“I’m just a simple Scots country lad,” insists Sir Tom McKillop, the boss of AstraZeneca, Britain’s second-biggest pharmaceuticals company, sitting the pharmaceutical firm’s plush Mayfair office.
McKillop was seeking to play down the fact that, 10 days ago, he was named as Britain’s best-connected boardroom chief in The Times Power 100. Speaking exclusively to the Sunday Herald, McKillop dismisses the accolade as “a piece of nonsense”.
Born during a German air raid in Irvine, Ayrshire, in 1943, Tom McKillop was ranked ahead of business luminaries such as Sir Fred Goodwin of the Royal Bank of Scotland and Lord Dennis Stevenson of HBOS and Pearson.
So how did he rank so high? It probably boiled down to the fact that McKillop sits on the boards of three of the UK’s 10 largest companies — BP, AstraZeneca and Lloyds TSB.
But, as McKillop points out, he is soon to step down from his non-executive role with Lloyds, and only recently joined BP’s board. It was only by chance, he says, that the two non-executive roles overlapped.
McKillop says: “There’s huge value in people having a non-executive position on another company’s board. You do learn a lot and I hope you contribute too because, particularly when you come new into another company with fresh eyes, you ask different kinds of questions; you get a different perspective on things.”
McKillop studied chemistry at Glasgow University in the 1960s, and it was a chance meeting in the Rubaiyat pub on Glasgow’s Byres Road that opened the young McKillop’s eyes to the opportunities presented by the world of pharmaceuticals.
There he bumped into Peter Doyle, then a manager in ICI’s research department. Doyle had preceded McKillop by a couple of years at Glasgow University and had, like McKillop, done a PhD there.
McKillop recalls: “It’s the pub that the chemistry department uses, and that’s where Peter said only a fool begins his career without considering the alternatives.”
McKillop — who was then pursuing his chemistry studies at the Centre de Mecanique Ondulatoire Appliquee (CMOA) in Paris, where he says he was exhilarated to experience the revolutionary fervour of 1968 at first hand — had secured a research fellowship and was signed up to pursue a career as an academic back at the University of Glasgow.
However, McKillop, who had not properly considered going into the private sector, was bowled over by a visit to the Imperial Chemical Industries laboratory in Runcorn, Cheshire. Without consulting his wife Elizabeth — who was awaiting him back in Paris —he changed his plans and accepted a job with ICI, then the bluest of Britain’s blue chips.
McKillop explains: “There was this very exciting research lab, where there were multi-disciplinary activities going on. At the end of the day they said they’d like to offer me a job. I accepted on the spot, went back to Paris and I had to tell my wife that all those plans we’d made …”
He says he has never looked back. By the time ICI demerged its pharmaceuticals business as Zeneca in June 1993 — prompted by some sabre-rattling from hostile shareholder the late Lord Hanson — he was already its head of pharmaceutical research. At the demerger, McKillop became Zeneca’s inaugural chief executive.
Having steered the business through the merger with Sweden’s Astra in 1999 and after pursuing a policy of focusing on a limited number of potential “blockbuster” drugs, AstraZeneca has a market value of £38.5 billion. This compares to ICI’s £2.6bn. So AstraZeneca is now worth 14 times its erstwhile parent.
But last month, AstraZeneca experienced perhaps its biggest setback when the US Food and Drug Administration (FDA) blocked one of its most promising new drugs on safety fears. The blood thinner Exanta, which has approval for short-term use in the EU except the UK and Ireland, failed to secure marketing approval in the US.
This came after it emerged that 6-7% of patients treated with the drug would suffer from what McKillop describes as “a transient elevation in liver enzymes”.
This came as a big shock to both the company and to its shareholders. It had been hoped Exanta would be AstraZeneca’s next big profits driver. But McKillop rejects accusations that the setback was a result of any failure to “engage” with the FDA.
“That is absolutely not true. You always engage with a regulatory authority. But it is certainly true that we were very surprised by the FDA’s review. We always knew that the review of Exanta was going to be difficult because you had this potentially exciting benefit but you also had the risk.”
AstraZeneca is now determined to fight the ruling and seek to persuade the FDA to change its mind. In the meantime, McKillop rails against the broader issue of over-zealous regulators blocking what he sees as life-saving innovation. McKillop says: “What we’re seeing at the moment is a lot of fear of innovation, the precautionary principle that we shouldn’t do anything until it’s proven to be absolutely without risk.
“To me that is incredibly dangerous. Society advances through innovation, innovation is the foundation of wealth creation. If you have an attitude in parts of society that is holding back innovation, it will be at a tremendous cost to society.
“The distribution of wealth is a political and economic issue. But its creation has got to be a good thing because it’s making the cake bigger, making a more advanced society. It allows cultural evolution, it allows the arts to flourish, it allows all kinds of things to happen.
He adds: “In human health if you take the approach that a new product is only going to be approved after it has been absolutely proven to have no risk, then you’ll have no innovation.”
He says that, given it already costs some $1bn to bring a major new drug to market on existing timeframes, it would become commercially unviable to develop such products if regulators slow things down with testing that is too protracted. “When you hold back the use of new medicines you are also denying treatment to patients. And countless people many more people — will die from not having access to new treatments because of the fear.”
The Ayrshireman illustrates the point with a tale bout AstraZeneca’s lung cancer treatment Iressa. Prior to launch, research found that, while the drug worked well for a minority of patients, it did nothing for around 50% of people. This led to uncertainty over whether the drug would gain approval.
“Thank goodness in the end the drug was approved and, within a year of having the drug approved, a piece of science was done which explained why you get 50% of patients who do not respond. If approval of this drug had been held back countless patients would have died.
“I have had people come to this office to say thank you for saving their life. A woman who was within weeks of dying came from California. Her whole life’s transformed; she is able to scuba dive again. She’s got three kids.”
McKillop says this sort of thing makes him feel “fantastic”.
He believes time-honoured palliatives such as Aspirin and Paracetemol would fail to gain regulatory approval in today’s regulatory climate.
“Aspirin has undoubtedly killed more patients than Vioxx [a painkiller used to treat arthritis sufferers from Merck which had to be withdrawn in September after it emerged it might have caused thousands of fatal heart attacks] will have done. I don’t think Aspirin would have any chance of getting approved today. Paracetemol is one of the biggest causes of death through liver toxicity, and would have no chance of being approved.”
McKillop says AstraZeneca’s main focus in the developed world is now on finding treatments for the diseases associated with ageing.
“These are the chronic degenerative diseases — wear and tear, the breakdown of tissue in the body, neuromuscular diseases and dementias. These are slow, degenerative processes. And we’re trying to stop those happening.
“I want to see people die healthy. So you have a good quality of life and you do not end up as a social and economic burden.”
For the developing world, McKillop says the priority is different. Because the healthcare infrastructure is usually so poor, his company’s focus is on providing treatments for diseases such as Aids and tuberculosis (TB). Last year AstraZeneca opened a research laboratory in Bangalore, India, specifically to find new treatments for TB.
But McKillop acknowledges that the industry has its work cut out, partly because of the regulatory backlash and because its poor reputation means governments are more likely to squeeze prices down on a global basis.
“I believe the industry has to carry out a root and branch review of how it does everything. We have to recognise the escalating cost of R&D, the pricing pressure we’re under; governments don’t want to pay us the same prices for new and innovative products.
“If we wish to continue bringing forward new products we’ve got to look for substantial efficiencies and I believe we’re going to see winners and losers emerging.”
But he denies that AstraZeneca has any plans for further mergers. “We are focused very much on organic growth. We believe that we have a very good portfolio and a very good track record in R&D. That’s the best way to improve shareholder value and, I believe, to bring new medicines to society.
He does not feel that “fat cat” salaries such as that enjoyed by his counterpart at GlaxoSmithKline (GSK), Jean-Pierre Garnier, are the cause of the industry’s declining reputation. “The industry is not as egregious as many other industries [where executive pay is concerned]. In the US, its reputation has taken a dent, but I don’t think anyone talks about big pay packets.
“The issues about the industry’s reputation are more to do with things like misrepresentation of Aids issues.
“How do pharmaceutical companies contribute to the treatment of diseases such as Aids in emerging countries? I think we have been very misrepresented over intellectual property, and there is a view that the industry is only interested in profit. Those kinds of feelings underlie the decline in the industry’s reputation. The UK is particularly besotted with this idea of salaries. I don’t think you find that anywhere else.”
Not, perhaps, the views you would expect from a “simple Scots lad”.
MINI PROFILE: SIR TOM MCKILLOP
Sir Tom McKillop was born in Ayrshire on 19 March 1943, the son of a coal miner. He has been CEO of pharmaceutical company AstraZeneca since it was formed through an Anglo-Swedish merger in 1999. From 1993-98, he was CEO of Zeneca Pharmaceuticals, which demerged from ICI in 1993. From 1969-93 he held a variety of research roles with ICI. He is a non-executive director of Lloyds TSB and BP and pro-chancellor of the University of Leicester. He stepped down as a non-executive of Nycomed Amersham in 2000. He was educated at Irvine Royal Academy and the University of Glasgow. Married to Elizabeth, he has two daughters and one son.
This profile interview with Sir Tom McKillop was published in the Sunday Herald on 14 November 2004