Monday manifesto: Jon Symonds
Jon Symonds has a knack of switching jobs at just the right time.
The slightly built chief financial officer of AstraZeneca, Britain’s
second-biggest pharmaceutical company, joined Zeneca from KPMG in 1997.
Within months, the company had entered merger talks with Sweden’s Astra and Mr
Symonds emerged as a key architect of the new group.
By 1999 he had been elevated to chief financial officer of a $30 billion
company – one of the largest in the FTSE 100.
Now drug industry insiders are wondering if his latest move – to become a
partner at Goldman Sachs – may be similarly prescient.
At 48, Mr Symonds is no stranger to the US investment bank. Goldman advised
Zeneca on the 1999 merger, remains AstraZeneca’s corporate broker and has
worked on a string of other deals for the company.
The bank also ran the recent auction for MedImmune, the American biotechnology
group that AstraZeneca bought in April for $15.2 billion.
“I've worked very closely with Goldman for a decade,” Mr Symonds says, talking
from AstraZeneca’s global headquarters off Park Lane. “I have enormous
admiration for the company and for the people within it. So this was a
perfect match for me.”
Mr Symonds says that he started thinking about the move earlier this year and
dabbled with the idea of joining a private equity firm before settling on
the move to Goldman.
In his new role based at the group’s European headquarters on Fleet Street, Mr
Symonds’ will be a roving role, working to develop the bank’s UK client
list, “adding value where possible” to its global pharmaceutical business –
and looking closely at the role of private equity in the drugs industry.
“That’s really why I chose Goldman – it gives me opportunity across a massive
water-front,” he says.
The attractions of a career as a managing director and partner at Goldman,
where it is thought Mr Symonds could earn more than $10 million (£5 million)
per year – well above his 2006 salary of £1.2 million – seem obvious enough
but it is this last point about private equity that is perhaps the most
intriguing aspect of the move.
In the past, private equity firms have steered well clear of the notoriously
volatile and risky healthcare sector but there are signs that a change may
be afoot. Last month, several private equity firms were involved, albeit
unsuccessfully, in a $6.6 billion bidding battle for the generic drugs arm
of Germany’s Merck.
Only last week, a private equity consortium that included Goldman Sachs agreed
to raise its bid for Biomet, a US maker of artificial hips and limbs, by 4.5
per cent to $11.4 billion.
Mr Symonds believes that private equity’s appetite for deals in the sector
will continue to develop and may soon extend beyond the more predictable
medical device and generic drugs businesses into riskier, research-based
pharmaceuticals.
“If you look at the amount of money in private equity and the amount of money
in pharmaceuticals, it is clear that at some point they are going to come
together,” he says.
“The problem is the sheer volatility of the pharmaceutical business. It has
phenomenal cashflows and the rewards are substantial but the risks are very
high too and that’s not a model that fits very easily with private equity.”
He believes there are good reasons why attitudes are shifting. “These days
more and more business risks can be disaggregated. You can take pieces of
risk out. You can sell royalty streams for example.” New ideas about
restructuring companies and redistributing risk, combined with the wall of
money available to private equity firms seeking ever new investment
opportunities, are driving these changes.
So should big pharmaceutical companies such as GlaxoSmithKline, Pfizer and
AstraZeneca, which itself had $6.8 billion in free cashflow last year, be
worried?
So far, unlike many of their counterparts at retail or consumer goods
companies, chief executives of big pharma companies have not had to worry
about the threat of takeover by private equity or of activist shareholders.
“I think it will happen but it’s probably not a threat as much as an ally,” Mr
Symonds says.
While his financial wizardry will be welcomed at Goldman, it will be sorely
missed at AstraZeneca, a company that is facing even greater pressure from
manufacturers of generic drugs than many of its big pharma peers.
The company is set to lose 38 per cent of revenues over the next five years
because of the expiry of key drug patents. They include Arimidex, a breast
cancer drug with annual sales of $2.2 billion whose patent ends in 2010;
Seroquel, a schizophrenia drug with sales of $4.7 billion and patent expiry
in 2011; and Symbicort, an asthma medicine with $3.7 billion sales and a
2012 patent expiry.
To compound these problems, the group has suffered a string of late-stage
failures of some of its most promising experimental products, including a
drug for atherosclerosis known as AGI-1067, the blood clot medicine Exanta,
the diabetes drug Galida, and the antistroke drug Cerovive.
Against this difficult background, perhaps it’s no surprise that Mr Symonds
has decided to make the leap into banking.
But some have suggested his departure may be linked to frustration that he was
beaten to the top job by his colleague David Brennan after the departure of
Sir Tom McKillop, the former chief executive who retired at the end of 2005.
Mr Symonds insists this is not the case. “If it was that, then I
wouldn't have stayed for two years,” he says. “I have a very strong
commitment to the company and a very good relationship with David Brennan.”
Instead, he says that after ten years with AstraZeneca, it was simply time for
him to move on, and adds that there was a certain satisfaction in completing
a series of deals that have at least gone some way towards rebuilding
AstraZeneca’s weak pipeline of new products.
They included last year’s £702 million purchase of Cambridge Antibody
Technology, a string of smaller deals and most recently the takeover of
MedImmune, AstraZeneca’s biggest acquisition since the creation of the
company in 1999.
Mr Symonds believes that the deals, most of which have been focused on
manufacturers of biologic drugs, have gone a long way to restoring
AstraZeneca’s troubled development programme. He rejects criticism that
AstraZeneca may have overpaid for MedImmune and says that the deal was
“absolutely the right thing” for the company.
Nevertheless, he agrees that he is leaving at an awkward moment. The
integration of MedImmune has barely begun, the company remains in the midst
of a major cost-cutting drive – including the loss of 3,000 jobs – and is
struggling to reposition itself as a producer of biologic medicines in the
face of a string of patent expiries.
“It’s not a job done,” he admits. “We have not yet resolved the pipeline
issue.”
He also says that the market did not fully understand the rationale of the
MedImmune deal. Shares in AstraZeneca slipped sharply after the announcement
and since then there has been criticism of the huge payouts offered to
senior MedImmune executives to stay on.
Mr Symonds will leave AstraZeneca at the end of July and will start his new
job at Goldman Sachs in September.
Curriculum vitae
–– Born in 1959, Jon Symonds graduated from university in 1980 and immediately
joined Thomson McLintock – which later became KPMG
–– He qualified as an accountant in 1984 and developed expertise in the
chemicals industry. After spending two years in the US, in 1991 he was
seconded to ICI, where he helped to spin off its drugs arm Zeneca
–– He later spent four years working first with Shell in the Hague and then
with Hoechst in Frankfurt. He was hired as Zeneca’s first finance director
and helped to mastermind the 1999 merger with Sweden’s Astra
–– He is a nonexecutive director of drinks group Diageo and a former chairman
of the Hundred Group of Finance Directors. He is a former board member of
the Accounting Standards Board and joint chairman of the Business Tax Forum
–– Married with two children, he lives in Hertfordshire and enjoys sailing,
golf, travel, opera and reading. He is a keen supporter of Saracens rugby
club
