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Wednesday, March 14, 2012

BMS Up Sanofi Down

The CEO of Bristol Meyers Squibb has received a 27% raise for being the boss of a company that saw a bump in success. The success came from the FDA approval of a monoclonal antibody that began life in 1993. What if the CEO and his people back in 1993 decided to axe the Yervoy project?

In "The Drunkards Walk" we read about the Hollywood CEO who was fired after a bad year of movies. The movie mogul didn't make the decisions regarding movies that tanked. The year after she was fired, the movies she produced made a nice profit for her former company. This sounds remarkably similar to the BMS story. What exactly did the BMS CEO do above and beyond keeping the company running? It seems the profits were on the way when he took over in 2010.

What if he were the CEO of Sanofi? The closing of the manufacturing plant in Fawdon is blamed on the growing use of low-cost generic drugs and the European economic downturn. It all seems unfair but that is the randomness that runs our lives. In the Leonard Mlodinow video (link to The Drunkards Walk) he talks about the association between the perceived quality of wine and the actual quality. When the same wine is given to the same person, but the price and/or rating is altered, the actual enjoyment of the wine changes accordingly. Replace the quality of wine with the quality of a CEOs performance. We may judge the CEO of BMS as being superior to that of the CEO of Sanofi based on the information given here. Could the CEO of Sanofi have done a good job at BMS had he won that job over Lamberto? How well would Lamberto do if he were running the show over at Sanofi?

One thing for sure is that the 450 people at Sanofi will take with them some valuable knowledge on how drugs are manufactured. Where they will go with that knowledge is unclear. Having witnessed the talents of other European drug manufacturers and how they interacted with their under qualified biotech customers, I came away with a great respect for that side of the drug industry. Making drugs is complicated. American biotechnology companies, especially the smaller start-ups, do not have the expertise to even begin talking about manufacturing issues. The soon-to-be unemployed Sanofi workers do have that knowledge. Are there any young start-up biotech CEOs who know that they need the expertise that Sanofi is letting go?

As one man randomly succeeds 450 men and women randomly fail. The closing of the Sanofi plant had little to do with the ability of the workers to do their job. As stated it was due to generics and the economic downturn. Lamberto Andreotti may have done his job very well. I am assuming he has been rewarded for a random series of events over which he had little or no control. No one has yet to figure out the best way manage complex scientific medical research. Many have made the claims of a new way that will revolutionize the industry. Yet success in drug innovation remains random. The success of Lamberto Andreotti is not a sign that BMS has fixed the drug industry R&D management problem. We randomly stumble along.

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