How did we get to where we are now with regard to business objectives in our industry? Why are American-based life science companies so anxious to add to their quarterly profits that they would even give up their citizenship in the country which provides their qualified staff and employees’ education, government research support funds and lots of support infrastructure? Their goal is to stop paying taxes in the U.S. and, thereby, decrease costs. They disregard public duty and responsibility to help pay for benefits they enjoy from taxpayer supported business infrastructure environment and market access. It’s worrying to see the role “inversions” have been playing in M&A decisions, for example. The fact that Abbvie’s Board is now directing stockholders to vote against the Shire acquisition upon restudy of the tax implications under the new U.S. rules intended to discourage inversions tells me that the deal lacked merit other than financial savings for stockholders. What is the mission of their business? Are accountants driving their business strategy?
“AbbVie’s claims that “although the strategic rationale of combining our two companies remains strong, the agreed upon valuation is no longer supported as a result of the changes to the tax rules and we did not believe it was in the best interests of our stockholders to proceed,” remarked AbbVie CEO Richard A. Gonzalez.” Abbvie noted that the new rules “eliminated certain of the financial benefits of the transaction, most notably the ability to access current and future global cash flows in a tax efficient manner as originally contemplated in the transaction.”
It appears that financial savings was the major basis of the deal rather than strategic. It seems to me that the business objective of delivering needed and innovative products was not the major reason for Abbvie’s inversion endeavor. How will our industry survive with the short-term thinking and movement away from what is in the best interest of the company’s mission long-term? Building companies and staff with a vibrant culture for the long-term seems to be less of the business rationale than previously. The beliefs expressed by the financial staff at companies like Roche, for example, that they can easily replace the culture of a highly successful company with buyouts of others startups frightens me. I see more than more of this short-term thinking–we need to increase profits this quarter to keep our stock price higher, so lay off a 100 or 1,000 employees with so thought as to the impact on the future of the company’s ability to innovate.
I recently read an insightful article from McKinsey and Company about capitalism. The authors Eric Beinhocker and Nick Hanauer suggest business needs to move away from the misguided idea that shareholder value is the primary objective of business. See their article entitled “Redefining capitalism: Despite its ability to generate prosperity, capitalism is under attack. By shaking up our long-held assumptions about how and why the system works.
I quote “But some argue that elevating the creation of shareholder value to the status of primary objective is based on a faulty assumption—that capital is the scarcest resource in an economy, when in reality it’s knowledge that’s the scarce, critical ingredient in solving problems. It has also led to a myopic focus on quarterly earnings and short-term share-price swings, to say nothing of a decline in long-term investment. This is in startling contrast to the attitudes of even the recent past. If you asked a CEO in the 1950s, an era of tremendous prosperity growth, what his job was, his first reply would probably have been “to make great products and services for customers.” After that, the CEO might have said something about looking after his company’s employees, making profits to invest in future growth—and then, finally, giving the shareholders a decent, competitive return.
Elsewhere in the article they state recommendation “We believe that a reorientation toward seeing businesses as society’s problem solvers rather than simply as vehicles for creating shareholder returns would provide a better description of what businesses actually do. It could help executives better balance the interests of the multiple stakeholders they need to manage. It could also help shift incentives back toward long-term investment—after all, few complex human problems can be solved in one quarter.”
Highlights for Week of Oct. 19 Life Science Events in the Bay Area
- BioCentury This Week, See new program Webcast Starting Sunday, Oct. 19, 2014, http://www.biocenturytv.com, Available anytime starting at 9:00 a.m. EDT; Topic: “Chilling Reality: What Next for ALS? Speakers: Brett Morrison, Physician and Assistant Professor of Neurology, Johns Hopkins University; Richard Garr, CEO, Neuralstem; Mary Woolley, President, Research America; Benjamin Corb, Director of Public Affairs American Society for Biochemistry and Molecular Biology
- Bio2Device Group, Tuesday Morning, Oct. 21, 2014; Topic: Improving Access to Healthcare – A Global Perspective; Speaker: Burt Houtz, CLS, PMP, President, Leadership With Health
- BioScience Forum, Wednesday Evening, Oct. 22, 2014; Topic: “Designing Clinical Research in Challenging Times;” Speaker: Peter Blaisdell, Ph.D., Executive Director, Global Study Management, Amgen
- ASQ, Wednesday Evening, Oct. 22, 2014; Topic: Medical Mobile App & HIPAA; Moderator: George Marcel; Speakers: Mobile Medical App Security (Geetha Rao) and HIPAA (Bill Kurani)
- PBSS, Thursday Afternoon, Oct. 23, 2014; Topic: “Biomarkers in Drug Development: Translation of Biomarkers from Early Discovery to the Clinic;” Speakers: Bob Yauch, PhD (Genentech), Scott Fountain, PhD (P¬zer), Kristin Wildsmith, PhD (Genentech), Leigh Anderson, PhD (SISCAPA), Ian McCaery, PhD (Genentech); Organizers: Alyssa Morimoto (Genentech), Kristin Wildsmith (Genentech)
- BayBio, Thursday Mid Day, Oct. 23, 2014; Event: “Lunch and Learn: Next Generation Sequencing;” Speaker: Jennifer Friel Goldstein
- Biotech Bay Career Fair, Thursday Afternoon, Oct 23, 2014; Event: Job fair
You can download Audreys Picks Oct. 19, 2014 with complete details on the above and other meetings and conferences through Dec. by right clicking on the highlighted titles. Also see JobsThatCrossedMyDeskThrough Oct. 19, 2014 for your information.