As JP wavesa golden goodbye to anxious employees and unhappy investors, the retiring ceo leaves his post at the beleaguered drugmaker with a decidedly chipper feeling. In a chat with The Financial Times, he's characterized as coy when asked to describe his legacy.
He concedes that “there are dozens of things you wish you had done differently,” including earlier and wider dissemination of its analyses of Avandia, the diabetes drug that has seen scrips plummet after a study last year raised concerns about side effects. But JP isn't inclined to recite his list. "I have no regrets. The legacy of GSK is not what happened in the past 10 years. It’s ahead of us.”
To make his case, JP points to Glaxo's research arm, Centres of Excellence in Drug Discovery. “There is no question that the model has raised productivity,” he insists. “This is not just a one-shot deal. We are 200 per cent better at re-loading the pipeline. You have to really create the conditions for success. If not, you have zero chance. You can have serendipity only if the grounds are right.”
One unnamed analyst, however, threw a bit of cold water on JP's boast. “Whether he likes it or not, his legacy will relate to the CEDDs because he’s made such a big deal of it,” the analyst tells the FT. "He's left GSK in far better shape, but the speed and quality has probably not matched the expectations he led the market to have. It’s not moved from serendipity to predictability.”
Another accomplishment JP raised was the creation of a new corporate culture in the wake of the merger with SmithKlineBeecham. “The company - it’s not me - has made significant progress. I take pride in having done the merger, in creating a single company with a very strong culture of performance, integrity and passion.”
As to stock performance, well, the FT notes that, since 2000, Glaxo's price-earnings ratio has declined sharply and continues to underperform the market, despite share buybacks and dividend hikes. In JP's defense, Lehman Brothers analyst Jo Walton says all drug stocks - not just Glaxo - aren't good investments. “Nobody could have sensibly predicted the changes in the sector,” she says. “In the long-term, (as an investor) you simply didn’t want to own drug companies.”
18 Comments
The last two sentences from Lehman Brothers are scary. With NME approvals falling to record lows and the FDA becoming more and more conservative, I can't disagree with his assessment. I can also see evidence of his assertion first hand: almost all of the stock-options that I've received over the years are worthless.
As much as I love this industry, I just really doubt that I will be able to spend the next 20 years of my career here. The entire business model we have seems to be slowly crumbling.
Bingo! Nathan gets it!!
Insider - funny. I've defended this buisness model relentlessly on this site because I believe it's the only viable one we have. While this buisness model is crumbling, I don't see another one emerging. Will my children's generation have new drugs or will they be relying on the same crappy drugs that we currently have? Our current buisness model encourages innovation. We're quickly moving to a "status quo" where there will be essentially no pharmaceutical innovation taking place. That's what is sad here. In spite of all the complaining on this site, maybe Americans are growing satisfied with the current pharmaceuticals we have.
I suppose the fact that Garnier is on his way out leads observers to misplace the admonition about not speaking ill of the departed. If one seeks instead the plain truth, Garnier has been a pompous, arrogant, micromanaging, incompetent ass. His approach to pharmaceuticals, with line extensions and promotional ploys, was that of a wannabe Procter & Gamble manager. He never synergized SmithKline and Glaxo in the ten years he ran GSK after the merger. His putative legacy, the Centers for Excellence, have been a cumbersome, duplicative, expensive mess. GSK's productivity at new drug development has been abominable. Garnier's generation of CEOs -- McKinnell, Gilmartin, McKillop, et.al. -- leave a legacy of greed, arrogance and short-sightedness. They have backed the industry into a gulley wash and we can only hope their successors can clean up the mess. For J.P Garnier, no hail to his farewell. Instead I say, eat dirt and die.
Garnier's next stop is going to a country that will not extradite him back to the USA, to face his criminal behavior. Hey Lawler do you still have to protect this ass after he retires? I would be carful, because there could be guilt by association!
Definately one of the most infamous CEO's of the past decade..
And quite the character indeed... I have seen comments left by Glaxo drug reps on Cafepharma which paint no pretty picture of Mr Garnier..His legacy in his head may be one of prestige and accomplishment.. Unfortunately, the damage done by Avandia, Paxil( Seroxat) and the sheer volume of Bad press GSK has recieved over the past 8 years might be the real and historical perspective of his tenure...
I would rather spend 8 years in poverty than 8 years making millions on the backs of a corrupt and defunct pharmaceutical company...
"...I take pride in having done the merger, in creating a single company with a very strong culture of performance, integrity and passion..."
I'm sorry, I'm just going to be petty. Would this be the same man of integrity who told the Senate Finance Committee that he knew nothing of John Buse's intimidation, only for it later to be revealed that he had been copied on a whole series of emails, pertaining to just that, and that he had stood by and let it happen? Yep, a company just jam-packed with integrity. Frankly it doesn't seem terribly relevant what it's passionate about, and performance? Last word to the Senate Finance Committee, with the quote of the Century, thus far:
"Less than stellar".
Matt
I'm interested in Nathan's comments and the issue of the buiness model as viewed from the inside. I wonder whether most people agree that it is a certain generation of CEOs - McKinnell, Gilmartin, Garnier, (and maybe Hassan) - or whther these folks are more the "symptom" than the disease - a kind of last gasp attempt to find a "soft landing" that doesn't require more profound transformation.
Justice, You ask a good question. I don't know if they really understand what is going on. Just when our company makes a change that I think is in line with doing business a new way, they do something else that undermines it. One thing they are doing is taking a lot more input from the field, so maybe there is hope down the road. HC
Justice, Frankly, most (researchers) that I talk to at my company really don't think about the "big picture" a whole lot. They dislike the CEOs and blame a lot of our problems on management. But I think those people are neglecting to notice that the entire ground we are standing on is shifting under our feet. The FDA is slowly (or quickly) changing its guidelines. It used to be that drugs were only required to be "safe and efficacious". Now, the FDA is requiring new drugs to be shown to be either safer or more efficacious than previous treatments. You can't blame them for that - they have congressmen calling them murderers.
To give you an idea of the "hopelessness" that most scientists see for the future of this industry: I have yet to meet a single scientists in industry who would encourage their kids to enter this profession. It's not going to last. As it currently stands, I don't see how my children's generation will have any sort of pharmaceutical innovation taking place.
In the big picture, governments and their constituents are demanding improvements in cost and safety. In spite of what FPME would like us to believe, you can't improve both simultaneously. Given our current technology, development costs (price) and safety are completely dependent on one another. I believe that society's demands both to improve both simultaneously is causing the entire system we have to slowly implode.
In the auto industry, when safety improvements are mandated by the government, the auto industry simply raises the price to accommodate the new demands. In the pharma industry, we are rapidly loosing our ability to increase prices to accommodate new demands. Sooner or later, it just won't be economically feasible to develop new drugs -- and this business will dissolve completely.
Nathan,
Nathan, Time to usher in a new marketing paradigm for those new entities to be released. The new paradigm would have the following elements: 1. Smaller sales force with experience in sales and health care- nursing, pharmacy, physical therapy. 2. More extensive usage of physicians and clinical scientists in medical affairs. 3. Greater availability of patient education about the disease state on both the web and in print. 4. Take a stand on expensive lunches and dinners at high end restaurants....deli trays and meetings at mid end restaurants. 5. Greater focus on the plight of the patient for both information and deductibles for high end biologics. 6. No special pricing to targeted groups so that the perception of selling on the spread is eliminated and no issue with best price gaming to medicare. To sum it up... the healthcare providers are looking for transparency and integrity. A small biologic company can readily road test a new selling model. What do you think?
Nathan and Pharma/Phamacist, thank you for your posts--they are two of the most eloquent descriptions of the challenges facing pharma and new paradigms for an efficient operating model.
Pharma/Pharmacist, the only point with which I disagree is differential pricing. Although it has political repurcussions, it is the most efficient way to achieve both societal goals of welfare improvement. A single global price, for example, would be too low to generate cash flow and operating margins to sustain R & D and too high for the least developed geographic markets. Regional price convergence is occuring due to transparency and the EURO and some price concessions are being implemented but I don't think a single price is desirable. Within the US, I don't see a way to move away from price discrimination among customer segments unless Medicare moves to a reference pricing system, which I think is unlikely since attempts would re-open the entire law.
Bob,
Based on the mention of "spread" and "Medicare", you may have misinterpreted Pharma/Pharmacists point around pricing. I think he was talking about the practice of setting an artificially high AWP for a product and selling it at a much lower price. Given my understanding of your industry knowledge, you are already aware that this incents the provider to choose the product based on the profits generated by the large spread. Of course, you are also aware that new reimbursement practices based on ASP rather than AWP have eliminated this practice in Medicare Part B.
Atlex
ATlex, thanks for pointing that out. I did misread his discussion of spread. Not enough coffee.
Gentlemen, Please be advised that ASP is a very complicated formula that is defined by "best price". With that being said, if price concessions are offered to specific groups relative to the drug's availability through that supply chain, then it alone creates an avenue for redefining customers as those available for price concessions. This greatly impacts best price to the government. Merck was just fined regarding similar activities. It might be worth reconsidering the ancient Merck & Co. philosophy to offer only a single price. What do you think?
Pharma/Pharmacist: Yes, ASP is complex and in the context of best price it's even moreso. I always thought Merkc's single price policy made sense--it certainly gave them a lot of goodwill in the retail sector. Merck went off-message when it lobbied for the Medicaid rebate system as an alternative to State formularies back in the early 90s. Extending deep rebates to managed care organizations was not a wise decision.
Anyway, I'm sure companies would prefer a one-price policy but, like sampling, dtca and enforcement of certain provisions in wholesaler contracts that would decrease drug diversion, taking a leadership position can put the company at a severe competitive disadvantage.
I like your thinking, Pharma/Pharmacist.
Pharma/Pharmacist,
Like your thinking. We need to keep the patient needs front and center. At times we are so distant from them that we forget what they need, and what it is really like to be them. Very importantly we need to understand the role we play when we put ourselves between the patient and the doctor. We do this by conducting patient needs analysis and then re-packaging the information back tot he doctor. Very often I have seen the information gets filtered to suit our own needs, we need to stop doing this.
We should support more patient groups to do more research among their patient population and empower them. We cannot access this information for all the obvious reasons. Let the patient groups get better armed with information and provide it to us. That is true transparency/collaboration.
We need to stop being us (pharma and doctors) versus them (patients)...
We could get on the right path of re-establishing trust and improving the public perception of the industry and health care over all.