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

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