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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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February 23, 2009

Genentech's Culture: At Risk or Not?

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Posted by Derek

This article from the San Jose Mercury News has gotten a lot of attention for its take on the Roche-Genentech struggle. The reporter, Steve Johnson, is asking if all the concerns about Genentech's fate are overdone.

It's true that the precious-unique-culture stuff can be overemphasized. Roche has indeed been insisting that they want to preserve Genentech's entrepreneurial spirit (although, to be honest, they'd say that no matter what they were really thinking - what are they going to do, say that they really just want all the Avastin revenue and whatever else is high up in the pipeline?) And, as the article correctly points out, there have been any number of good-sized biotech outfits taken over by Big Pharma over the years.

But what worries me a bit is what's happened to some of those biotechs. It really is rare, from what I can see, for a company's culture to stay the same after something like this happens. It's a bit like those singers who make it big from obscurity; you read these articles saying that they're just the same small-town person that they always were. Right - that would be the least likely outcome of them all.

The thing is, the atmosphere of the acquiring company is going to seep in, no matter what. The new projects are going to be approved using the processes of the larger company, aren't they? They'll be expected to fit into a new, larger picture, and to find their place. And the compounds that advance will advance against the larger company's criteria, not the ones in place under the old regime.

Those are just the direct effects on research. What might be a larger difference is a psychological one. As a stand-alone company, even one the size of Genentech, you live by your own wits, but that changes. As part of a larger company, you know that there are other projects out there, other divisions, and that some of these will be expected to pick up the slack now and then. It's a big company, after all. It'll keep going, even if you don't deliver this year. Right? That's actually one of the trickier parts about running a company with a lot of sites and research areas - the inevitable frictions when one group or another feels (sometimes correctly) that they're being leaned on more than those lazy bums over in XYZ, who haven't delivered a clinical candidate since (fill in the year).

At more than one of my previous jobs, I've heard a lot about a "sense of urgency", and how desirable that is. (That's mostly true, although too much of it can perhaps cause you to do something stupid under time pressure). Overall, it really does help to know that you really do have to deliver, that there's no net down there, no one waiting to cushion the blow. It doesn't make things fun, not necessarily, but it does make them more productive. Remember Samuel Johnson's remark about the minister-turned-forger William Dodd: "Depend upon it, Sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully."

Unfortunately, I think the key line in the Mercury News piece is this one:

Besides, Genentech scientists don't have a lot of other employment options these days, according to Rodman & Renshaw analyst Christopher James. "There would be more of a concern in a market where there were a lot of opportunities for people to leave," he said.

There's the rub, all right. . .

Comments (20) + TrackBacks (0) | Category: Business and Markets | Who Discovers and Why


COMMENTS

1. milkshake on February 23, 2009 9:58 AM writes...

Why can't they keep Genentech a completely autonomous site, like Janssen used to be for a very long time? Unfortunately pharma appartchik career self-advancement is best served by wielding control over sites and groups that have had good results - and re-aligning them into complete submission. Then they can claim the credit for the results, while putting up dynamic management show to justify their own importance and pay scale.

Permalink to Comment

2. processchemist on February 23, 2009 10:25 AM writes...

Culture loss is becoming an huge issue, and no one with true decisional power seems to care about it.
Take overs, mergers, outsourcing are intimately connected with loss of culture, both entrepreneurial and technical.
The ones (the few ones, I hope) talking about "post scientific" economies are trying to neutralize the problem assessing that it's NOT a problem.

Permalink to Comment

3. Anon-e on February 23, 2009 10:25 AM writes...

Time to revisit the conversation re: Takeda takeover of Millennium. There was a lot of happy talk here about retention of employees and retention bonus payouts.

From what I hear, things are definitely becoming more bureaucratic inside MLNM.

When the highest level strategic decisions are being made oceans away, it is hard for a firm to stay "the way we were".

I expect Genentech will continue to be a reasonably good inventer of new drugs, but it wont be the same place culturally.

To their credit, Roche seems much more adept at these things than Pfizer. Still, folks I have spoken with were much happier when their official employer was Syntex vs Roche.

Permalink to Comment

4. ex-Genentecher on February 23, 2009 10:32 AM writes...

Genentech has been majority owned by Roche for decades now. Many of the staff responsible for the development of Herceptin and Avastin are already gone. The current pipeline is thin indeed - mostly follow-on indications for the above & Rituxan (an Idec drug, BTW). I see little downside risk to Roche in purchasing the remaining shares of DNA. The should do everything possible to retain Art Levinson and other key staff, at least in the near-term, and they should leave the sign out front the same. But, they shouldn't worry about losing an entrepreneurial spirit that was lost long ago...

Permalink to Comment

5. UK Chemist on February 23, 2009 10:51 AM writes...

At least Roche are planning to do with Genentech what they did with Piramed in the UK. The day after the deal went through, all Piramed staff lost their jobs.

Permalink to Comment

6. Hap on February 23, 2009 10:52 AM writes...

You can work people pretty hard when they have no choice, but when they either 1) break (because you rode them too hard - everyone has a breaking point) or 2) they realize that, while they are considered responsible for the company when it might fail, they won't actually be considered responsible (or paid accordingly) when it succeeds - then, well, things are likely to go less well for their employers.

Things probably began to degrade when employees were considered resources. Whether the resources are renewable or not, I don't think people like to discuss what inevitably happens to the resources when they are used.

Permalink to Comment

7. pete on February 23, 2009 12:03 PM writes...

re: culture clash -
I had a phone conversation with hedge fund managers soon after Roche made known their intent to scoop up the rest of Genentech. These investment guys were genuinely incredulous about any science-centric hand wringing. Their take: "Why in the world wouldn't Genentech scientists greet such a move by Roche with wide open arms?? Especially in this economy!!"

I felt I was bringing up a genuinely unique perspective, explaining potential negative consequences when decisions about budget & research directions get lifted further from the hands of the researcher.

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8. mr152 on February 23, 2009 12:27 PM writes...

Roche buys companies with profitable pipelines to make money. That's it. Their culture allowed them to set the record for paying the largest criminal fine in history for illegal price fixing of vitamins. There are tremendous profit potentials in Genentech's drugs that Roche wants exclusively. It's that simple. Culture doesn't matter.

Permalink to Comment

9. MMI on February 23, 2009 12:49 PM writes...

As Scientists, why don't we actually look at the data here? I'll start by stating I have been formerly employed by Roche, and there is little that they do better than foster an environment where long-tenured employees watch out for themselves, usually to the detriment of newer staff.

That said, all that this does is let Roche get in its own way. When it has come to the acquisition of other companies, they have shown a remarkable restraint in allowing those derivative corporate cultures to thrive. When Roche took over 454 Life Sciences, it allowed their culture to stay intact, seeing it as a mechanism to help the division thrive in the future. Personally, I think Roche, while not prescient enough to adapt their own monolithic culture, is at least smart enough to let effective smaller shops do what they do best. As a previous poster said (thrice, no less), Roche is doing this to make money. What we may be missing is their ability to realize that the best way to make that money may be to leave well enough alone.

Permalink to Comment

10. Derek is Corrupt on February 23, 2009 3:58 PM writes...

Derek, Why do you consistantly bash Genetech? Are you shorting this stock? Do you work for Roche? I mean seriously?

Permalink to Comment

11. DNAer on February 23, 2009 4:27 PM writes...

Besides, Genentech scientists don't have a lot of other employment options these days, according to Rodman & Renshaw analyst Christopher James. "There would be more of a concern in a market where there were a lot of opportunities for people to leave," he said.

There's the rub, all right. . .

Maybe not. Herb Boyer said "one of Genentech's most valuable assets walks out the door every evening in jeans and a baseball cap (meaning Art Levinsion)." Art and his executive team will most likely leave (and have the means to do so). I work at Genentech because I love the culture, and what I do. If this deal goes through, I know scores of people who will no longer have to work. Important people with lots of experience, like franchise managers... Many of these people will do what I plan to do, cash out 10 years of stock options, take my retention bonus and head for the door.

Permalink to Comment

12. Another DNA on February 23, 2009 4:35 PM writes...

I for one will stay at Genentech. BUT....Gone will be the 10 hour days, frequent publishing, and weekends in the lab. Here will be punching the clock, playing ipod chess, and hating Roche.
Eventually the economy will turn, or one of my coworkers will launch a start-up, then I 'm gone! You don't need a Ph.D. from Duke or MIT (in my case) to figure that one out.

Permalink to Comment

13. Lab Rat on February 23, 2009 5:20 PM writes...

Hap: "You can work people pretty hard when they have no choice, but when they either 1) break (because you rode them too hard - everyone has a breaking point) or 2) they realize that, while they are considered responsible for the company when it might fail, they won't actually be considered responsible (or paid accordingly) when it succeeds - then, well, things are likely to go less well for their employers."

Due to a change in management at my company, this very thing is occurring. The CEO actually smirked in the hallway a few weeks ago that no one would be leaving anytime soon due to the economy.

Since then his behavior has worsened. And he expects us to take it. Meanwhile, the economy may suck but the writing is on the wall and everyone has seen it. People are looking for any job--chem related or not---to get out from under his thumb.


Permalink to Comment

14. BigSky on February 23, 2009 6:01 PM writes...

After spending most of my career at smaller biotechs, some successful, most not nearly so, I think that the 'culture' of an organization is critical to future success. I've never worked at Genentech or known anyone who has and all I know is what I read with the rest of you but the notion that their culture is responsible for a good deal of their success sounds plausible to me.

After having been subsumed by one of the Big Pharma sharks I am very pessimistic that Roche will want/ be able to maintain the apple cart that represents internal culture at Genentech. It will start out with small things like email and server issues and then will devolve to title equalization, reporting matrices and equipment budgets. But before long what you thought you had just isn't there anymore.

That's assuming they don't just fire everyone and liqiudate the assets right out of the gate.

Permalink to Comment

15. Hap on February 23, 2009 6:06 PM writes...

Doesn't he realize that there are lots of things that he could lose without people necessarily leaving? See: Jurassic Park for examples in biotech. You might catch people eventually, but, well, it'll cost you a lot and leave the writing out on the wall for everyone else out there. The position of the shoe changes when it's the CEO's name on his stockholders' hit list - when the company isn't worth so much people might start looking at management, and he might get to see how good the job market is, exactly. This elides some even worse options as well.

I thought management had something to do with (good) people skills. I guess not.

Permalink to Comment

16. The Pharmacoepidemiologist on February 23, 2009 9:34 PM writes...

Unfortunately, when the new owner begins with the comment, "First, think of us as your banker..." it doesn't do much for your confidence that the entrepreneurial spirit will persist for long. Unfortunately, Roche isn't buying Genentech because of its fantastic capabilities, but because it will reduce the cost of doing business in the US. That's the only reason it can give for trying to move Genentech to Nutley. The bottom line is that Gilead will get some good talent, and there may be some new start ups in a few years. But unless Avastin does very well in the next trial to be reported (in late March, I think), Genentech is history. And with it will go a unique entrepreneurial culture.

Permalink to Comment

17. Jack Carver on February 23, 2009 11:18 PM writes...

Genentech has nothing to worry about. After all, with so many VP-s and Directors recruited from Merck, Pfizer & Co, it is now a Big Pharma ... sorry, Art.

Permalink to Comment

18. DNA sympathizer on February 27, 2009 7:02 PM writes...

Everyone is talking about the trial that potentially will increase the stock price of DNA. But how many people bother to take a closer look at the trial? I guess very few. For those who are interested here is the link. In the initial analysis of the data after 4 years, here is the author's conclusion:

Author's Conclusions


Bev and mFOLFOX6 has acceptable toxicity and are safe in a selected population of patients. However, adjuvant use of this agent can not yet be recommended as this regimen has not yet been shown to improve outcomes.
The addition of Bev did not result in a decrease in the mFOLFOX6 dose.
Hypertension, wound complications, and proteinuria increased with Bev but these are manageable side effects.
Neuropathy was likely due to the increased dose of OX in the Bev arm. The authors theorize that this may be due to physicians stopping Bev first when toxicities occurred, such that patients in group B got additional cycles of mFOLFOX6.
Clinical/Scientific Implications


This is a very important study as it not only compared the efficacy of mFOLFOX6 + Bev versus mFOLFOX6, but it also evaluated the toxicity associated with combined treatment with mFOLFOX6 and Bev. Bev is an antiangiogenic agent, and there is great concern about how it could affect vasculopathic patients, such as those with significant coronary artery disease, hence the exclusion of these patients from this study. Even in patients with normal vessels, there is concern about damage to the kidney and the risk of gastric perforation due to the antiangiogenic effects of Bev, particularly when it is used with other agents. There is also concern about the use of Bev resulting in hemorrhage as has been seen in some patients with lung cancer treated with Bev. From the results of this study, it appears that Bev does not significantly increase the risk of these toxicities, aside from the renal toxicity. However, long-term follow up is needed as some of these toxicities may present late or worsen over time.

The authors make the appropriate statement that no conclusions can be made about the efficacy of this therapy as the follow up is short and up until now no improvement in overall survival has been seen. Nonetheless, this study suggests that Bev is safe and we await long term results.

Please note that long term means at least a couple of years from then (June 2008). So you wont see any positive outcome in April or in Sept. You probably only get to see it after Roche finishes the whole thing, certainly not in the range of $95, not to mention $112.

I would get the money and run now because Roche may further lower the offer in April.

Good luck to all the DNAers. Be good before Roche turn you into RNAers.

Permalink to Comment

19. DNA sympathizer on February 27, 2009 7:02 PM writes...

Everyone is talking about the trial that potentially will increase the stock price of DNA. But how many people bother to take a closer look at the trial? I guess very few. For those who are interested here is the link.

http://www.oncolink.com/conferences/article.cfm?c=3&s=48&ss=268&id=1814

In the initial analysis of the data after 4 years, here is the author's conclusion:

Author's Conclusions


Bev and mFOLFOX6 has acceptable toxicity and are safe in a selected population of patients. However, adjuvant use of this agent can not yet be recommended as this regimen has not yet been shown to improve outcomes.
The addition of Bev did not result in a decrease in the mFOLFOX6 dose.
Hypertension, wound complications, and proteinuria increased with Bev but these are manageable side effects.
Neuropathy was likely due to the increased dose of OX in the Bev arm. The authors theorize that this may be due to physicians stopping Bev first when toxicities occurred, such that patients in group B got additional cycles of mFOLFOX6.
Clinical/Scientific Implications


This is a very important study as it not only compared the efficacy of mFOLFOX6 + Bev versus mFOLFOX6, but it also evaluated the toxicity associated with combined treatment with mFOLFOX6 and Bev. Bev is an antiangiogenic agent, and there is great concern about how it could affect vasculopathic patients, such as those with significant coronary artery disease, hence the exclusion of these patients from this study. Even in patients with normal vessels, there is concern about damage to the kidney and the risk of gastric perforation due to the antiangiogenic effects of Bev, particularly when it is used with other agents. There is also concern about the use of Bev resulting in hemorrhage as has been seen in some patients with lung cancer treated with Bev. From the results of this study, it appears that Bev does not significantly increase the risk of these toxicities, aside from the renal toxicity. However, long-term follow up is needed as some of these toxicities may present late or worsen over time.

The authors make the appropriate statement that no conclusions can be made about the efficacy of this therapy as the follow up is short and up until now no improvement in overall survival has been seen. Nonetheless, this study suggests that Bev is safe and we await long term results.

Please note that long term means at least a couple of years from then (June 2008). So you wont see any positive outcome in April or in Sept. You probably only get to see it after Roche finishes the whole thing, certainly not in the range of $95, not to mention $112.

I would get the money and run now because Roche may further lower the offer in April.

Good luck to all the DNAers. Be good before Roche turn you into RNAers.

Permalink to Comment

20. FMRTanox on March 12, 2009 11:50 PM writes...

Genentech's only aquisition was Tanox and the result was the end of a 20 year old biotech in of all places, Houston Texas. I hope Roche treats the Genentech employees with the same consideration as the Tanox employees.

Permalink to Comment

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