Too big to succeed, too entrenched to listen

As I mentioned in a recent column, success begets failure. Individual winners become complacent or drunk with power.

Peter Kissinger
As I mentioned in a recent column, success begets failure.Individual winners become complacent or drunk with power. Soon they lose anability to think of their complaining environment as anything but uninformed ormisinformed. They deserve greatness.
 
 
Hedge fund managers, dictators, CEOs, labor union bosses anduniversity administrators are all subject to this problem. Servant leadershipis too rare, and even Gandhi wasn't perfect. This is a fact I know fromexperiential learning. A phrase from my youth has been haunting me for weeks:"If you don't have anything positive to say, don't say anything at all." Itwould take more discipline than I've got to be silent.
 
I was really looking forward to a settled 2011, with seriouspeople making progress on serious problems in a civil way. Then Tucson,Tunisia, Egypt, Bahrain, Libya, Iran, Wisconsin, Syria, Ohio, Pfizer, Yemen andIndiana happened. What's going on here? Is there an SNP, a biomarker, a commoncause to explain all of this?
 
 
A few people comfortable with their power have littlesympathy for the suffering majority who wish for a fair hearing and to not beshut down or out. Taxpayers, students in the Middle East and researchscientists at Pfizer all have this complaint. Leadership, entrenched fordecades in many cases, can't seem to listen and embrace new ways.Constituencies such as shareholders, citizens and elected officials play alongfor a while.  Then the tippingpoint occurs. We're there.
 
 
Once the government employees got a better deal than theunemployed taxpayers who paid them, demands for realignment and sharedsacrifice became inevitable. When so many work for the government, theever-smaller numbers supporting them with taxes see a lack of sustainability.We're all shareholders of something.
 
I still have many friends at Pfizer (my surrogate marker forBig Pharma as a whole), but far fewer than before. The announcement of closingtheir Sandwich, England R&D center hit me like a ton of bricks. The way itlooks from the outside, two CEOs spent billions on acquisitions that have donenothing for patients, nothing for shareholders and nothing for employees ortheir communities.
 
I'm not buying that Skokie, Kalamazoo, Ann Arbor, St. Louis,Groton, California and New Jersey would all have been in worse shape withoutthe help of Pfizer's planners. We have no way of knowing for sure. If all thiswas to be a stimulus, it's clear it did not have a positive result foremployees or shareholders. A little more than a decade ago, the company wassuddenly too small, and the pipeline too empty. The ensuing financialengineering didn't help. Now they are too big in the wrong places and moreheads must go. They hint that a good portion of products supporting their hugesales should now be spun off. The previous leadership sure looks confused inretrospect. 

To be honest, I don't have an answer for them. They triedsomething and it didn't work. So now it's on to try, try again. 
 
It appears that the next, current and future try is verticaldisintegration. Pfizer, GSK, Merck, Johnson & Johnson and Lilly, amongothers, have been playing this theme song for some time now. It's a matter ofbreaking the ego system and embracing the life science and manufacturingecosystem.
 
Components include outsourcing much that is tactical to CROsand CMOs and strategic to passionate small biotechnology firms and academics.In the last three years, this has included moving captive facilities and peopleinto CROs and CMOs who can be recognized for success with lower net income thanexpected for pharma.
 
 
In a way, "too big to fail" has become "too big to succeed"from an R&D perspective, particularly for the "R" (or discovery) part.Discovery risk is pushed out to smaller business elements. Many will fail. "De-risking"is a new word. The tactical development stuff being pushed out to competentcontract partners accelerates a 20-year trend, not unlike what has long beencommon for auto parts. 
 
 
There is a renewed discovery opportunity for academics andsmall firms, but they too are highly stressed; the universities by tax revenuesand the small firms by declining venture investing in the early stages. Whatmakes disintegration sensible is that it allows for flexible allocation ofpeople when projects or companies fail. It puts talent in smaller environmentswhere faster decision-making is a survival instinct.
 
 
A new jargon has developed around the terms open innovation,virtual integration, FIPNet, precompetitive technologies, and the like. Slidedecks from strategists at major pharmas and their supporting consulting firmsare becoming highly repetitive. Deals are being announced weekly. Pharmas haveagreed to make unique animal models (or precompetitive technologies) availableto other firms. They have opened up their libraries to screening by outsiders,and have opened up their screens to outside molecules and even whole libraries.They've announced major deals with multiple universities and jointly fundedventure capital; trying yet again.
 
This new and refreshing openness to things "not inventedhere" is a positive trend, and I'm rooting for it to work. It will if we don'tlet planners get too frustrated by the unknown unknowns that definebiology. 
 
Underneath all of this realignment, the innovation machineis alive and kicking, but struggling a bit for funding. Government grants willget even tighter and early stage venture capital is about as rare as flyingpigs. Nevertheless, while we're in the valley today, the really good stuff willget sorted out and make it over the next mountain. In my next column, I plan totake a look at a few topics with momentum that are changing the world of drugdiscovery and development.
 
Peter T. Kissinger is a chemistry professor at Purdue University,chairman emeritus of BASi and chairman of phlebotics and director of Prosoliain Indianapolis.

Peter Kissinger

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