Why Doesn't Pharma Hire from Biotech?

At this week’s BIO-Europe meeting, Vaughn Kailian asked his panelists: why don’t biotech’s most innovative executives ever join pharma? But they do, argued back panelist and Merck VP Barbara Yanni: look at Peter Kellogg, who joined the company from Biogen-Idec.

Irrelevant, countered Kailian. Counting money in biotech or in pharma: same thing. What about research?

In fact, biotech CFOs could probably contribute some innovation to Big Pharma, in particular perhaps Kellogg will begin applying some of the lessons of biotech finance to Merck – like figuring out some alternative strategies for financing a broader pipeline.

But Kailian is mostly right.*

The key contribution biotech's management can make to Big Pharma is in R&D -- but by and large Pharma doesn't really go after biotech's R&D stars. While big-name academics regularly join Big Pharma – Merck has made a habit of plucking its research bosses from academia (like Peter Kim, Ed Scolnick and Roy Vagelos) – rarely do biotech’s research poo-bahs.

Sometimes they get there by acquisition, like J&J’s research chief Paul Stoffels – Janssen to Tibotec-Virco and back, via purchase, to J&J. Or Harlan Weissman, who stayed at J&J following the purchase of Centocor. And yes, every once in a while there appears in Pharmaburg a Corey Goodman (ex-Stanford and Berkeley, then Renovis CEO, now running Pfizer’s new Biotherapeutics center). But biotech’s innovators are vanishingly rare in the top echelons of pharma.

Mostly they don't get asked to join. Big Pharma likes to promote from within. Fewer square pegs in round holes. And leaders of large research organizations, goes the argument, need experience in running large research organizations. Which in turn perpetuates the problems of large research organizations.

Talk to the top researchers in biotech and what you’ll hear is that they don’t want the Big Pharma jobs. Maybe. But we know of a few who ended up in biotech because they didn’t get the top jobs in Pharma. And most would probably at least like to be asked. Some might even say yes.

So should Pharma go after biotech for their R&D bosses? Yes, and for the same reasons it should probably go after their CFOs: a sense of creative urgency. Paul Stoffels, we understand, is forcing his research executives to submit business plans, not budgets (the latter permits spending; the former posits results). And he tapped J&J’s top biz dev guy (a lawyer—no scientist)—Tom Heyman—to run J&J’s discovery (and force into the open arguments about the relative quality of internal vs. external projects).

We don’t know whether Stoffels will be any more successful than his recent predecessors (J&J’s research has been manifestly unproductive). But at least he’s thinking differently. And that’s a good start. [UPDATE: J&J is shaking things up at the top as well.]

*OK, OK, we admit: we had to say that because Kailian is also a director of Windhover Information, whose employees churn out this blog. But we swear on a stack of SEC filings, we would have said the same thing even if he were, well, not on Windhover’s board.