00:00:00 I want to welcome you all here.

00:00:21 You're a very special group of people since without you and your input to this process,

00:00:26 we wouldn't be able to have this meeting.

00:00:29 We're looking forward to putting phase one of the Drug Development Optimization Program

00:00:37 into perspective for you, to sort of give back to you what it is that we learned from

00:00:42 you in this process, and to reinforce the real importance and the urgency of this program.

00:00:47 It's absolutely critical to our continued success and to our ability to cope in the

00:00:54 coming decade and the years beyond that as well.

00:01:01 Jim Wilson is going to be our lead-off speaker, but before I turn the podium over to him,

00:01:07 I wanted to indicate that Paul Freeman will also be joining us.

00:01:10 He's going to be coming in a little late.

00:01:12 As you all know, Paul is involved in quite a few things and is always juggling his schedule.

00:01:17 He's giving a talk as we stand here, and he'll be in to our session to wrap it up for us

00:01:23 near the end of the first hour.

00:01:27 John Fried would be here except for a trip to Germany looking for yet new products for

00:01:33 us to develop in the most optimized fashion possible and get to the marketplace as rapidly

00:01:38 as possible, and he sends his regards as well.

00:01:44 We are going to use these two hours to communicate to you DDoPers as effectively as we can what

00:01:51 we learned out of Phase 1, what Phases 2 and 3 are going to look like, and how we're

00:01:58 going to get there.

00:02:00 We're going to start out by creating or discussing the Corporate Case for Action, why it is that

00:02:08 the Drug Development Optimization Program is such a critical program.

00:02:13 Jim Wilson, our Chief Operating Officer and President of the Corporation, has kindly agreed

00:02:18 to put that perspective on the day for us.

00:02:20 Jim?

00:02:21 Thank you, Bob.

00:02:30 He told me to stab this in my tie.

00:02:45 I've been doing this now for a couple of weeks, and I presume this was the correct

00:02:48 way to do it.

00:02:51 Last week we had a Nobel Laureate, David Baltimore, here to speak, and I assume he's got things

00:02:57 pretty well figured out.

00:02:58 He took one look at this and the pins and stuck it over in his lapel.

00:03:04 We'll figure out where is the intelligent place to stick this.

00:03:08 If my ties begin to unravel, I may try the lapel.

00:03:14 I'm pleased to be here.

00:03:16 I see that I've been asked to address one simple question, why DDOT?

00:03:25 Let me answer that question with an understatement, and that is that it is without a doubt the

00:03:31 single most important initiative occurring throughout the Corporation.

00:03:38 In case you think that I'm, in a sense, preaching to the choir this morning, in the last few

00:03:44 weeks I've given talks to such groups as our Financial Worldwide Conference, our Worldwide

00:03:53 Marketing Conference put on by Dick Ackerman here, and a few other forums as well.

00:04:00 In each of these, I have made the singular point that the most important thing for Syntex

00:04:09 to do to ensure its success in the 90s is to improve its drug development effort.

00:04:18 I believe that very strongly.

00:04:21 I'm therefore pleased that Bob, Roe, and others have taken on a massive undertaking.

00:04:29 At the end of my comments, I want to come back and talk about just what type of undertaking

00:04:36 this is and what kind of changes we've got to be willing to make as a corporation if

00:04:41 we're going to be successful.

00:04:43 But let me begin first with some data that I didn't prepare.

00:04:48 You know, I would speak more frequently if it would be handled the way Bob Roe did this.

00:04:53 He asked me to speak and then handed me some of the best, most convincing data I've seen

00:04:59 in a long time.

00:05:01 So if I don't convince you, it is, you know, I only have myself to blame.

00:05:08 I can blame everybody who provided me this data.

00:05:11 But I think it's really quite compelling, and let's see the first overhead.

00:05:15 I'm going to go through this quickly.

00:05:18 I could dwell on each of these overheads a bit more, but I've got 15 minutes on the agenda

00:05:23 and I want to make several points.

00:05:26 First, there's no question that Syntex is successful.

00:05:32 We are well regarded by our competitors, by our investors, and certainly the employees

00:05:42 throughout Syntex feel that we are a successful company.

00:05:46 And these are just some of the measures.

00:05:48 The problem is these measures, as important as they are, are relative and they do not

00:05:54 take into consideration size.

00:05:57 You can be a very small company with a very significant return on equity because that's

00:06:03 a relative measure.

00:06:04 Given the amount of equity in the firm, what kind of return are you making?

00:06:09 So we look very good in these kinds of measures.

00:06:12 However, turning to the next overhead, if you begin to look at the picture a little

00:06:23 differently, for example, a simple measure is sales.

00:06:26 You see that we are a relatively small player.

00:06:29 Now with these bar charts, we've broken out U.S. versus total, or the hash are effectively

00:06:36 international.

00:06:37 That's not really the point here.

00:06:38 The point here is when you look at total sales, you see Merck is way ahead of the others.

00:06:45 Now if we had some other companies, Smithline, Beecham, Bristol-Myers Squibb, it would be

00:06:49 even more dramatic because they've also got bar charts that move well along the page.

00:06:56 But Syntex is really a relatively small player.

00:07:02 In fairness, we're a medium-sized pharmaceutical company because if you put all the other pharmaceutical

00:07:07 companies around the world, there are many in the $200 to $300 to $500 million range.

00:07:13 And if you did a complete analysis, you'd see that we are a medium-sized player.

00:07:18 However, I think this representation is really the correct one because we have to find a

00:07:24 way to compete with the big fellows if we're going to remain successful.

00:07:31 Turning to the next.

00:07:37 We have historically compensated for this fact, and I think correctly so by spending

00:07:42 a higher percent of our sales on R&D.

00:07:46 I personally think that's been a wise strategy and should be continued.

00:07:51 Nevertheless, in spite of the fact that we have made this investment, we are still not

00:08:01 spending nearly what the other companies are in terms of total R&D, and that just stems

00:08:07 from the size.

00:08:09 This really just stems off the previous chart.

00:08:12 It's important, though, because sometimes we tend to believe our own story too strongly

00:08:18 and we talk so positively about the significant percent of our sales that we put towards R&D

00:08:25 and all that's very good.

00:08:26 But nevertheless, we aren't competitive with these larger companies.

00:08:35 I think more serious, though, and I think this begins to get to the real issue we want

00:08:40 to talk about today, is that Syntex is trying to move a large number of drugs to the pipeline.

00:08:45 We are pretending we're larger than we really are, and even though we are putting a significant

00:08:54 amount of our sales into R&D, we aren't adequately supporting the number of drugs that we're

00:09:02 trying to move through.

00:09:03 I think this chart actually is made all the more stark with the next overhead, in which

00:09:12 we look at the amount we're spending per drug per year.

00:09:17 This is per new compound we're moving through the research process.

00:09:22 As you can see, we are not doing nearly as well as Merck, Lilly, Pfizer, and a few others

00:09:32 that could have been on this chart.

00:09:33 We're reasonably in the pack with Upjohn, Merriam-Merrill, Dow, Shuren, Plow.

00:09:39 I personally don't like the peer group that we're part of.

00:09:46 And though this graph is maybe not as dramatic as some of the others, and I think also we

00:09:52 should say there's a certain amount of distortion that occurs here depending on the kinds of

00:09:55 drugs you're moving through your pipeline, and we recognize all of that.

00:10:01 But nevertheless, no matter how you cut the data, Syntex is trying to move more drugs

00:10:09 through its pipeline per dollar being spent on research than the well-run pharmaceutical

00:10:17 companies.

00:10:18 And you can cut the data all different ways.

00:10:20 You can take out this drug and that.

00:10:21 You will still come to the same basic conclusion.

00:10:25 I think, in a sense, this says what maybe 50, 100, 150 employees have told me directly

00:10:33 in individual meetings and in groups, and that is that Syntex is not yet doing an adequate

00:10:38 job of prioritizing its research and development efforts, and I think that's shown here.

00:10:50 As a result, things have a way of piecing together in some sort of logical fashion,

00:10:57 so it is not surprising that Syntex is taking longer to develop its drug than the leading

00:11:08 companies.

00:11:09 And again, you can see the peer group.

00:11:11 We're right in there with Upjohn, Merrill, and Merrill Dow over the group average, not

00:11:16 nearly competitive with some of the others.

00:11:20 This is a dramatic difference.

00:11:22 It is influenced, admittedly, by such drugs as Tyclopidine, which extended our delivery

00:11:29 time.

00:11:30 But even then, if you take into account such inconsistencies, you will still be left with

00:11:38 the fact that Syntex takes longer to develop its drugs than the better run companies.

00:11:46 And that last statement, it may sort of stop some of you, I said better run.

00:11:50 I think that, by and large, pharmaceutical companies should gauge their effectiveness

00:11:58 not in terms of sales or profitability, but in terms of the efficiency with which they

00:12:05 develop drugs.

00:12:06 And that, to me, is the key measure, and I'll come back to that at the end.

00:12:16 I thought about answering the question at the beginning with this overhead, because

00:12:20 if anybody wanted to ask a question of why DDoP, just take a look at this.

00:12:25 This shows what happens when we are able to remove two years from the average development

00:12:32 time for each new drug in Syntex's pipeline, current drugs in our pipeline.

00:12:37 And what you see is that during the 90s, or the latter half of the 90s, we would actually

00:12:45 pick up over a billion and a half in revenues.

00:12:49 I think equally important is that in years like 96 and 97, we actually gain a hundred

00:12:58 million dollars in sales.

00:13:01 That's coming at an extraordinarily critical time.

00:13:04 If we could pick up that hundred million dollars, it would significantly erase the decline we

00:13:14 will be experiencing in Naperson for two reasons.

00:13:18 One is, not only does it put a huge dent into the sales loss, but secondly, when added to

00:13:26 the sales increases that we're going to be seeing from Toradol and Ticlopidine, it essentially

00:13:31 fills in the gap.

00:13:33 But lastly, it's an important signal to the investment community that at a time when our

00:13:40 major drug is coming off patent, we are effectively moving drugs through the development process.

00:13:46 So if we could achieve this, it would essentially correct or eliminate any difficulties we would

00:13:54 experience in the mid-90s.

00:13:55 Now, don't go to the next overhead yet.

00:14:01 I'm going to wrap up my comments with an overhead that I prepared last night.

00:14:08 Because I think that, as I've thought about DDoP, I've realized that it is not only important

00:14:20 for what it will do directly for the company and our drug development efforts, but I think

00:14:28 that DDoP is becoming, in a sense, the example of what we need to do in the corporation to

00:14:40 affect change.

00:14:42 And I'm amazed at how many initiatives or ideas that are floating around the corporation

00:14:52 seem to be coming to DDoP almost like a magnet.

00:14:56 And I think that if we are successful with DDoP, not only will we be successful in improving

00:15:01 drug development, but we will, in fact, may have taught the corporation an extremely important

00:15:07 lesson.

00:15:08 So let me show you with the next overhead what I'm talking about.

00:15:15 I've put in on this overhead five – I've got to step back because I don't have a hard

00:15:20 copy of this so I can see it.

00:15:21 I've put up here five different issues that I'm going to talk about.

00:15:27 Those that are in quotes represent what I would call internal positions or statements

00:15:33 that have been made.

00:15:35 Those that are not represent external initiatives that we think should be brought into Syntex.

00:15:43 So let me just talk through – first, we are now in the middle of a strategic planning

00:15:51 effort, and it won't be finished for another few months because we've got several different

00:15:58 task forces and we're looking at many different strategic issues.

00:16:05 However, one point is beginning to emerge, and that is drug development will likely be

00:16:14 the competitive battleground for the pharmaceutical industry.

00:16:18 Some of you have heard me talk on this, so I don't want to be redundant, but I've used

00:16:22 the example before and I'll use it again.

00:16:25 Pharmacy was the competitive battleground for the automobile industry.

00:16:31 The Japanese recognized this and used it to their advantage.

00:16:37 I think we need to look forward and realize that in the pharmaceutical industry, your

00:16:43 competitive ability and drug development will largely determine your success as a company.

00:16:52 The second issue is that – is one of performance benchmarks or competitive benchmarks.

00:17:01 What this means is that if you are really going to be competitive in any area, you need

00:17:06 to compare yourself and what you're accomplishing honestly and objectively with the competition.

00:17:14 That is the key to competition.

00:17:17 Here's a Harvard Business Review article.

00:17:21 I think it's the January – yes, January, February issue.

00:17:25 I think it's one of the most important articles that I have read in some time.

00:17:32 I recommend it to everybody.

00:17:34 It is called the Performance Measurement Manifesto.

00:17:39 What it says is – it makes two key points in this article.

00:17:43 One is that if you're measuring your performance as a company in financial terms, you are not

00:17:50 measuring what is most important.

00:17:53 I agree.

00:17:54 I would much rather see Syntex follow the time to develop a drug than earnings per share

00:18:03 because I think one follows from the other and not the other way around.

00:18:08 Secondly, though, the article reinforces the point that in doing this, don't be too insular.

00:18:15 I think Syntex has been an incredibly insular pharmaceutical company.

00:18:21 It's been advantageous in some areas.

00:18:23 I think we've managed to create our own culture and we've been incredibly successful.

00:18:27 But as we move into this highly competitive period, I think we must be willing to compare

00:18:34 ourselves to the very best pharmaceutical companies, even if we sometimes come up short.

00:18:42 Third point, TQM stands for Total Quality Management, that the very heart of DDoP is quality.

00:18:53 However, we believe that total quality management is also important in many, many other areas

00:19:00 of the company, not just product.

00:19:03 What total quality management essentially says is if you're only looking at your product

00:19:10 standards as the area where you can gain from quality programs, you are missing huge opportunities.

00:19:18 The fact is every part of a corporation lends itself to total quality management programs.

00:19:26 I think that's basically what you're going to be doing at DDoP.

00:19:29 Why I make the point.

00:19:30 If we're successful at DDoP, it's going to teach the corporation huge lessons.

00:19:37 Next is vested interest versus change.

00:19:42 One of the problems that stems from Syntex's longstanding success is that people tend to

00:19:54 want to protect their vested interest, even if it's not in the best interest of the corporation.

00:20:01 They may do this subconsciously, or they may do it because it's kind of part of the culture.

00:20:06 But I think we need to accept that as a culture, we have an unusual interest in protecting

00:20:14 people and departments.

00:20:17 I have yet to be in a serious discussion about any kind of change in the company in

00:20:24 which within 30 seconds into that conversation, someone doesn't say, oh, what's so-and-so

00:20:28 going to think about this?

00:20:29 Or he's going to have a little less responsibility, or she won't be able to do this.

00:20:33 I don't mean to sound insensitive, but I think that if we get too bogged down in our vested

00:20:41 interest, we're all going to lose.

00:20:43 We're absolutely all going to lose.

00:20:45 I would encourage everybody that's part of DDoP to teach the corporation that vested

00:20:51 interests do not have to drive the process, that we are not going to lay a veneer of change

00:20:59 over what already exists, and frankly, I see that.

00:21:02 I see committees established not willing to really get rid of this committee and this

00:21:07 activity because, gee, you don't want to tell this person they don't have their little committee

00:21:11 anymore, so we'll just lay another one on top of it.

00:21:14 I think with DDoP, you should be willing to get to the core of it and be willing to

00:21:19 make change.

00:21:20 It also speaks to the issue of product priorities.

00:21:23 I think most people here would agree that one reason we pursue as many products we do

00:21:29 is because of vested interests.

00:21:31 It's not because in the cold light of day, there is broad support for all these programs.

00:21:38 It's because people have their own pet projects, and nobody wants to hurt their feelings.

00:21:43 We just can't have it.

00:21:44 I don't mean to be too strong on that, but I'm dealing with some of these issues in my

00:21:50 own specific responsibilities, and so I tend to get moving on the subject.

00:21:58 The last point is investing in people.

00:22:05 Again, as we try to really change the company and put in place new ways of doing things,

00:22:15 I hope we will pay particular attention to the impact on our people and always ask ourselves,

00:22:24 is this change going to give people more responsibility, more authority, or is it going to confuse

00:22:30 decision-making?

00:22:32 Is it going to keep decision-making at the top of the corporation?

00:22:35 I think if we don't address those issues, no matter how important the changes we think

00:22:41 we're making, I think we'll ultimately fail.

00:22:44 We say sometimes people are resistant to change.

00:22:47 I think that's often the case for the reason of vested interest, but I think another reason

00:22:53 why people are resistant to change is they're resistant to stupid change.

00:22:59 They're resistant to change that they know won't work.

00:23:03 They see a complex new procedure, and they know that this isn't going to work, and so

00:23:10 they resist it, and so I think if DDoP is going to work, don't just hear all resistance

00:23:16 to change as parochial or whatever, but maybe the people are saying, this just is not going

00:23:26 to work at the people level.

00:23:28 It's got to.

00:23:29 The last thing I'll say about the change is that when you're all done, see if you can't

00:23:40 get DDoP and all the changes that you want to make and the whole new program onto one

00:23:47 piece of paper because I think if you've got it on one piece of paper, you've done two

00:23:52 or three things.

00:23:54 One is you've faced up to the vested interest.

00:23:56 You're not sugarcoating things.

00:23:57 You're being stark.

00:23:59 You're going right at it.

00:24:00 You're being direct.

00:24:01 Secondly, I really question whether a corporation can get behind a whole new program and concept

00:24:08 that can't be represented in one page.

00:24:10 If it takes more than one page, I think it's too complex, not that there won't be add-on

00:24:15 programs and all that, but I would have that as one of your guiding principles.

00:24:21 The changes need to be important and far-sweeping, but ultimately, they need to be simply stated.

00:24:27 Thank you very much.

00:24:50 Thanks very much, Jim.

00:24:51 I guess I'm going to have to give some serious thought to my customary apparel.

00:24:55 I would hate to be viewed as one of those with vested interests, but if I stop wearing

00:25:02 my vest, I'm going to have to get my ties cleaned more often, so there's a real trade-off

00:25:08 there.

00:25:09 What I'm going to do now is, in part, follow up on the suggestion that Jim left with us,

00:25:19 and that's go through the initiatives that were viewed and studied as part of phase one

00:25:25 and try to capture them, each one on a single page.

00:25:29 What that means is we've tried to distill down not only the weeks and weeks of work

00:25:35 that all of you have put into the process, but the eight hours of presentation we had

00:25:39 early this week to hear the full content of the discoveries and to look to the recommendations

00:25:46 that come from them.

00:25:50 Jim made a couple of important points for us, and one is the issue of time, and time

00:25:58 and quality are obviously heavily interrelated.

00:26:03 We already have a vision of completing some of our current very critical programs in a

00:26:09 much shorter time frame than that which has been the syntax tradition.

00:26:17 I think the critical statement, and when we finally get to the point where we can put

00:26:22 DDoP on a single page, this is clearly going to be part of what's on that page, is our

00:26:27 global vision.

00:26:28 It's been modified a bit from time to time, principally to try and make it, I think, clearer.

00:26:36 I found in reading it last night that you have to read this carefully to make it as

00:26:39 clear as it should be, so we may still need to work on it just a bit, but it's so important

00:26:44 that I actually want to take the time to read it.

00:26:49 We want Syntex to be the worldwide leader in the industry by which drug development

00:26:53 is judged in terms of quality and time to product launch in those therapeutic areas

00:27:00 we choose to pursue.

00:27:03 I think each component part of that vision is very critical to the understanding of where

00:27:08 we're going with DDoP.

00:27:12 This activity is clearly going to be one of considerable work.

00:27:23 It's going to require great dedication from all of us in this room and literally hundreds

00:27:28 of other people if we're really going to succeed, and it's somewhat expensive.

00:27:33 It requires new technology, it requires additional people, and to put it in place worldwide,

00:27:41 we've estimated that the total cost may be somewhere between $60 and $80 million over

00:27:46 the next few years.

00:27:49 But I think it's critical to keep in mind the benefit.

00:27:53 While we're talking about money, the benefit in terms of money is that $1.6 or $1.7 billion

00:27:59 in increased return over the next 10 years.

00:28:01 I think that's quite an acceptable return on investment.

00:28:07 The other issue, of course, is quality, and the way we're going to save much of our time

00:28:12 is because of the enhanced quality that in itself will, I believe, decrease the cost

00:28:19 of drug development and augment the ultimate return.

00:28:24 Now as we move forward through the five initiatives, we're going to try and distill the discoveries

00:28:35 that you, the people who worked on these initiatives, provided to us.

00:28:41 And the format of that presentation will be illustrated on the next transparency.

00:28:47 It's the same for all five.

00:28:51 Spend a little time reviewing what life looks like today, and then what our vision is for

00:28:59 the future when we have accomplished those tasks we're setting before ourselves as part

00:29:04 of this drug optimization program.

00:29:10 First initiative dealt with portfolio management and the planning of the development process.

00:29:25 Today each plan is a new ballgame.

00:29:28 We plan each project as if we hadn't learned anything from the previous projects, and that

00:29:36 leads to clear inconsistencies.

00:29:40 We don't adequately manage our resources principally because we don't manage them by project.

00:29:48 We manage them by work group, and that makes it very difficult to stay on top of resource

00:29:53 allocation.

00:29:56 We have communication problems with respect to these development plans.

00:30:03 Some people don't hear about them.

00:30:06 Some people hear about them many times.

00:30:08 There are many versions that float around.

00:30:11 The iterative process doesn't necessarily get us better adherence or better quality.

00:30:19 The next one's a term that I particularly liked.

00:30:22 I don't know who coined it, but whoever did should get one of the first gold stars that

00:30:26 comes out of the DDoP process.

00:30:28 That's creeping divergence.

00:30:30 Sounds pretty insidious to me.

00:30:34 But it's what happens.

00:30:35 As part of the normal course of doing business, things come up, change the way the program's

00:30:41 going.

00:30:42 Next thing you know, the timeline has shifted.

00:30:45 It's only crept a bit.

00:30:47 We don't pay adequate attention to that kind of thing, and pretty soon our development

00:30:52 times are higher than the industry average.

00:30:58 And finally, because of the way that we've managed projects, there has not been a clear

00:31:03 accountability for meeting the dictates of the project plan in terms of content, and

00:31:11 most importantly, in terms of time.

00:31:14 Now, our vision for the future is fairly simply stated, and for most of these initiatives,

00:31:22 it's pretty straightforward.

00:31:26 We're going to create a worldwide environment and the processes necessary so that the benefits

00:31:34 that you're going to see in the next four transparencies can accrue.

00:31:41 Without clear planning, without portfolio management, without managing a new chemical

00:31:48 entity for its entire lifecycle, we're not going to be able to achieve the fairly miraculous

00:31:55 savings in time that you're going to see in the next few transparencies.

00:32:01 Strict adherence to plans, to milestones, to deadlines will become the key word and

00:32:09 the key action.

00:32:12 We can only do that if we provide people with adequate resources so that they can achieve

00:32:17 the goals that we set.

00:32:20 And there will be clearly established and effectively communicated priorities throughout

00:32:25 the entire drug development process.

00:32:31 Now the four initiatives that deal with the processes involved in drug development and

00:32:38 the processes that we are going to optimize.

00:32:43 The first, and perhaps the one that we started on earliest, even before the drug development

00:32:49 optimization program took life, is the clinical trials management project.

00:32:57 And its primary goal is to substantially reduce development time.

00:33:05 I've already dealt with issues of integrated planning and resource allocation.

00:33:10 They're so critical that they're restated again at the head of this transparency.

00:33:17 We have in the past managed our clinical programs with limited involvement with the

00:33:22 investigators.

00:33:23 We have not managed the investigators as if they were Syntex employees at the time they're

00:33:27 doing the trials.

00:33:29 Other companies do that and do it successfully.

00:33:32 Makes them partners and collaborators, gets us better quality and more timely participation.

00:33:39 We tend to react to new findings, to new issues, to changes in direction, rather than

00:33:48 being proactive, rather than anticipating those, rather than doing things in parallel

00:33:54 to achieve the best outcome.

00:33:58 We currently are existing in aging and inadequate systems.

00:34:04 These are the technological systems that support all of the vast data management and

00:34:10 the interpretation and analysis of the clinical trials data and other data.

00:34:16 And in fact, it was that identification by research information services and others that

00:34:23 began the concepts that grew into the drug development optimization program.

00:34:27 We clearly have to fix that piece, and we are in the process of doing that.

00:34:32 It's going to be one of our quick fixes to get some of those technological advances in

00:34:36 place.

00:34:40 Now with increasing time, or with decreasing the time frame, with increasing emphasis on

00:34:44 time savings and increasing emphasis on quality, we're going to be able to do away with the

00:34:51 extensive reanalyses that we now see.

00:34:54 And that in itself will both be an indicator of the truly substantially enhanced quality

00:35:01 of our work product, but will also result in major time savings.

00:35:09 The vision for the future, again, is fairly straightforward.

00:35:13 Absolute adherence to the project plan, unless there is a clear and compelling discovery

00:35:17 that requires us to change, and then absolute adherence to the new plan.

00:35:23 Standardization of approach to data collection, to those parts of the research process that

00:35:29 can be readily standardized.

00:35:33 Increased quality feedback to the investigators, to the data managers, to the monitors, so

00:35:37 people can stay on top of that very critical issue.

00:35:40 And so that there is quality built in, not quality checked in at the end.

00:35:48 We want quality built in from the beginning.

00:35:52 Streamlined work groups that decrease the number of handoffs, the iterative processes

00:35:56 back and forth, that in itself is going to save a great deal of time.

00:36:01 And one of the stretch goals is a 48-hour time lapse, only a 48-hour time lapse, from

00:36:10 the last patient visit to data lock on any given trial.

00:36:14 That's different by far from where we are at present, and I can see some knowing smiles

00:36:20 out there from the people who hold the key that locks the data.

00:36:27 The time savings that we envision are at the bottom of this transparency.

00:36:32 We went over these in considerable detail at our off-site meeting on Monday.

00:36:38 I think they're good goals.

00:36:41 I think they're stretching these goals.

00:36:43 I wouldn't be surprised if, once we have this process in place, we couldn't beat these goals.

00:36:48 And as you can see, there's 92 weeks of savings there.

00:36:53 It's not bad.

00:36:56 Gets us a long way along the road that we're heading down.

00:37:05 Chemistry manufacturing and controls, all the way from synthesizing the raw drug substance

00:37:15 through creating the product that we ultimately sell.

00:37:21 This has been an area that's received a substantial amount of attention recently because some

00:37:27 of the issues that we have discovered really have only manifested themselves as we have

00:37:33 succeeded.

00:37:34 If you don't have six drugs, new drugs, to get to the marketplace and get launched and

00:37:40 succeed with, if you only have one or two, some of these issues can hide from you.

00:37:47 They can't now.

00:37:49 They've come home all too clearly on a number of instances, and we're going to address them

00:37:54 as part of this process.

00:37:59 There have been and continue to be frequent shortages in chemical supplies and drug product

00:38:06 supplies, if not in the U.S., certainly in other parts of the world.

00:38:13 Research and the commercial side have provided inadequate forecasts on a number of occasions

00:38:19 that have helped to support these deficiencies.

00:38:23 Sometimes it's for reasons that are truly unanticipated, but one of the areas where

00:38:27 we are most at fault is in the forecasting for ganciclovir.

00:38:33 We need more ganciclovir to run our oral ganciclovir development research program than

00:38:39 the corporation currently sells, and we are, as a consequence, the main cause for the shortage

00:38:45 in ganciclovir.

00:38:46 We should have anticipated that further in advance than we did.

00:38:52 There are problems with the tracking of materials.

00:38:54 That often becomes a regulatory issue, but it's a very important issue in just the day-to-day

00:39:00 course of business as well.

00:39:03 The commercial prototype, especially created at a facility where the ultimate commercial

00:39:13 material is to be produced and in quantities similar to production runs, is often not available

00:39:19 until late in Phase III or sometimes after Phase III is over, and we end up trying to

00:39:25 rely on things like bioequivalents and sometimes without much success, and that keeps us from

00:39:32 getting to the marketplace in a timely fashion.

00:39:34 We cannot allow that to happen in the future.

00:39:37 It costs us too much in terms of time and in terms of money.

00:39:45 At present, we have a checkered record with respect to our preapproval inspections.

00:39:53 The Tyclopidine inspection, I think, went exceedingly well.

00:39:58 Many of you in this room and many more outside this room put a huge investment in time into

00:40:03 preparing for that inspection.

00:40:06 We should not have to do that at the end of the process.

00:40:09 We thank you for all the effort that went into it.

00:40:12 We passed that inspection.

00:40:14 It's going to be very critical to us in the next short while as we finally get our Tyclopidine

00:40:20 approval, but it took immense effort directed away from other critical tasks.

00:40:27 We've had some preapproval inspections that we failed and that as a consequence we didn't

00:40:32 get approvals.

00:40:33 We've had to go back and rework those projects at great cost in terms of the cost of the

00:40:41 rework activities and obviously in terms of the cost of lost sales.

00:40:50 Our vision for the future is a very broad vision in this case.

00:40:56 We need the final chemical process development in phase two so that we can have the commercial

00:41:03 prototype in phase two and we can do our phase three work with the final commercial product.

00:41:09 It's the only way we're going to succeed in this decade to cut the time out of the process

00:41:15 that we must cut out.

00:41:17 That's an extraordinary difference in the way we do business.

00:41:20 It's a very critical difference.

00:41:22 It's one that we absolutely have to adhere to.

00:41:26 We need complete material traceability for the reasons that I cited earlier.

00:41:31 This has been a great one because the stretch goal has changed every time I've seen this.

00:41:36 It was 24 hours until the most recent presentation.

00:41:39 It's now down to eight and I have heard people suggest that perhaps we can get it down to

00:41:44 real time by the time we're finished.

00:41:49 Worldwide coordination of supply, manufacturing, control, and distribution, a lot of efforts

00:41:54 are being put into this.

00:41:55 There is a critical strategic task force that's looking at many of these issues as well.

00:42:02 I think they're in a two-day off-site meeting today beginning that process.

00:42:05 It's one of the corporate task forces.

00:42:10 We want to be ready for our inspections 30 days after we file the NDA or other registration

00:42:17 dossiers.

00:42:18 It's not because we expect to be inspected within 30 days.

00:42:23 It's highly unlikely, in fact, that the agency is going to spend its resources inspecting

00:42:27 us until they have some sense that the package is approvable.

00:42:33 Of course, by the middle of this decade, the fact that it has syntax on it will guarantee

00:42:37 them that it's approvable.

00:42:39 Maybe they will inspect us within 30 days.

00:42:41 In any event, we're going to be prepared for that.

00:42:46 Then we want to be ready for launch.

00:42:50 We want to be ready for launch so that we can launch when we have approval.

00:43:01 There's another area where we're going to enhance quality, decrease time, and increase

00:43:14 user friendliness of the submissions we make.

00:43:17 That's in the dossier management area.

00:43:22 At the present time, I probably don't have to tell you this, but at the present time,

00:43:27 we create a registration package for the United States, for the FDA, and then we get around

00:43:35 to working on registration packages for those other countries.

00:43:40 Our track record is not particularly good.

00:43:42 We have had as much as 60 weeks pass between an important U.S. filing and an important

00:43:50 filing in one of our other major countries.

00:43:54 It's not that people weren't trying to do the process efficiently and effectively.

00:43:59 It's that the procedures in place and the fact that we did not focus the dossier production

00:44:06 from its earliest inception on broader use than the U.S. led to those kind of delays.

00:44:12 We cannot tolerate that in the future.

00:44:14 We will not tolerate it, and we plan to be prepared to file in all countries of interest

00:44:19 essentially simultaneously.

00:44:27 The vision, again, here is easy to grasp.

00:44:35 The registration dossier will be available for worldwide distribution according to our

00:44:46 regulatory plan within one week of the completion of the final report that goes into that dossier,

00:44:54 except that the stretch goal is 48 hours, so I know it will be ready within 48 hours.

00:45:00 That's a considerable improvement over what we've seen in the past.

00:45:04 In the U.S., our most critical filings have usually taken us 8 to 15 weeks, I suppose,

00:45:12 after the final report.

00:45:14 And I already mentioned some of the time frames around international filings, so 48 hours

00:45:18 is going to be a real improvement.

00:45:24 We're going to anticipate and plan for the inquiries that we get, again, being proactive

00:45:29 rather than reactive.

00:45:31 We're going to spend time knowing where the relative shortcomings of our registration

00:45:38 dossiers exist and being prepared with responses for those.

00:45:43 We're going to move in the direction of helping agencies through those dossiers by pointing

00:45:47 such areas out to them and providing our responses up front or at least in a very proactive manner.

00:45:57 And a 24-hour turnaround for responses on any but really complex questions or deficiencies

00:46:06 will be the state of the art.

00:46:20 The final initiative is an equally critical one.

00:46:23 It's somewhat different than the others.

00:46:27 It has equal importance, but it addresses issues other than time, at least by and large

00:46:34 issues other than time.

00:46:36 It addresses things like Syntex's ability to meet its regulated and legally mandated

00:46:46 requirements for safety reporting.

00:46:50 It impacts things like Syntex's reputation.

00:46:54 It's a very critical area, and it's one that has been a principal focus of the corporation

00:47:00 now for a considerable period of time, as best reflected by Bob Sparks leaving the board

00:47:08 of directors to take on overall responsibility for the activities related to corporate compliance

00:47:14 and safety.

00:47:17 In fact, this is another initiative, the origins of which go back well before drug development

00:47:22 optimization because the staff from IRDM and from the corporate safety office began a process

00:47:31 for putting the corporate safety database together some time ago.

00:47:36 How long was it, Stu?

00:47:37 We started the original committee about four years ago.

00:47:40 All right.

00:47:41 So we've got a four-year head start on this.

00:47:44 Now that in itself is a commentary.

00:47:46 In the new environment, it won't take us four years to get this far.

00:47:49 I can guarantee you that.

00:47:51 But at least it shows that we were thinking about it and we were working on it sometime

00:47:56 before the drug optimization process started.

00:48:04 I think it's very safe to say that DER management today is a fairly difficult process.

00:48:10 Hal Upjohn in the front row here would probably confirm that.

00:48:15 The ability to collect safety data worldwide has been severely limited, is still somewhat

00:48:21 limited, cannot be limited.

00:48:23 We cannot have that happen.

00:48:25 But it's not been too many years since it was often impossible to know what the full

00:48:33 breadth of safety data around the world was, much less get our hands on it for regulatory

00:48:38 purposes.

00:48:40 Our abilities to answer product safety inquiries are inconsistent, and we do not have an adequate

00:48:48 ability to monitor the drug over its entire life cycle, not only looking for adverse reactions,

00:48:55 not only looking for drug experience reporting, but also looking for positive manifestations

00:49:03 of the drug's efficacy and benefit.

00:49:06 And that can come out of this initiative as well.

00:49:12 So in our vision, we'll have a structured, proactive process to manage the entire clinical

00:49:17 experience.

00:49:18 Obviously, that part that's in the research database has always been available to us,

00:49:23 but this will allow us to follow both issues of safety and efficacy throughout the life

00:49:29 of the product.

00:49:34 A global communication network, including regulatory agencies as well as all of the

00:49:40 syntax units, will be an important and critical component part of this activity.

00:49:47 And a single, centralized, comprehensive database, that in itself will instantly diminish the

00:49:55 headaches that our safety folks now suffer by virtue of the fact that safety data is

00:50:01 in at least three databases that can't talk to each other.

00:50:11 Those are the initiatives then.

00:50:14 And again, I want to acknowledge that we've distilled an immense amount of discovery and

00:50:19 work on the part of the people in this room down to a few bullet points, but I think we

00:50:25 have managed to capture the critical bullet points.

00:50:29 If we have not, please let us know.

00:50:37 This summarizes the benefits that we anticipate from the DDoP process.

00:50:47 As you can see, in terms of time, we're well above two years, and I'm sure we can continue

00:50:57 to work on that number, but that already guarantees us savings in excess of those

00:51:03 illustrated.

00:51:04 Actually, I should rephrase that, increased sales stream in terms of the slide that Jim

00:51:15 used.

00:51:16 It's going to provide us clear focus on our priorities.

00:51:20 It's going to ensure that we have adequate resources for all projects that go through

00:51:25 the development activity.

00:51:27 It's going to give us critical path planning, and we're going to have a worldwide ability

00:51:35 to manage success.

00:51:40 Quality is clearly a critical aspect, and it will help us to do that piece that has

00:51:49 in the past been the most time-consuming once we've had our registrations, that's responding

00:51:54 to inquiries, and we'll be able to anticipate and proactively manage that part of the process.

00:52:04 The ultimate yield is IND to launch as a routine in 6.5 years as opposed to the eight to eight

00:52:16 and a half years we've seen in the past, and I think we probably rounded that number the

00:52:20 wrong direction.

00:52:21 I want that down below six, so we'll have a new transparency the next time you see this.

00:52:30 Clear management of our pipeline productivity.

00:52:32 We really have to be sure that we obtain all available benefit from the discovery process,

00:52:41 that critical basic research activity that gives us the new chemical entities that do

00:52:47 ultimately become drugs.

00:52:48 We cannot afford to waste that extraordinarily valuable resource.

00:52:53 We cannot afford to waste any time in bringing that resource to the marketplace.

00:52:59 And finally, as you all know because I'm sure you've heard John Fried discuss it on several

00:53:05 occasions, we plan as a minimum 10 new chemical entity approvals in this decade, three of

00:53:13 those in animal health, I'm sorry, 10 new chemical entities on the human side and three

00:53:20 additional in animal health.

00:53:23 The final transparency allows me to give you some sense of what the future looks like.

00:53:34 We have now finished phase one, the discovery process, and I think we've benefited immensely

00:53:43 from the insights that you have provided to us and that we have obtained from others not

00:53:49 in the room today.

00:53:53 We're going to go through a process in the next days and perhaps weeks of looking at

00:53:58 all of these potential areas of improvement and doing some prioritization.

00:54:07 The overall scope of this is large enough that we clearly cannot do all aspects of it

00:54:13 simultaneously and we want to manage the process so we do the most critical parts first and

00:54:21 manage the resources necessary to do that such that we do have the resource and the

00:54:25 time and the commitment to get it all done before we're finished.

00:54:33 So we'll go through that process in the next short while.

00:54:38 I owe a report to the Corporate Operating Committee who have provided us immense support,

00:54:48 both emotional and resource support, to this undertaking and we'll be doing that in the

00:54:57 middle of November.

00:55:02 And then as you can see there are a number of preparation items there to get us ready

00:55:06 for phase two.

00:55:09 And in phase two we will really be spending time looking at process redesign, looking

00:55:18 at the kinds of technology that are going to be critical to success in this activity,

00:55:28 putting together our re-engineering lab, which in some respects will be a lab, a place people

00:55:39 can go and try out new technology, live in an environment where they can experience what

00:55:47 the various approaches to a given problem could be so we can learn from hands-on involvement

00:55:57 the best directions to go.

00:56:00 But some of that laboratory experience will be out in the real world where we're going

00:56:04 to look at the application of technologies to ongoing projects, we're going to run pilots,

00:56:13 we're going to evaluate whether the selections that we've made, whether the choices that

00:56:20 we've made really hold up to the real-life setting before we begin what we term here

00:56:27 as the second wave of implementation, that wave that really puts in place all that we

00:56:34 have discovered as part of the Drug Development Optimization Program.

00:56:41 As part of that process we are obviously going to need to continue to involve large numbers

00:56:47 of people, the involvement will undoubtedly take on a different appearance than what we've

00:56:55 done in phase one.

00:56:57 With the conclusion of phase one, the various task groups, et cetera, who have participated

00:57:02 so successfully will now in essence be disbanded as we form new groups to address the various

00:57:10 issues that come forward.

00:57:13 That'll allow us to redistribute the critical resources that we have used during the discovery

00:57:18 phase and apply them most appropriately to each of the projects as we move forward.

00:57:27 We're going to, starting with this meeting and the others that I have mentioned, we're

00:57:34 going to re-energize the communication process from this point forward.

00:57:40 I think it's critical that we keep all of the participants fully informed, fully bought

00:57:47 into the process.

00:57:50 It's people such as those of you in the room, all of us who have participated in phase one

00:57:56 who really have to be the ambassadors of this program.

00:57:59 We have to be the people that can spread the knowledge of the program, the enthusiasm for

00:58:06 it, the extraordinary benefits that will accrue from it so that we can keep people focused

00:58:13 as we move forward.

00:58:18 The next presentation will be made by Jim Ware.

00:58:23 It has to do with what change management is all about.

00:58:27 And I've noted that Paul Freeman has now joined us.

00:58:32 And so he will speak to us just as soon as Jim is finished.

00:58:35 Paul, I think you have a commitment at 10.30, is that?

00:58:38 Okay, good.

00:58:39 Jim?

00:58:40 Thank you very much, Bob.

00:58:55 I too will partially destroy my tie in getting the microphone on.

00:59:02 Bob has asked me to spend a few minutes talking with you about something that many of you

00:59:06 know and have been exposed to in other settings.

00:59:09 The whole theme of how we experience the changes that DDoP represents.

00:59:13 Clearly it is an exciting and an important program to Syntex.

00:59:17 Many of you are sitting here looking at numbers like $1.6 billion in 52 weeks, in 20 weeks,

00:59:25 in 48 hours.

00:59:27 And you have to be thinking, it sounds wonderful, but how could it possibly happen?

00:59:31 How can we do it?

00:59:33 Well, I personally have spent over 20 years working with organizations trying to go through

00:59:39 these kinds of change programs.

00:59:41 That may cause you to question my sanity.

00:59:44 But I have become convinced that organizational inertia is very real.

00:59:52 And in spite of all of the promises and the benefits, and in spite of statements from

00:59:57 Jim Wilson, such as, which I wholeheartedly agree with, resistance is typically resistance

01:00:02 to stupid change.

01:00:04 It is extremely difficult for organizations to accomplish the kinds of things that you're

01:00:08 setting out to do.

01:00:10 Extremely difficult.

01:00:12 We all know the concept of homeostasis as it applies to the biological entity.

01:00:17 I think it applies even more rigorously to large organizations.

01:00:23 Organizations reject foreign bodies just as vigorously as the individual human does.

01:00:28 DDoP is asking you to challenge almost everything you know about the way you do things.

01:00:35 Not because you've been doing them wrong in the past, but because the present and the

01:00:39 future require them to be different, and because the capabilities that the technology brings

01:00:45 to you and your own understanding of your processes bring to you allow you to do things

01:00:50 differently.

01:00:51 But you must be sitting there, many of you, thinking, how can we be talking about this

01:00:55 being the most important thing in the decade when we've just finished our most successful

01:00:59 year ever?

01:01:00 You're thinking, I helped create what we are today.

01:01:03 What's wrong with it?

01:01:05 I'm already working very hard.

01:01:06 We know how many hours many of you have carved out of your personal lives to make the last

01:01:12 90 days, the last six months, really, happen.

01:01:16 Most of all, I think what you're thinking is, what does this mean to me?

01:01:20 Not only you, but all of the people in the organization who will be affected have to

01:01:24 be asking, what does this mean to me?

01:01:27 Any change experience involves a very complex mixture of emotions, a combination of excitement

01:01:34 and anxiety, a combination of anticipation and frustration.

01:01:40 I want to propose to you a general model that I think describes pretty effectively how each

01:01:44 of us experiences any change, whether it's within a job or our personal lives, whether

01:01:49 it's as simple as buying a new car or as complex as marrying someone or having a child or changing

01:01:58 your job.

01:01:59 We all go through a cycle over a period of time.

01:02:03 This cycle has, in some instances, been described as analogous to the grief cycle.

01:02:08 I don't want you to feel DDoP in any grief sense, but let me just take a moment to talk

01:02:13 about it.

01:02:14 As we become aware of a change, and this is true whether it's a positive change or a change

01:02:19 that we view as negative, whether it's one that we are initiating or one that's being

01:02:22 initiated on us, there is an anticipation.

01:02:25 We tend to focus on the positive.

01:02:28 When you buy a new car, you think about all the wonderful things, how much better you

01:02:32 will feel, how fast the car will be, how comfortable it will be.

01:02:36 We tend to suppress the negative.

01:02:38 We don't think about it.

01:02:39 Sometimes we don't want to tell other people how much it's costing us or some of those

01:02:43 other issues.

01:02:45 But then phase two, reality begins to set in.

01:02:49 We discover that the car feels differently than we thought it would be.

01:02:52 I bought one recently.

01:02:53 I discovered that the seat was nowhere near as comfortable after three hours of driving

01:02:57 on a trip as it had been during the 20 minutes I drove it before I bought it.

01:03:02 We discover that we don't get everything we expected, and we get some things like an

01:03:06 uncomfortable seat that we didn't expect.

01:03:10 You know, the car is too big for the garage, the seat is uncomfortable, whatever.

01:03:15 It also, when we get into organizational change, clearly in every situation I've seen it takes

01:03:21 more work and it's much more complex than we anticipated or than we wanted to believe.

01:03:27 That kind of takes us into what I call the third phase, letting go of the old.

01:03:31 Because we begin to get concrete ideas about what the new will be, we have to face up to

01:03:38 some of the letting go.

01:03:39 To do something new means stopping doing something old.

01:03:43 And when you hear discussions of changing the way we do work, that has to be what's

01:03:48 going through your minds.

01:03:50 What will change for me?

01:03:51 What will I have to let go of?

01:03:54 And I will assure you that in spite of the fact that many of you will experience the

01:03:58 improvements and feel very good about the improvements in DDoP ultimately, letting go

01:04:04 even of things that are unpleasant is sometimes difficult for us to do.

01:04:08 The familiar is very comfortable.

01:04:10 Most of us have very common patterns of the way we drive to work.

01:04:13 You know, if there's construction along the way and you have to go a new way, you may

01:04:17 discover that it's actually faster the new way, but you'll probably on a few occasions

01:04:22 start to go the old way without realizing it.

01:04:25 I know some organizations that have quite literally in the midst of a process like this,

01:04:30 as they began to kind of bottom out, if you will, very formally have had letting go parties,

01:04:38 almost funerals, you know, burning the old forms and procedures, symbolically recognizing

01:04:43 we can't go back and we don't want to go back.

01:04:47 Only when you've kind of completed that can you really begin to refocus on the new and

01:04:52 put your energy into the new processes, the new skills that it requires, really experiencing

01:04:59 it working.

01:05:00 And that, of course, is what takes you up the curve on the other side, to the point

01:05:04 of having success that is self-reinforcing.

01:05:07 Now several people have asked, as I've talked about this model in other settings, well,

01:05:11 where are we with DDoP?

01:05:13 I would propose that we're somewhere on the way down, but we're not there yet.

01:05:19 I would love to be able to reassure you, but in fact I believe that we are in that process

01:05:25 of coming to grips with the possibilities of the new, but probably more aware right

01:05:29 now of what the old is and what we may have to let go of than we are of where it will

01:05:33 really be.

01:05:35 That means that it may get worse before it gets better, and I hate to be the bearer of

01:05:39 bad tidings.

01:05:41 The fact is we each go through this cycle, and in fact you are all going to be going

01:05:45 through it at different rates and different paces, and probably in some sense there are

01:05:49 many versions of this all along the way, as we become familiar with the new design.

01:05:55 And then we have to deal with the realities of implementing it and convincing others that

01:05:59 it's better than the past.

01:06:03 Part of what happens in a program like this is that some of you will be at phase two while

01:06:07 others are at phase three and others are at phases four or five around a particular process.

01:06:12 So some of the discussions and the conflicts that will occur will be because you're seeing

01:06:16 similar things very differently.

01:06:19 How do we get through this?

01:06:21 How do we get through what I sometimes call the valley of despair?

01:06:26 The words are easy, leadership, commitment, conviction, faith.

01:06:31 The difficulty about this process is that we're trying to create things that no one

01:06:35 else has done before, things that will work at Syntex in new ways.

01:06:42 Above all, it's going to take some stubborn persistence on all of our parts.

01:06:46 I don't want to depress you, it won't be easy.

01:06:50 But it will be at times confusing and you will feel lots of conflicting emotions.

01:06:55 Does that feel real?

01:06:57 Many of you already probably would wish we could go back to a simpler era.

01:07:01 We all do, I know I have at times.

01:07:06 But in fact there are a lot of questions that become more and more personal as the reality

01:07:10 of the new designs gets closer and closer to each individual who will be affected.

01:07:14 And I'm not going to read through these things, but these are the kinds of questions that

01:07:18 people are typically talking about in the midst of large-scale change.

01:07:22 One of the real tragedies I think when change doesn't go well or when it gets stopped is

01:07:27 that people don't realize they've all been feeling this.

01:07:30 We often tend to hunker down and get quiet about it or even defensive about it, thinking

01:07:35 there's something wrong with me as an individual because I'm feeling this and I'm hearing all

01:07:39 these words of excitement and powerful benefits from senior management, but I'm feeling some

01:07:45 of these negative things.

01:07:46 I probably shouldn't say anything about it.

01:07:48 Well, the fact is that all of us are feeling that and we need to be realistic and we need

01:07:52 to be honest about it.

01:07:54 We are feeling competing emotions, excitement and anxiety.

01:07:59 It is possible to get through this valley of despair, let me assure you.

01:08:02 I've seen organizations do it and I'm convinced that Syntex will do it.

01:08:07 Let me just tell you one very quick story about another company in another industry,

01:08:12 a company however that was focused on the product development cycle as you are.

01:08:17 They had a core team of about 20 people that worked for about 10 months, both on focusing

01:08:22 on the need for change and much more specifically on the way in which they could take over a

01:08:27 year out of the product development cycle that was admittedly considerably shorter than

01:08:31 yours to start with.

01:08:33 They developed a vision.

01:08:34 Those 20 people became very convinced not only that the targets were important, but

01:08:39 that they were achievable.

01:08:41 They developed very specific operating plans.

01:08:45 As they went out and started talking about them to the rest of the company, no one else

01:08:48 believed them.

01:08:50 This was a company ironically that had a significant commitment to quality and it had a quality

01:08:55 program in place for a number of years.

01:08:58 One of the ironic results of that was that the individuals in each of the areas, each

01:09:02 of the units within the product development operation had taken tremendously powerful

01:09:07 ownership of what they were currently doing.

01:09:10 They had achieved a lot of incremental improvements, but they were so locked into the current way

01:09:14 of thinking that they couldn't imagine that a full year could be taken out of the way

01:09:18 they were currently doing things.

01:09:19 There was only one person that believed the team could achieve it in addition to the team.

01:09:25 Fortunately, that person was the chief operating officer of the company.

01:09:29 It helped a lot.

01:09:31 The president appointed a full-time director of re-engineering who laid out a very specific

01:09:36 implementation program.

01:09:38 He worked very closely with the officers in charge of the various parts of product development.

01:09:44 They selected three products as pilots.

01:09:46 This all took place, by the way, less than a year ago.

01:09:51 Now I have just heard in the last week, in fact, those three products are coming out

01:09:56 of the pipeline at a 50% faster rate than the company has ever achieved before.

01:10:02 The excitement is now really building because it's experience-based.

01:10:05 It's not promises.

01:10:06 It's reality.

01:10:07 The pressure they're having now is that all the managers of all the other products are

01:10:12 clamoring to get their products into the new process.

01:10:16 They're concerned more about organizational ability to assimilate the changes than they

01:10:21 are the resistance to it.

01:10:24 That can happen.

01:10:25 It can be done.

01:10:26 But it takes a lot of hard work on the part of a lot of people.

01:10:30 What does it take to be successful?

01:10:31 Let me propose five themes that will be influencing all of us as we go forward.

01:10:37 First, we want to simplify the structure by which we're working.

01:10:41 Bob Rowe alluded to that kind of thing a few minutes ago.

01:10:44 To achieve focus, to relieve many of the pressures that many of you are feeling in terms of demands

01:10:50 on your time.

01:10:52 You will continue to be involved, if you're not on the core team, through the re-engineering

01:10:57 laboratories that Bob just described and through a series of processes that will bring the

01:11:02 new ideas to you for testing and reaction.

01:11:06 The statement, only one committee, really focuses us in on the executive steering committee

01:11:10 that will be providing the overall leadership for DDoP.

01:11:14 We see the structure itself being simplified.

01:11:17 We're not sure we can get the committee meetings down to only six people, Mr. Wilson, but we're

01:11:22 going to try.

01:11:24 The second theme has to do with directive leadership, with a responsibility on the part

01:11:30 of the executive sponsors of this program to manage consensus, to bring the organization

01:11:36 to points of support, not simply to wait for it to happen.

01:11:41 We're going to all be working actively on managing expectations, both about change and

01:11:46 about levels of involvement and about contributions.

01:11:49 The third area, planning, is completely analogous to the planning challenges that you have within

01:11:55 your own drug development processes.

01:11:58 It is important for us to establish milestones, to make and then to meet formal commitments

01:12:04 along the way and to work in collaborative fashions without losing sight of accountability

01:12:10 along the way.

01:12:12 Fourthly, and one that will really challenge us, is to remain flexible in the midst of

01:12:17 this effort that is focused and committed to specific milestones.

01:12:21 We need to learn by doing.

01:12:24 We need to actively experience how these new processes might work.

01:12:29 That is what the reengineering laboratories will be about.

01:12:32 When things don't work, we need to throw them out and move on to trying other things.

01:12:38 We're going to be focusing on the results that the laboratory and the new process designs

01:12:44 produce rather than all the details of the process.

01:12:48 Those will be worked out as we begin to move into pilot form.

01:12:52 We're going to do it as experientially as possible.

01:12:54 We're going to try to create an environment where the organization can learn from itself

01:12:59 and from its own experiences, learn from the experiences that you and others in research

01:13:02 bring to the process, and learn from the laboratories themselves.

01:13:07 Lastly, self-managed groups, task forces that are focused on specific tasks, and as the

01:13:12 work is done, will be disbanded and moved on to other things, but will be empowered

01:13:17 to recommend change and to take action.

01:13:21 These themes will not eliminate all the questions and concerns that many of you have and will

01:13:26 continue to have, but I think they will clarify what we're doing, why we're doing it, and

01:13:32 how we're doing it.

01:13:33 Our challenge in the next six to eight months is to make the visions that Dr. Rowe described

01:13:39 a few moments ago, to make them real, to make them believable on everyone's part at the

01:13:46 level that those who are going to be doing it know it will work, so that we are not proposing

01:13:51 stupid changes and, again, experiencing it.

01:13:57 Finally, four critical success factors to make a program like this work.

01:14:02 Clearly, there is a need.

01:14:04 There's no question about that.

01:14:06 That's been expressed and stated very clearly this morning.

01:14:10 There is management commitment to that vision and to making it real.

01:14:14 The resources and the structure are being put in place and have been put in place to

01:14:19 give you, as an organization, the means to accomplish these ends.

01:14:24 The last question, which is really up to you, is, is there the will to change?

01:14:28 I know that the Executive Steering Committee has that commitment.

01:14:32 I certainly heard it on the parts of many of the rest of you.

01:14:36 Admittedly, lots of questions, but I think, ultimately, the fundamental question, is it

01:14:40 worth it?

01:14:41 I know how Jim Wilson and Paul Freeman and Bob Rowe and others of you feel.

01:14:46 I know how I feel.

01:14:47 This is going to be a really exciting journey.

01:14:49 It'll be a rocky one, but a year from now, you're going to really be excited about what's

01:14:54 happening.

01:14:55 Thank you.

01:14:57 Thank you.

01:15:03 Thanks very much, Jim.

01:15:04 Paul, if we could get you to come down from the back, before we start our question-and-answer

01:15:09 session, we'd like to hear your words of wisdom for us.

01:15:13 Thank you.

01:15:15 You're anticipating something.

01:15:18 Thank you.

01:15:24 Thanks, Bob.

01:15:25 Good morning, everyone.

01:15:26 I couldn't help but thinking, when I heard Jim talk about change, how much change is

01:15:33 really a part of our life.

01:15:35 A couple of years ago, I remember giving a talk to a marketing group about change and

01:15:42 the need to change, and I was looking for a quote from a famous source to kind of start

01:15:49 my speech.

01:15:50 I came up with one that's always intrigued me.

01:15:53 It's a simple one.

01:15:54 It says, the world changes, and we must change with it.

01:15:57 You know, nothing really profound, except the guy that said it was a man by the name

01:16:03 of Lothar the Great, you know, a very famous figure.

01:16:06 He was a Germanic king who lived in the year 890.

01:16:11 Now, those were the dark ages when we consider that nothing changed and nothing changes,

01:16:17 but the fact of the matter is that probably the only constant in my life is change, and

01:16:22 probably the same with yourself.

01:16:24 And I'd like to just talk about change, keying off some of the things that you said,

01:16:30 because there's a lot of change taking place in the company.

01:16:34 And if I could just bear some personal thoughts about it to you, in the vernacular of New

01:16:40 York, change ain't easy.

01:16:43 I'm trying to make a lot of change in the company, some of it subtle and some of it

01:16:49 overt and a lot of it painful.

01:16:52 We've changed the style of the company, I think, in a lot of ways in bringing in a Jim

01:16:56 Wilson, a younger man with new views and new visions and outside experience, bringing him

01:17:03 into the top management of the company, and that was not an easy decision to make because

01:17:08 we've got a lot of very good people sitting inside the company wanting to move ahead.

01:17:15 We've made a major change, or a major change has been made, in Syntex Laboratories with

01:17:22 the movement of Virgil Thompson as president.

01:17:25 Tomorrow, Jim will announce, and I can't blow it for Jim, a very major change in our

01:17:30 international business organization.

01:17:34 You've seen a major change in our human resource organization with the advent of Leo Contois.

01:17:41 You've seen Vic Ackerman enter his new role in international marketing and soon an

01:17:46 expanded role.

01:17:49 We're going to see two major changes, which are probably a few months premature on, but

01:17:54 in the leadership of the research organization and a major change in the organization of

01:18:01 the administrative functions in this company.

01:18:04 Those are big, bloody changes, I have to tell you that.

01:18:07 There are many nights over the past six months to a year, personally, that I've gone home

01:18:13 and agonized and said, is it all worth it?

01:18:15 I could see myself on that slide going down because I'm taking people that I grew up with

01:18:21 in this company and in some ways turning my back on them in the process, and that hurts,

01:18:27 and change hurts.

01:18:29 But there are a couple of things that really drive my own decisions and should drive this

01:18:34 process, and it's the need to accomplish for the greater good of the company rather than for

01:18:42 any one individual.

01:18:43 And let me expand on that because all this sounds very esoteric.

01:18:47 Let me just go back to last year.

01:18:50 About a year and a half ago, I took over as CEO, and in looking out at the decade of the

01:18:57 90s, the thing that struck me most about what would influence our business and our company

01:19:03 was change.

01:19:05 I mean, not internal change, but external change.

01:19:09 A world that is going to be more cruel toward pharmaceutical companies, a world that we lose

01:19:16 some control over with regard to which products are going to reach the marketplace and how

01:19:21 much we can charge for them.

01:19:23 A world that is really shaping us rather than us shaping the world in the truest sense.

01:19:29 And in the midst of all that, we saw in the last few years a series of mega merges in this

01:19:35 industry.

01:19:36 And I'll just recount them for those of you that are not fans of mega merges.

01:19:40 But there was Bristol-Myers and Squibb, two of the biggest companies, now forming the

01:19:45 largest company in the world.

01:19:48 Merck.

01:19:49 Oh, excuse me.

01:19:50 Merck is the second largest, but they did not merge.

01:19:54 But the fact is they're about four times our size, maybe almost five at this point.

01:19:59 The merger of Rohrer and Rhone-Poulenc.

01:20:02 The merger of SmithKline and Beecham.

01:20:06 The absorption of Robins by American Home Products.

01:20:10 Marion, one of the fine independent companies in the U.S., absorbed into Merrill Dow.

01:20:17 We've seen locally Genentech owned partially by Hoffman LaRoche.

01:20:22 And I think that's just a temporary point on the road.

01:20:26 We've seen Cetus and Chiron merge forces.

01:20:32 And there's probably some others I'm not talking about.

01:20:35 But the fact is I saw a lot of difference in the environment that Syntex has to operate in.

01:20:42 And most of it was negative.

01:20:44 Most of it centered on the fact that life was going to be more difficult.

01:20:49 We were going to be one of the smallest companies in this pharmaceutical industry.

01:20:53 And we were going to have to compete against Bristol-Myers and Squibb and others.

01:20:57 And how the hell are we going to do it?

01:20:59 So we set about to bring our operating committee into the 21st century by establishing

01:21:07 a major strategic planning operation last year.

01:21:11 And we put together what we considered to be the first strategic plan for the corporation that's ever been put down.

01:21:18 We've had little pieces of strategic plans, but this was the whole ball of wax.

01:21:23 And it wasn't a bad one, but it also pointed out as we finished it where the holes were.

01:21:28 And at the end of the day, we said to ourselves, how are we really going to survive over this next decade?

01:21:36 Because what came out of the plan is the following.

01:21:39 We're living in the fat years, 1990, 91, 92, 93.

01:21:44 I mean, we're getting new products every two hours, it seems.

01:21:47 Research has a rich pipeline.

01:21:50 We're hiring people.

01:21:51 We're putting up new buildings.

01:21:53 Everything's going real well.

01:21:55 And in a sense, if you really look outside these walls today,

01:21:58 I just came from a meeting of other CEOs in the Valley, and they're screaming the blues.

01:22:03 And we've been pretty immune to that.

01:22:06 Now, as we look at the year 1993, December 21st to be exact, and dreadfully exact,

01:22:16 we lose a patent on Naperson in the United States.

01:22:20 That's a product that sells about $600 million in the U.S.

01:22:24 It has a profit margin that's very large and contributes to most of the growth of this company

01:22:32 and contributes in our ability to do things like DDOP or put up new buildings or other things of this nature.

01:22:38 And we saw ourselves in the mid-'90s, 94, 95, 96, and possibly even into 97,

01:22:46 sitting in a valley of not having the resources to bridge what we saw as a major gap.

01:22:56 The loss of a product like Naperson is immense.

01:23:00 We're going to lose about $300 million to $400 million of those $600 million in sales.

01:23:05 We'll try and compensate elsewhere.

01:23:07 It's not going to be easy.

01:23:09 There are ways that we can compensate for it, and I'm not going to bore you with that.

01:23:13 But I put out a challenge to the operating committee at that time and said,

01:23:18 are there any ways that we could take the revenues that are flowing in very heavily right now

01:23:24 and invest them in some way to strengthen that mid-decade gap?

01:23:29 At the other side of the gap, of course, are all the RS numbers that Bob and others love so well,

01:23:35 and we're pretty sure that we're going to get a couple of winners out of that.

01:23:38 But they look like they start coming out with one or two exceptions in 97, 98, 99, 2000.

01:23:46 And my real fear is that this company could lose its independence

01:23:51 as a result of mediocre performance in the middle of this decade.

01:23:56 To me, independence is the first and foremost goal that I've got in my own mind,

01:24:01 is to preserve the culture, the good jobs, the spirit, the science,

01:24:07 the familial feeling I think that most of us have toward the company.

01:24:11 And I can tell you my biggest fear is one day a Swiss or German company comes along,

01:24:17 and because our company is so weak and our stock price is so low

01:24:21 because we're just not growing the business in this mid-decade period,

01:24:25 that we fall prey to an unfriendly acquisition.

01:24:28 And that could happen.

01:24:30 So how does DDoP shake out of this?

01:24:34 In the task of asking the operating committee to come up with ways

01:24:38 that we might enhance the middle decade,

01:24:42 Bob Burrow came back with the program that we know is DDoP today

01:24:46 and said that perhaps the most important single thing that we can do in this company

01:24:51 is to speed up the process of drug development.

01:24:54 And I don't know what was said before, but I suspect everybody's saying the same thing,

01:24:59 that one year's saving on a $100 million product,

01:25:04 as far as getting a product to the marketplace, is $100 million.

01:25:09 And I can tell you that we need it, and we will need it very, very badly.

01:25:13 And moving products like 61443, which were on our chart as 1996 up to 1995 or 4,

01:25:23 will make all the difference in the world to this company's future and to its survival.

01:25:28 And if we can pluck out a couple of those 1997 items and move them to 1996,

01:25:34 we're so far ahead that it's a no-contest situation.

01:25:38 Now, you may feel that you're breaking new ground in the whole process,

01:25:43 but I can tell you that you're not.

01:25:45 I think Syntex is a laggard in its drug development process.

01:25:51 This whole thing is new and exciting and wonderful to us,

01:25:54 but I'd like to remind you that there are a whole bunch of competitors

01:25:57 that have been doing this for years.

01:26:00 In some of the work that you've been doing

01:26:03 and exploring what other companies are doing,

01:26:06 and in some interviewing that I've been doing recently,

01:26:09 I can say that the end point of DDoP has probably been accomplished

01:26:14 in about half of the major pharmaceutical companies in the U.S.

01:26:18 And I'll tell you, if we want to compete, just to get even, DDoP must be a success.

01:26:24 I attended the steering committee meeting over at the Garden Court Hotel the other day

01:26:29 and was delighted to feel, first of all, a sense of urgency that people can do this

01:26:36 that was emanating from the group,

01:26:38 and secondly was a willingness to be flexible and to change direction.

01:26:45 I think the first six months, from what I've gathered, have been fairly rocky,

01:26:49 and a lot of it is the normal resistance that one finds to change.

01:26:53 But I was delighted to find that we're taking recommendations

01:26:57 that came out of Cressip, for instance, on how we organize drug development

01:27:02 and just challenging the hell out of them

01:27:04 and saying there are too many layers, too many committees, too many this, too many that.

01:27:08 What we have to focus in on is can we speed up products in the marketplace.

01:27:13 I mean, that is the name of the game, and everything else is prelude to that.

01:27:17 We must succeed in this venture.

01:27:20 Now, Bob asked me to come in here just to say do I think this is important,

01:27:25 and to give you a pep talk, and this really isn't a pep talk.

01:27:28 It's fact of life, and I hope you're as pragmatic about this as I feel about it,

01:27:32 that this is the major cornerstone for this company's success in the 1990s.

01:27:38 And quite frankly, I was shocked walking in the door to see how many people are here

01:27:44 and to realize from my perspective of the importance of this project

01:27:51 from a very personal standpoint.

01:27:53 I can assure you the following, that there may be changes in the organization as a result of this.

01:27:59 There may be shifts in jobs.

01:28:01 There are not going to be layoffs of people.

01:28:04 We need good people desperately in this company.

01:28:07 What we're looking for is efficiency, speed.

01:28:11 Perhaps we can even increase the breadth of our research scope

01:28:16 by being more efficient in the things that we do.

01:28:20 So please don't face this thing with more than a normal trepidation.

01:28:24 It's tough. Life is tough.

01:28:28 But if you guys really like working for this company,

01:28:32 let me tell you that what you're doing is about as important as anything that's being done in this company today.

01:28:38 So with that, I thank you very much, and I appreciate your efforts.

01:28:41 Thank you.