CEOs have taken the helm at major pharmaceutical companies since 2006. Such high-level turnover in less than two years is rare in any industry—but for the pharmaceutical industry, it's a complete management overhaul that's already changing how the sector manages research and development, controls its image, and approaches dealmaking. Among the new CEOs are Jeffrey Kindler of Pfizer (PFE), which is under pressure to make wise use of its enormous $26 billion cash hoard, and Severin Schwan of Roche (RHHBY), which recently made a $43.7 billion bid to buy out the 44% of Genentech (DNA) shares it didn't already own. There is also James Cornelius of Bristol Myers-Squibb (BMY), who tried to buy cancer drugmaker ImClone (IMCL), but was outbid by Eli Lilly's (LLY) new CEO John Lechleiter. In interviews with BusinessWeek writers Arlene Weintraub and Kerry Capell, the four new CEOs weighed in on some of the most pressing issues facing their industry. Following are edited excerpts from those interviews.

Is the pharmaceutical industry primed for consolidation—perhaps even megamergers?

Schwan: I am not in favor of megamergers at all. You end up with huge overlaps and you destroy a lot of value. If you look at Genentech, even though it is a sizeable transaction in terms of financials, the two organizations are very complementary to each other. Genentech's activities are centered in the U.S., whereas Roche is active on an international basis. And within the U.S., the commercial focus of Genentech is on oncology, whilst Roche is selling medicines in other diseases such as virology, transplantation, or osteoporosis. Importantly, Genentech's research will continue to operate as an independent center to preserve the unique culture at Genentech and to maintain the innovation momentum.

Lechleiter: Acquiring ImClone fits right in with our strategy of growing our presence in oncology. It is an opportunity to build critical mass. It's difficult to imagine megamergers. We have not seen any create really significant sustained value. If there is one, it will be about someone getting bought from a position of weakness.

Kindler: We never say never. We are constantly engaged in a very robust process of reviewing every imaginable opportunity. Having said that, our criteria [for choosing acquisitions] hasn't changed: It has to be complementary to our strategies. It has to have the right price relative to the value it creates. It has to be one where we feel we can manage the inevitable destruction that deals create.

What's the solution to the lack of productivity in drug research?

Cornelius: It's troubling in that the Food & Drug Administration is approving 18 to 20 [new drugs a year], but we're spending about $60 billion on research. That equation doesn't work. Something has to give. We'll have to be selective in the R&D bets we make. We're going to see companies working together more to address that R&D productivity issue.

Kindler: The expression I use here a lot is: "the spirit of small, the power of scale." I want our business units to be small enough that they can get all the benefits of an entrepreneurial organization. They can do what needs to be done to meet their customers' needs on the one hand, but on the other hand get the benefits where scale does help. Scale helps in late-stage clinical development trials that are very expensive; scale helps commercialization in large markets. If we can get the balance between those two things right, we are going to effectively grow the business.