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Pharma Strategizes To Meet Future Challenges
  Drug Firms Employ Strategy Masters
Wall St Jnl
April 14, 2008; Page B5
As the drug industry wrestles with major challenges, some top companies are turning to a new kind of executive for help: strategy master.
Over the past six months, at least four large U.S. drug makers, including Johnson & Johnson and Pfizer Inc., have created top-level executive positions tasked with overseeing company strategy, with titles such as senior vice president of strategy. In some cases, they report to the chief executive.
Their responsibilities, which vary from company to company, include identifying new business opportunities, overseeing the cost-cutting programs that have spread through the industry and improving coordination among company divisions.
The drug industry's embrace of strategy masters comes as companies are under pressure. Sales and profit growth have been slowed by generic competition, research stumbles and increased government scrutiny of pricing, marketing practices and drug safety. Many large pharmaceutical companies are laying off workers and closing plants to save money, while seeking new medicines that can sustain profits. A strategy point person might help set priorities and allocate resources more efficiently.
It is a bit early to know what difference these strategy chiefs are making, and companies are fairly tight-lipped about what they are up to. Their work, however, could lead to significant changes in drug makers' business models, industry consultants say.
"We've got clients asking fundamental questions about what businesses they should be in," said Ian Wilcox, vice president and pharmaceutical-sector leader for Hay Group, a human-resources management consultancy.
For instance, as the brand-name prescription-drug business gets more challenging, some companies might consider entering the medical-device or generic-drug businesses. Or they could choose to get rid of nondrug assets. That could fuel merger and acquisition activity in the sector.
At least two drug companies, Eli Lilly & Co. and Wyeth, named strategy executives a few years ago. In the more recent wave, J&J in November created an Office of Strategy and Growth. Its mission is to identify new business opportunities in health care that are distinct from its current businesses of pharmaceuticals, medical devices and consumer products. J&J has indicated one new potential opportunity is in health-care information technology.
To head the new office, J&J named Nicholas Valeriani as vice president of strategy and growth; he had previously led J&J's device and diagnostics unit. A J&J spokesman said Mr. Valeriani wasn't available for an interview, and the company hasn't yet announced specific changes resulting from his work.
Some of the new strategy chiefs are responsible for cost-cutting programs. A month ago, Bristol-Myers Squibb Co. named John Celentano to the new position of senior vice president, strategy and productivity transformation. He was previously head of Bristol's health-care group, consisting of nondrug assets the company is in the process of shedding.
Mr. Celentano had a running start because last year, in his previous post, he had been designated leader of Bristol's "productivity transformation initiative." The initiative includes a 10% reduction in Bristol's work force of about 42,000 and closing half its manufacturing plants by 2010. In his new role, Mr. Celentano said, he continues to lead this program.
Mr. Celentano also is responsible for corporate and business development, and information management and "global shared services." That includes M&A activity and identifying business functions that Bristol can outsource. Some of his responsibilities were previously handled by separate areas of the company, and the creation of his new position helps bring "those activities under one central leadership," he said.
Indeed, in the past, strategic decisions often were made by individual business divisions, said Matt Gurin, another Hay Group vice president. Now, companies are concluding that priorities need to be set at the top "to try to get a bigger bang for their buck."
Much of Bristol's overall strategy was already in place before Mr. Celentano took on his new role. Part of his job is refining that strategy and "making it understood to the entire organization," he said. Bristol's strategy includes narrowing its research focus and seeking more biotechnology-type drugs that can command higher prices and may be less vulnerable to generic competition. Bristol also plans to make modest-size acquisitions and license deals to complement its internally developed drugs. The cost-cutting program that Mr. Celentano oversees is integral to this broader strategy because it frees up money to make such deals, he said.
The same week Mr. Celentano took his new job, Pfizer named William Ringo to a new position, senior vice president of strategy and business development, reporting to CEO Jeff Kindler. Mr. Ringo is a 35-year veteran of the drug industry who has been a CEO. His will oversee strategic planning and business development, Pfizer said.
And in January, Merck & Co. hired Caroline Dorsa in the new post of senior vice president of global human health strategy and integration. Ms. Dorsa, a former treasurer at Merck returned after a year in which she served as chief financial officer at Avaya Inc. and Gilead Sciences Inc.
Merck spokeswoman Amy Rose said the position was needed because Merck's global human-health unit was a relatively new organization, and there are various strategic initiatives to improve its operating model.
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