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Taking a healthy dose of risk
Roche CEO Schwan's top priority is to reinforce the tie-up between scientists involved in discovering new drugs and their counterparts in diagnostics.
- By Haig Simonian and Andrew Jack, Financial Times
- Published: 23:23 August 5, 2008
Severin Schwan's bright, blue eyes betray no strain in spite of weeks squinting down microscopes, peering into fermentation tanks and staring at assay trays.
Since becoming chief executive of Roche in April, the 40-year-old Austrian has been on a whirlwind tour to gauge for himself what is widely viewed as the world's most successful big pharmaceuticals company.
He has heard biologists tell how the company could extend its leadership in cancer into auto-immune diseases such as rheumatoid arthritis. And he has travelled well beyond Roche's headquarters in Basel - where a curvaceous new 42-storey skyscraper will eventually symbolise the group's status as the world's most profitable drugmaker - to Genentech and Chugai, Roche's majority-owned associates in the US and Japan.
Such peregrinations have not stemmed from a need for frequent flier miles or because the new chief executive has just parachuted in from outside. The understated and soft-spoken Schwan is a company veteran, having joined Roche 15 years ago after studying business and law in Innsbruck. He decided not to pursue law, regarding it as too narrow and country-specific, in favour of commerce, and has worked for no other company since.
Schwan's youth, his non- scientific background and - less important nowadays - the fact he was not Swiss meant his elevation to chief executive came as a surprise. His career began in finance and continued through administration, including stints at foreign subsidiaries. Even his last job, which provided the springboard to the top, was running diagnostics, by far the smaller of Roche's two divisions, accounting for only about a quarter of group sales.
He ducks the question how such an outsider beat more seasoned rivals such as Erich Hunziker, Roche's respected chief financial officer, and William Burns, the head of pharmaceuticals. Instead, Schwan stresses his suspicion of metrics and the importance of teamwork - both to define his management style and what Roche requires.
"I spend a lot of time with people at the front: I'm not interested in PowerPoint presentations but prefer to go to the source, spending time with a project leader in his research lab or meeting a multiple sclerosis patient and his physician in the hospital. You can learn a lot from people in a true dialogue: for me this means listening and asking questions," he says.
Collaboration is paramount for Roche. The group has a decentralised structure and - at least until this month's bid to buy out minorities at Genentech - a hands-off relationship with subsidiaries that analysts say has been a major contribution to its success. The federated structure has fostered focused research, with each company concentrating on specific areas, but has also been supple enough for collaboration on marketing.
Tough decision
Development of Avastin, for example, the breakthrough cancer treatment discovered by Genentech, was accelerated by a division of labour between it and Roche, with each concentrating on different types of the disease. Acterma, a novel rheumatoid arthritis treatment discovered by Chugai and already on sale in Japan, is now being prepared by Roche for Europe and the US.
"Teamwork is essential in a knowledge-based business such as pharmaceuticals, where scientists need the freedom to think." he says.
"When I toured our labs, I grasped the potential and the enthusiasm of our people. We have to capitalise on that. If you tell your people all the time what to do, don't be surprised if they don't come up with new ideas. Innovative people need air to breathe."
He accepts there has to be broad guidance too and makes clear that teamwork also requires results. "Our culture of working together at Roche is based on mutual trust and teamwork.
An informal, friendly manner supports this: at the same time, this must not lead to negligence or shoddy compromises - goals must be achieved and, at times, tough decisions have to be implemented."
His strategic priority now as chief executive is to reinforce the co-operation between Roche's scientists involved in discovering new drugs and their counterparts in diagnostics.
Many pharmaceuticals analysts believe such proximity has become inevitable as leaps in molecular biology help drug researchers identify much more closely the chemical and biological characteristics of the new treatments they are seeking, allowing them to focus their research efforts much more accurately.
Diagnosis also aids the efficacy of new drugs by helping identify the sorts of patients most likely to benefit. "You need diagnostics to develop tailor-made medicines," Schwan says.
He tried to encourage teamwork when still rising up the ladder in diagnostics. "But such efforts were largely on a one-off project basis. After taking over diagnostics in 2006, I tried to do things more systematically. And, as chief executive of the group, I now want to do that more than ever."
The process has already started. At Roche's big biotech production site at Penzburg in Germany, for example, researchers from pharmaceuticals and diagnostics work together on new cancer treatments under one roof rather than being separated as in the past. With Schwan as chief executive, such contacts will be deepened.
"This also has to do with encouraging people to take risks: innovation needs courage. And if something goes wrong, let's put the issue on the table, learn from it and resolve it together. In our sort of business, it's extremely important to be willing to celebrate failure."
Celebrating failure may sound extraordinary coming from the chief executive of a company with 46.1 billion Swiss franc (£22 billion) in sales and 11.4 billion francs in net profits. But Schwan uses a recent example to illustrate his point. For much of last year, Roche was locked in a bitter legal dispute with its US rival Amgen over the intellectual property rights to their two competing drugs for anaemia associated with chronic kidney disease.
Roche's lawyers were convinced of the merits of their case and pushed the legal battle to the limits. In the end, a US court sided with Amgen, barring Roche's Mircera drug from the all- important US market.
Schwan did not admonish the lawyers for poor judgment: just the opposite. He cracked open the champagne, congratulating them for pursuing what they believed was the correct outcome. "No one in group legal has been punished or censured," he says.
"Risk aversion is typical of the culture of a big company. People believe they'll never advance by sticking their necks out. We want to develop a culture of encouraging risks to distinguish ourselves. We want quality, not quantity."
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