Ian Read: the pragmatist out to transform the drugs industry
Appointed to bring stability, the Pfizer chief is exhibiting a taste for deals
Joe Cummings illustration of Ian Read
When Ian Read’s private jet landed in London on Tuesday after an overnight flight from New York he knew the next 48 hours could be the defining moment of his career.
The chief executive of Pfizer had crossed the Atlantic to press the case for the US drugmaker’s proposed £63bn takeover of AstraZeneca. If successful, the deal would create the world’s biggest pharmaceuticals group and represent the largest foreign takeover of a UK company.
As he was driven through the heavy London traffic, he received a warning of the challenge ahead. Pfizer had made public its interest in AstraZeneca the day before and the morning’s British newspapers were brimming with hostile commentary on the perceived threat to UK science and manufacturing.
This was the man, after all, whose first big decision after becoming chief executive in 2010 was to shut Pfizer’s research and development centre in Sandwich, Kent, with the loss of more than 2,000 jobs. He went on to reduce the company’s overall R&D budget by a third, saying resource allocation must always be based “on metrics” rather than “investing in hope”. Was this a person in whose hands Britain should entrust some of the crown jewels of its life-sciences sector?
“It is clear to me that this proposed takeover is going to deal a devastating blow to our profile in the pharmaceutical area, which I think is going to be critical in the next 30 years,” said Lord Sainsbury, the former science minister and billionaire scion of the eponymous supermarket chain.
For two days Mr Read criss-crossed Whitehall and the City trying to convince people that such fears were unfounded. Short, bald and bespectacled, the 60-year-old Mr Read sought to play up his British roots having been born in Scotland and studied chemical engineering and accountancy in London. However, he long ago adopted US citizenship and his accent betrays barely a hint of Caledonian influence. Perhaps more convincing was the presence at his side of two British executives and Pfizer’s Swedish head of science to reinforce his message that the UK and Europe would maintain a big presence in the merged group.
Yet, as he wooed Britons with the promise of a US-UK “science powerhouse”, many investors on the other side of the Atlantic were puzzled by a high-stakes gamble that seemed so out of character for a chief executive better known for cost-cutting than dealmaking.
Mr Read was drafted in to stabilise Pfizer four years ago after a period of disruptive deals, stagnant sales and dysfunctional management. He lacked the star power of his Harvard-educated predecessor, Jeff Kindler, but his no-nonsense character and under-the-bonnet knowledge of the business, the result of 36 years at the group, were just what the board wanted.
A year before, Pfizer had bought Wyeth, a rival drugmaker, for $68bn. It was the latest in a succession of large deals that greatly increased Pfizer’s scale but had done little for shareholder returns. The stock had fallen from a peak of $49 in 1999 to less than $13 in 2009, a period that coincided with more than $200bn worth of acquisitions.
It is clear to me that this proposed takeover is going to deal a devastating blow to [the UK’s] profile in the pharmaceutical area
- Lord Sainsbury, former science minister
Mr Read’s predecessors had hoped that doing deals would make up for Pfizer’s woeful record of innovation. The company was renowned for its powerful marketing machine, including a hard-charging sales force bristling with military veterans hired for their drive and discipline. Yet no amount of marketing could make up for the dearth of new medicines coming out of Pfizer’s laboratories.
Even Viagra, the anti-impotence pill and a rare Pfizer homegrown success, came about by accident. Scientists at Sandwich were developing an angina drug when male patients taking part in clinical trials reported that it had no effect on their heart condition but had a surprising effect on their sex lives.
The $112bn acquisition of Warner-Lambert in 2000 provided access to Lipitor, the cholesterol treatment which, in the hands of Pfizer’s salesmen, became the world’s first $10bn-a-year drug. However, the loss of its patent in 2011 once again exposed the lack of new products emerging from the company’s own pipeline. By then Mr Kindler had gone. His departure was attributed to exhaustion but there were also reports of infighting on the executive floor of Pfizer’s Manhattan headquarters, which one business magazine illustrator likened to a heap of writhing snakes. “There was a lot of internal politics,” recalls one executive, with palpable understatement.
Enter Mr Read, who joined Pfizer as an auditor in 1978 before working his way up through a variety of roles in Latin America and Europe. He had solidified his reputation as an astute operator while running the core pharmaceuticals business since 2006 and was popular with the board, counting the chairman as a golf partner. “He’s a pragmatist rather than a revolutionary and very straightforward,” says one person who has worked with him.
His decision, within two months of taking over, to close Sandwich sent a message that the days of shovelling endless resources into the company’s choked development pipeline were over. Deals also looked off the agenda, with Mr Read in 2012 declaring himself “very disinclined” to look “at any possibility of another mega-acquisition”. “I think that more and more of the value [of big deals] gets transferred to the seller and not the buyer,” he said, insisting that Pfizer had “all the science we need”.
Investors loved his brusque focus on shareholder value. The stock has doubled since he took over. Yet, while the Scottish accountant’s cost cuts have kept earnings on track, sales and innovation continue to disappoint, helping to explain why Pfizer is once again looking to buy growth and innovation from outside.
As he flew back across the Atlantic on Wednesday night to plot his next move in the takeover battle, Mr Read no longer looked so different from his dealmaking predecessors.