Assigning Credit and Blame to Biopharma R&D Chiefs


Xconomy Seattle — 

There’s been an awful lot of turnover lately among Big Biopharma R&D chiefs, with departures from Merck, Amgen, Bristol-Myers Squibb, AstraZeneca, Roche, and AbbVie. Their average tenure in this position was less than 7 years; the range was from less than 2 to 12. That’s similar to the average CEO tenure, which is only 8.4 years across all industries and is even shorter in the pharmaceutical sector. Compare these tenure numbers to the lengthy time frame (widely reported as 10 to 15 years) it takes to move a new drug from the lab to the marketplace. These numbers imply that most R&D chiefs will not be in their jobs long enough to see drugs discovered on their watch ever win FDA approval. This raises an interesting series of questions: who gets the credit if one of their current portfolio drugs makes it to market? Who will be blamed if it doesn’t? Is it even possible to figure this out?

Many of the folks hired to replace these departing R&D executives will be joining organizations that already have an existing pipeline of potential drugs at various stages of development. Once they come on board they will move quickly to differentiate themselves from their predecessors, who may or may not have left under good terms. The keys to their success, given what may turn out to be a brief tenure, will not be found at the early end of the pipeline. In fact, their achievements will be tied most closely to their acquisitions, as detailed below. This skewed focus towards near term results even in R&D may help explain why Big Biopharma has developed the reputation of buying, but not creating, innovative medicines.

The task of tracking down the details of who did what (and when) to properly assign credit and/or blame in R&D could give morphine a headache. It also likely requires insider knowledge to parse the fine details. Let me illustrate this by focusing on just a couple of these recent, high profile personnel moves. Peter Kim, the former head of Merck’s R&D group, saw 20 products launched during his 12 years in that position. Mercks’s website lists some 98 marketed prescription medicines, which is not as impressive a number as it appears. For example, the list includes three distinct versions each of four different drugs. You also can’t tell by perusing it that generic versions of some of their marketed medicines are widely sold by competitors. What really matters (at least to the Wall Street crowd) are the top financial drivers in the group. Put another way, it’s not the number of drugs that you sell; it’s how much money they collectively bring in. One blockbuster is generally worth way more than a handful of second-tier medicines.

Kim’s predecessor at Merck, Ed Scolnick, likely chose a substantial number of the medicines that won FDA approval in Kim’s first few years after taking the top R&D job. Longtime Merck watchers (which I’m not) may have some feel for the relative contributions of Kim and Scolnick, but it’s likely that both their fingerprints will be found on a number of Merck molecules. Who deserves the lion’s share of the credit for the recent top earners in this portfolio (e.g. montelukast [Singulair; FDA approved in 2005] and sitagliptin [Januvia; FDA approved in 2006]), and who made the key decisions to develop and continue to market the problem children like extended-release niacin/laropiprant [Tredaptive] and rofecoxib [Vioxx; FDA approved in1999]?

Merck doesn’t bother to include any drugs in Phase I on their most recent pipeline list, but they have 23 drugs in Phase II and 15 drugs in Phase III. They also list six drugs as being up for review by the FDA. Oversight for this extensive collection of drugs in development has now been shifted to Kim’s replacement at Merck, Roger Perlmutter. He returns to Merck (where he had an earlier stint) having spent the previous 11 years as the head of Amgen’s R&D group. We know, based on published numbers, that only about half (on average) of the 23 drugs in Phase II are likely to move forward, along with only about two-thirds of the 15 drugs in Phase III. Trying to significantly improve these percentages is a challenging assignment. It requires calculating which molecules have the least attractive chances for clinical and/or marketplace success, moving them to the back burner, and possibly purchasing some near-term replacements.

Amgen and Merck have distinctly different biopharmaceutical business models. Amgen’s marketed drugs are primarily protein based, whereas Merck’s historical focus has been on small molecules made through chemical synthesis. As a result, Amgen’s portfolio of drugs has been much less susceptible than Merck’s to generic competition. Substantially changing the makeup of a pharma pipeline is akin to altering the course of an oil tanker navigating dangerous shoals; it can be done, but it takes a long time and a wrong decision may be disastrous. Perlmutter’s other major task during his tenure will be stocking the pipeline for the next person to hold the job. It’s been suggested that one of the major reasons for Merck selecting Perlmutter was to … Next Page »

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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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2 responses to “Assigning Credit and Blame to Biopharma R&D Chiefs”

  1. Kyle SerikawaKyle Serikawa says:

    Stewart, nice commentary on the problems of short term incentives versus long term thinking, and the difficulty of assessing leadership quality in an industry that has such a long development cycle and that is subject to so much random variation. I’m reminded of a similar example in Leonard Mlodinow’s “The Drunkard’s Walk,” discussing how studio heads also are often assessed on current successes of movies even when those movies were greenlighted and developed under a previous studio head’s tenure.

    I think an interesting question, given the low correlation between leadership quality (however that is measured) and performance, is how much effort organizations should be putting toward finding, assessing and hiring quality at the top. If, let’s say, the difference between the best CEO and the worst only affects probability of success by 5% due to the host of uncontrollable factors influencing drug development (I’m making that figure up. I’d love to know how to calculate that more accurately), how do companies factor that into their job search?

  2. Stewart LymanStewart Lyman says:

    For those of you who want to track Roger Perlmutter’s transformation of Merck’s R&D group, check out the update at