By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
In 2008 Takeda Pharmaceuticals took aim at becoming a global pharmaceutical company by making a number of strategic moves, such as the dissolution of the 23-year, 50/50 joint venture with Abbott, known as TAP Pharmaceuticals, and acquiring Millennium Pharmaceuticals (2008) and Nycomed. These changes strengthened Takeda’s position in two of the largest pharmaceutical markets outside of Japan (U.S. and EU), placing it on the verge of being the first Japanese company to be listed among the 10 largest pharmaceutical companies in the world. With 2012 net sales of $18.4 billion, Takeda ranks twelfth, up four spots from the previous year. What will get them to the next level?
According to Tadataka (Tachi) Yamada, M.D., Takeda’s chief medical and scientific officer (CMSO), the answer lies first in advancing Takeda’s very strong late-stage pipeline and second in developing a successful vaccine business that has the potential to be commercially attractive while at the same time creating low-cost health solutions (i.e. vaccines) for some of the poorest countries in the world (i.e. emerging markets). Yamada, who previously served as the president of the Bill and Melinda Gates Foundation global health program (2006 to 2011), explains why vaccines play a pivotal part in making Takeda a truly global pharmaceutical business, and how the company is building its vaccine franchise in order to do so.
The Strong Business Case For Vaccines
“We are not in the business solely to make money or to make a return on investment for our shareholders,” Yamada says. “Certainly we have to do that. But if we forget we are in the business of helping people with unmet medical needs, we are going to fail.” That mindset was first honed in Yamada while he was in medical school and then was rekindled during his tenure at the Gates Foundation. He brought this mindset with him to Takeda, as well as the business case as to why creating a global vaccine franchise makes sense.
Indeed, the vaccine market is in a significant growth mode. In 2002 the global vaccine market was approximately $5.7 billion, but today it is near $27 billion and expected to increase at a compound annual rate of 10.3 percent through 2015.
Vaccines represent very low-cost health solutions which prevent disease. The measles vaccine costs about six cents. WHO estimates global immunization campaigns save more than 2.5 million lives every year, and protect millions more from disease and disability. “From a business standpoint, vaccine development is a great investment,” states Yamada. “For a pharmaceutical company, it presents a product line which is not as dependent upon the life cycle of intellectual property as most small molecules. It is very difficult to create a generic vaccine without doing a set of clinical studies to prove it has the same human response as the branded vaccine.” Yamada believes the need to conduct clinical trials to gain approval of a generic vaccine provides companies with better IP protection, serving as a barrier to entry by smaller generic companies.
However, because vaccines are developed from biological organisms, they can be harder to work with, are less predictable than their chemical counterparts, and thus, have to be tested in more people before being licensed. As a result, it can take 15 years or more to develop a vaccine, and at an estimated cost between $163 million and $518 million.
Once developed, their biological nature makes them more difficult to consistently manufacture on a commercial scale. Another challenge revolves around the shipping and storage of vaccines. For example, temperatures for refrigerated and frozen vaccines need to be maintained between 2° C and 8° C and -50° C and -15° C.
These challenges aside, for big pharmaceutical companies the vaccine business remains a very worthwhile investment. Consider this: Of the 10 bestselling vaccines presently on the market, all are produced by five Big Pharmas — GSK, Merck, Novartis, Pfizer, and Sanofi. Total sales of the Top 10 are nearly $6 billion, with Pfizer’s Prevnar 13 (pneumococcal vaccine) topping the list. Available in 120 countries, and with sales totaling $3.72 billion in 2012, Prevnar 13 accounts for nearly 14 percent of the total vaccine pie. Merck’s chicken pox vaccine, VARIVAX, first received FDA approval in 1995, and still generates $392 million in annual sales.
The Vaccine Vision
For Yamada, creating a global vaccine business first involved developing a vision that fit within the company’s current corporate philosophy. At Takeda this is referred to as Takeda-ism and consists of four pillars — integrity, fairness, honesty, and perseverance. To come up with the vision, Yamada and his staff first asked the following questions:
What is it going to do?
What is its purpose in the company?
How is it going to be consistent with the rest of the company?
Why is it important to the company to invest in it?
To be successful in these developing markets, Yamada believes pharmaceutical companies need to be part of the solution to those nations’ problems, in addition to providing new drugs and vaccines. “There has to be a sense of commitment to helping the country as a partner, not just extracting resources and revenues and walking away,” he attests.
Yamada then recruited a former Gates Foundation colleague, Dr. Rajeev Venkayya, to head up Takeda’s vaccine business. While at the foundation, Venkayya oversaw the organization’s top two priorities — eradication of polio and new vaccine introduction. Once on board, Yamada then gave Venkayya the autonomy to build his own team, rather than micromanage the process, a common leadership mistake (see sidebar on page 27). In addition to recruiting talent, Takeda needed to acquire additional vaccine capabilities.
Adding Competencies Via Acquisition
In October 2012, Takeda acquired LigoCyte, a small biopharmaceutical company in Bozeman, MT, that manufactures a vaccine to prevent norovirus gastroenteritis. “Norovirus is the largest cause of epidemic diarrhea in the United States,” says Yamada. The CDC estimates 1 in 15 Americans come down with norovirus each year. Because it is highly contagious and presents with highly debilitating symptoms (i.e. vomiting, diarrhea, stomach cramps), there is significant lost productivity. Norovirus is estimated to affect 267 million people globally, causing more than 200,000 deaths annually, most occurring in less-developed countries.
The second acquisition occurred in May of this year when Takeda bought Inviragen. With this acquisition, Takeda picked up competencies for creating innovative vaccines for emerging infectious diseases, including dengue fever, a mosquito-spread illness primarily found in tropical and subtropical climates. “Half a billion people or more will get dengue each year,” states Yamada. Inviragen’s lead candidate, DENVax, a fourstrain recombinant viral vaccine for the prevention of dengue, is currently in Phase 2 clinical trials.
With these two acquisitions, the company picked up the ability to manufacture subunit vaccines via LigoCyte’s proprietary, virus-like particle platform (VLP) technology, as well as live vaccines. “These two important technologies shore up our ability to produce vaccines of the future,” states Yamada. “We are particularly interested in combination vaccines, including the Sabin-inactivated Polio virus, so-called sIPV. Oral polio vaccines are live strains, which can be shed. Once you’ve eradicated polio from the world, you really don’t want that around.” As a consequence, Yamada believes the world will soon turn solely to combination-inactivated polio vaccines, and he intends for Takeda to be ready for that trend.
As Takeda builds its global vaccine business, it strives to capitalize on the entrepreneurial and innovative thinking of the companies it has acquired. “Small companies are able to move more quickly and address opportunities in the most efficacious way, because there is less bureaucracy,” he says. “Hopefully, we can learn from these cultures and gain some competitive advantages and insights against the backdrop of what is a very important Japanese culture,” he states. Takeda should have plenty of learning opportunities to do so. Since 2010, the company has grown from around 20,000 employees to 30,305, adding more than 10,000 overseas-based staff, and operating in nearly 70 countries. For the first time in the company’s 232-year history, Takeda has more employees working and living outside of Japan than within — a testament to Takeda moving forward in becoming a truly global player.
The Most Common Leadership Mistake
Fifty years ago when Tachi Yamada was living in Stanford, CA, he invited his girlfriend from Ohio for a visit. Today, she is his spouse of 46 years. During her visit, she taught him a valuable leadership lesson. “It was a sunny day, and I suggested we wash the car,” he recalls. “After about 10 minutes of washing, she throws down the sponge and says, ‘If you want me to help you wash your car, let me help you. If you want to wash your car yourself, why don’t you do it yourself?’” Evidently, he was washing the car as fast as he could, assuming she couldn’t wash the car as well as he. “That was a very important lesson to me,” he attests. “I have carried it with me my whole career. If you are in a position of leadership, you have to remember that you can’t do everything. You have to depend on others and delegate authority. I think where CEOs get in the way of their own success is by assuming they can do tasks better than anybody else, and therefore should only do those tasks themselves.” Yamada believes this kind of thinking is unmotivating to the people working with you, not a sustainable leadership model, and impedes the attainment of objectives. His advice, “Take the fullest advantage of everybody around you who can help you do what needs to be done.” Though the car washing example may seem simplistic, everywhere Yamada has gone he has seen examples of leaders making the same mistake — only on a bigger scale.
Key Lessons From Working At The Gates Foundation
Prior to joining Takeda Pharmaceuticals as the chief medical and scientific officer, Tachi Yamada, M.D., spent five years working as the president of the Bill and Melinda Gates Foundation’s global health program. There, he directed projects geared toward solving some of the health challenges of the developing world. These included TB, HIV, malaria, other infectious diseases, malnutrition, and maternal and child health. As a former academic and pharmaceutical executive, Dr. Yamada was asked what was the most valuable experience he gained from working at the Gates Foundation. Instead of one experience, he explained he learned a lot about urgency, innovation, partnership, and measurement. “The sense of urgency we have in the pharma industry is not the same as that which I felt when I was in the field at the foundation,” he explains. “I would come into contact with mothers holding babies on the verge of dying or already dead. This happens seven million times a year unnecessarily or from preventable causes.” This experience gave Yamada a heightened sense of urgency about the work he was doing, and he brought that sense of urgency to Takeda. “If we don’t work with urgency, then we can’t meet people’s unmet medical needs, and they will suffer or die unnecessarily,” he states.
Regarding innovation, Yamada describes it this way. “We worked on problems at the Gates Foundation that didn’t seem to have any viable solution and required more than just the usual everyday pharmaceutical effort to solve. They require true innovation, which means more than just a little tweak or a little ‘smart’ move.” According to Yamada, the pharmaceutical industry is primarily involved in evolutionary innovation, which advances but does not significantly change the field. “Revolutionary innovation is where something absolutely transforms the field, and often it involves some crazy idea or something never thought of before,” he explains. “Take the example of peptic ulcer disease. It was treated with antacids, then with H2 Blockers, and then Proton pump inhibitors. All of these just treat the disease, but don’t cure it. The finding that Helicobacter pylori causes peptic ulcer disease — and if you treat with antibiotics, you can actually cure people from the ulcer and from ever having the ulcer again — is an example of revolutionary innovation.” To create revolutionary innovation, Yamada says you need to take chances, be willing to take risks, be willing to fail, and create an ecosystem of challenging dogma.
He also learned the importance of partnership, essential for executing global health initiatives. “You can’t do it alone,” he affirms. “We worked very closely with WHO, UNICEF, and other international agencies in the developing world to get things done,” he says. “Our closest partners were with the department for international development in the United Kingdom or USAID in the United States.”
Finally, there is the concept of measurement. “It is easy when you are giving a lot of money away to assume you are doing good,” he states. “But, in fact, you have to measure the impact of what you are doing.” This is something the pharmaceutical industry could do better. Recent policy makers are in agreement, as are payers, who are seeking outcomes-based data from patients taking medicines and the real impact those medicines are having on society and patients.
According to Yamada, these four concepts — urgency, innovation, partnership, and measurement — are critical concepts. “I worked with these every day at the Gates Foundation and brought them back with me to the pharmaceutical industry,” he concludes.
An Important Leadership Skill To Focus on
Ever meet people who make leadership look effortless and wonder how they do it? Perhaps you can’t quite put your finger on what makes them good leaders, but you view them as a leaders, not just managers. If you asked Takeda’s Tachi Yamada what his most valuable leadership skill is, and how he acquired it, he would say being able to extract the best out of the people who work for him. “I think you can walk into organizations and find a group of people who say, ‘These people are bad, let’s get rid of them all and bring in new people,’” he explains. “Or, you can walk into an organization and say, ‘These people are not perfect, but they are good, so let’s get the best out of the people we have.’ I get the most out of employees’ strengths and try to shore up their weaknesses. Every organization I have walked into I have been able to get the people to perform better than they probably imagined they could.”
How does he do it? Listening. According to Yamada, one of the keys to becoming a leader is listening to what is important to people. “Often people are good at what they consider to be very important,” he explains. “People’s feet take them to where their hearts want to go. Some people will say, ‘I really like this,’ but you see them every day demonstrating they don’t like what it is they say they do.” Yamada believes ferreting out what is really important to people is the difference between excellent and average performance. “You’ve got to make sure people are doing what they really love, and you’ll find they are good at it,” he affirms.