DILS: Severin Schwan

Thank you, ladies and gentlemen. Good afternoon. I come to Boston quite often for visits to research partners and investors. This is my first time speaking at MIT. I want to talk about innovation. The pharmaceutical industry model is based on patents. Society benefits when patents expire and generics come in. For example, the antibiotic Bactrim, developed in the 1960s, has saved millions of lives. However, 90% of development projects fail. Despite challenges, I am optimistic because of the explosion in scientific understanding, especially the genomic revolution. To foster innovation, I focus on five elements. First, give creative people freedom. We have a decentralized management model with five research units reporting to me in San Francisco. Second, have guiding principles and a common sense of purpose. Third, need visionary leaders who take responsibility. For example, our scientist who worked over weekends to prove the mechanism for Avastin, now one of the biggest cancer drugs. Fourth, celebrate success and allow failure. Fifth, think long-term. Much of our success in biologics is due to decisions made 20 years ago. I hope my successor will refer to contributions I initiated today. Thank you for your attention. I look forward to an engaging discussion.

I'm not the person to give you advice on how to do it best in Japan, but I would encourage you to think about how you can signal to the organization that it is okay to fail. It's very important to create an environment where failure is accepted.

I believe it is very useful, especially in a large organization, to have different perspectives. I worked in finance in local organizations and then globally. For example, when I was head of diagnostics, the CEO wanted to centralize HR. I was strongly against it because I believed it would stifle innovation. Later, as CEO, I came to the same conclusion and kept HR decentralized. It's important to have leaders who can look at things from different perspectives and grow through cross-functional experience.

Biologics manufacturing has become widespread. The complexity of the human body means there is still huge potential for innovation. We differentiate ourselves by being excellent in science. The future lies in understanding diseases at a molecular level and developing targeted therapies.

We spend about 10 billion US dollars on R&D, making us the biggest spender in the world. I cap the budget at the group level and then let the units decide. I don't get into details. My management style is to delegate decisions to the lowest level possible. If a scientist comes with a good idea, I will find the money. The key is to have the right people and give them freedom.

Personalized medicine is absolutely key to our strategy. As we understand diseases on a more granular level, we can develop more targeted and effective medicines. We combine diagnostics and pharmaceuticals under one roof to manage the interface. This allows us to develop the right medicine for the right patient.

That is a very interesting question related to access. We have a public stated aim to make our medicines available to patients. We work with stakeholders to improve infrastructure in less developed countries. We also practice differentiated pricing according to purchasing power. For example, we provide medicines at lower prices in poorer countries. However, there are challenges in middle-income countries and even in the US. We are making progress, especially in the poorest countries.