The question as to which Australian holds the most senior position in the global biopharmaceutical industry might deliver a surprising answer.
AstraZeneca’s CEO, Pascal Soriot, is not technically Australian but he does have close family connections and an obvious affinity with the country. He even spent the early part of his career in Australia and can readily recall many of the local industry’s most significant leaders.
He spoke to PharmaDispatch last week during one of his regular trips to Australia.
Mr Soriot was appointed to lead the UK-based company in 2012 following a long and successful career at Roche. At the time, AstraZeneca was known as largely a primary care company with a portfolio of blockbusters approaching the end of their lifecycle. Its pipeline was ‘bare’ and he says the company’s leadership had largely given up on the company.
Since 2012, Mr Soriot has successfully defended the company against a takeover and ‘renovated’ its pipeline to the point it is now full.
“It was my hope that by 2015 we would have made a lot of progress in our pipeline rebuild but it has been better that I could’ve hoped,” he told PharmaDispatch. "Management had given up and didn’t believe in the company. Didn’t believe in the R&D organisation. Didn’t believe in our portfolio. But the R&D organisation has actually delivered.”
“I always saw AstraZeneca as a great company. There was a time when we had the best pipeline in industry but it may have lost its way a little, investing in the wrong things. My thought when I joined the company was that it was on the wrong track but still full of great people.
“Our ambition was to return AstraZeneca to where it was, so we set about building a pipeline, which was very important.”
According to Mr Soriot, a company’s pipeline is not just a portfolio of products but a signpost of industry’s relationship with the wider community.
“I’m a believer that society unfortunately doesn’t always like us but, it needs us. However, it only needs us if we come up with great products that help patients. It may sound simplistic but it’s truly as simple as that.“
He says his first step as CEO was to change the company’s culture to improve a stagnating R&D organisation.
“We had to change a few things and people, but it was really a change of direction, driving a focus and new culture.
“AstraZeneca bought US-based MedImmune in 2007 and the leadership was criticised for how much it paid. We then had three setbacks in late-stage development.”
Mr Soriot says every company suffers similar challenges and that setbacks are an inevitable consequence of the pursuit of innovation.
“The management explained this but also became very conservative. The message to the organisation was that we’ll never fail again in late stage development. The problem is that, if you tell the organisation we’ll never fail in Phase 3 again, people won’t move anything into Phase 3.
“The company became very bureaucratic, conservative and focused on developing processes that meant nothing was every progressed. The R&D team was coming up with new reasons for not progressing products.”
He describes a staged process to changing the company’s approach to science, starting with flattening its structure and removing layers of management that were only adding complexity and risk adversity but “not much value”.
“We told people that we’re going to focus on science and innovation in three core areas. Innovation is risky, we have to accept failures, but that’s required if we’re going to focus on science.”
The three core areas are: oncology; cardiovascular and metabolic disease; and, respiratory, inflammation and autoimmunity.
AstraZeneca changed its R&D structure, creating two internal biotech organisations accountable for the discovery and early development of products, and a third organisation focused on late-stage development.
He says the relationship operates on an almost commercial basis, with formal processes governing the transfer of products from early to late stage.
“Essentially we have these internal research organisations that are as entrepreneurial as possible. By and large, our people responded very positively because the R&D organisation was getting a little desperate in the environment they were in. People have taken an approach to entrepreneurialism I didn’t expect they’d take so quickly.”
As evidence, he points to TAGRISSO (AZD9291), which was approved by the US FDA in November last year for the treatment of non-small cell lung cancer, just 32 months after the first in-human trials.
“It’s amazing. People reacted to the change and took the opportunity. We believe it’s the fastest development ever in industry – we’ve not found any that was faster – and our people made it happen. They did incredible things to fast-track TAGRISSO and there are other examples.”
Mr Soriot says AstraZeneca will out-license or partner products where they do not align with its late-stage and commercial priorities, as in the case of its collaboration with Lilly for the development of BACE inhibitor AZD3293 for Alzheimer’s disease.
The focus on investing in science is one of his constant themes.
He has overseen the acquisition of several companies since 2012, which have helped bolster AstraZeneca’s pipeline, but says each is encouraged to retain “scientific autonomy”.
“They don’t need their own IT or Finance systems, so we integrate those, but their scientific autonomy supports our focus on entrepreneurialism.”
Mr Soriot sets a cautiously optimistic tone despite the company’s series of positive recent announcements.
“We haven’t failed much but we are going to. My experience is that failures tend to come in a series and, when you get those, you have to hang in there. As I said, we haven’t failed much but with innovation comes risk and sometimes failure.
“There are examples of where we could’ve done better, mostly in execution, but by and large we’ve done very well.”
He is excited about the company’s pipeline, which he says is characterised by “differentiated products”.
“We have at least a couple of innovative products in each of our core areas,” he adds.
He says the nature of the company’s transition means he is essentially leading two companies – managing the loss of exclusivity on mature primary care blockbusters while funding the development of a burgeoning pipeline.
“This is the tough piece. If you compare 2017 to 2011, in six years we are losing $17 billion in revenue, in US dollars. The company was going to go from $30 billion to $13 billion without much in the pipeline to replace it. The transformation of our pipeline has gone better than expected but, as a result, we have to spend more money.
“We have this financial pressure. Our growth platforms are growing nicely but the rest is collapsing at a rapid pace.”
The company’s growth platforms, including new oncology and its diabetes portfolio, now represent almost 60 per cent of its revenue.
“Staying put on the topline requires a massive effort. It’s a tight squeeze to invest more in our pipeline than we thought we’d have to because this pipeline has grown faster than expected.”
While revenue from the company’s mature primary care blockbusters is falling in developed countries, they are driving rapid growth in markets like China, where AstraZeneca is one of the leading multinational companies.
“We have the highest growth rate in China. In China, the medical needs are very much what they were in Europe, US and Australia twenty years ago. It’s asthma, COPD, hypertension, cholesterol, diabetes, and these are medium priced products the government and consumers can pay for.”
He also points to China as further evidence of AstraZeneca’s transformation in recent years.
“There was a plan to launch branded generics in China. You have to tell me how can you beat Chinese companies in the generics market? We stopped that and focused on our own portfolio, which has done very well.”
The company’s transition extends to its emerging new R&D headquarters in Cambridge.
Mr Soriot says the move to Cambridge is progressing ahead of schedule.
“We now have 1,500 people in Cambridge of the 2,000 we’ve targeted. The next 500 will come this year and next year.”
He says the company’s researchers are working closely with scientists at nearby institutes, which is “building a network with the academic community at incredible speed.”
On Australia, a country in which AstraZeneca has maintained a significant long-term presence, including in manufacturing, Mr Soriot says a high corporate tax rate makes further investment difficult.
“In research, we look for science and great innovation. Australia has quite a bit of this. It’s a bit remote from a geographical point of view. Technology makes this less of an issue but it’s still an impediment.
“There’s more that can be done here but historically scientists have not been as open to collaborating with industry as people in the US.
“In terms of manufacturing, we’re looking for three things – quality, the right tax environment, and productivity, which is less of an issue.”
“We have quality in Australia and productivity is good but corporate tax is a real problem. The UK has reduced their tax rate to 20 per cent and they have an IP patent box of 10 per cent. Sweden has dropped their tax rate to 20 per cent, and they want to drop it further. Australia is still about 30 per cent. They’re talking about reducing it to 28 or 29 per cent by 2022, and 25 per cent 2025, but by then the world will have moved on.”
He says that, while some Australian politicians appear to appreciate the issue, a reduction in the tax rate is often seen as giving companies money.
“Taxing companies is actually shooting yourself in the foot because they vote with their feet and invest elsewhere. We’re making a big investment in manufacturing biologics in Sweden, which shows you countries like Australia can win if they have the right environment. If Sweden does it, why can’t Australia?”
