Pharma

Why Quintiles hired a CEO with no CRO or pharma experience

Quintiles‘ new CEO Tom Pike brings to the clinical research organization nearly 30 years experience […]

Quintilesnew CEO Tom Pike brings to the clinical research organization nearly 30 years experience — but none of that time was spent at a CRO or a pharmaceutical company.

Pike spent 22 years at management consulting firm Accenture (NYSE:ACN). He was named today the successor to Dennis Gillings, who has led Quintiles since he founded the CRO in 1982 to do statistical analysis work on a contract basis for pharmaceutical companies. The CRO business has changed a lot since, and so has Durham, North Carolina-based Quintiles. The privately-held company is now the largest pharmaceutical services provider in the industry with roughly $3 billion in annual revenue. In the context of Quintiles’ purposeful moves into pharmaceutical consulting, Pike’s appointment makes sense.

In the earliest days of pharmaceutical contract research, the lines defining the roles of the pharmaceutical companies and their CRO partners were clear. CROs handled the outsourced work that the pharmas did not want to do themselves. A CRO offered a pharma company a way to ramp up and run clinical trials more efficiently than a pharma could on its own. As both industries have evolved, those lines of division have blurred. CROs, which now already do much of the heavy lifting on a clinical trial, are taking on more work beyond clinical trial outsourcing.

The CRO industry’s largest companies such as Covance (NYSE:CVD), PPD, and Parexel (NASDAQ:PRXL) have moved into a strategic partnership relationship with pharmaceutical companies. In addition to clinical trial work, CROs are getting involved in more parts of a pharmaceutical company’s drug at various stages of a drug’s life cycle up to and including global commercialization.

One of the strategic partnerships that Quintiles has spoken openly about is its relationship with Eli Lilly (NYSE:LLY) on antidepressant Cymbalta. Quintiles helped finance the development of the drug, an investment relationship that gives the company royalties from the commercialized product. Quintiles also helped to market the drug after it was approved. The arrangements of a strategic relationship vary from company to company, but what these relationships offer a CRO is the guarantee of more work from a pharmaceutical company looking to to trim more of its internal expenses. And in exchange for taking on a greater share of the risk of drug development work, a CRO could gain royalty rewards greater than the company could earn from solely providing outsourced staffing and services.

As CROs position themselves as global partners rather than strict outsourcing vendors, CROs need scale. In addition to offering a breadth of services, a CRO also needs a global footprint. CROs now put greater emphasis on their global reach and their consulting capabilities, not only in drug development but also at the regulatory and commercialization stages. And they want to have a hand in drug commercialization efforts beyond Europe and North America. In particular, CROs want to do business emerging markets, which offer the largest growth opportunities.

Consulting experience fits the approach that the largest CROs are pursuing. Pike held various positions in his 22 years at Accenture, such as chief operating officer for Accenture’s global resources operating group and managing director of the firm’s North America Products and Health Industries. He also served stints as Accenture’s chief strategy officer as well as chief risk officer, a position that required meeting regulatory and compliance requirements around the world. Mike Wokasch, president of pharmaceutical consultancy Wokasch Consulting, said that while he is unfamiliar with Pike, CROs are now confident in their scientific capabilities and when they make executive hires they’re looking for financial business expertise to add to their businesses. Also, new executives who come from the consulting industry bring those relationships with them to their new job.

Pike was not available for comment. But Quintiles spokesman Phil Bridges acknowledged that the pharmaceutical consulting work that Accenture does is similar to business pursued by Quintiles. In that context, Pike was familiar with Quintiles as a competitor. Bridges said that Pike’s global responsibilities, particularly in working with regulatory matters in various global markets, are among the factors that weighed in his favor.

“What makes Tom such a great fit is how well he complements our organization given his track record of effectively growing multi-billion dollar, knowledge-based organizations and working with clients in large, long-term relationships,” Bridges said. “He has been through a number of the same business challenges and transitions we may face in the next few years.”

That makes Pike’s hire important not because of where Quintiles has been, but because of where the company sees the industry going. A week from today, Pike will take responsibility for steering the company on that course.

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