IDEA Pharma: IDEA Collider Mike Rea talks with Joseph Owens from Google X

https://vimeo.com/269261531

Joseph Owens: Good to see you. 

Mike Rea: Thanks for coming over. So, this is just for the benefit of everyone who has seen the previous live streams with me talking [in the camera]. This is hopefully the start of a new series of live streams and recordings where we're going to interview people that I find most interesting among the folks that I come across.

Joseph Owens: Well I hope you find some interesting folks.

Mike Rea: Well you're about as interesting as it gets. So, for those of you who don't know Joseph - Do you want to do a quick introduction?

Joseph Owens: Yes. I'm Joseph Owens. I am a Neuroscientist at Google X, which is now actually just called X. It's the R&D factory for Alphabet, which is the parent company for Google. I am a Neuroscientist and a Management Consultant by training, by way of McKinsey and Northwestern. And right now, I'm on a team we call The Early Pipeline and we're looking for big ideas that would eventually be companies that would rival Google, basically. So, for Alphabet, we are de risking to bet on Google by creating other bets. Before that I was a Consultant at Google actually, in the Ad side. And then way back when, I mentioned my PhD was in neuroscience of sleep. So back when I was a Consultant, I was one of the experts on why the job was not very good for you.

Mike Rea: And just for everyone who knows my background, Joe and I got over the McKinsey thing quite quickly. We've settled that conversation. So, one of the things that was most interesting actually in the conversation was really -- one of the things that pharmaceuticals struggle with is scaling innovation. And I know that you've had thoughts on that before you joined Google, and clearly since you've joined Google. It'll be interesting to hear whether you think pharma's going the wrong way, in terms of its approach, or do you think that there's a different approach possible?

Joseph Owens: Well, I don't know if I can speak so well towards what pharma is doing specifically, but I can speak towards some of the things that happened in Google that are good and some of the things that I think we're improving. One of the things that Google was blessed with was, and I think it was really funny because we both knew this analogy, which was, it was a windless tree. And so, it had so much revenue for quite a long time that basically it made sense to plant as many flowers as you could. And so, by spreading bets as widely and sometimes even duplicative, you have the opportunity to let things bloom and let things figure out. As you have businesses that are more related to each other -- a great example is DoubleClick, which is programmatic advertising. The pipes for that are so complex. Having three different versions of that doesn't really work. And in some cases, we've made smart acquisitions -- DoubleClick was actually an acquisition -- and in others, we've built our own from the ground up. I think for innovation to be learned from Google, I would say it's knowing when to pull -- it's giving the engineering directors -- so Google is an engineering-led company and so the equivalent in pharma would be like the scientists or the people closest to it -- some leeway to make a call on whether they're going to let their [directs] just sort of experiment. From what I do know from you and others from pharma, that experimentation is probably not -- the degree of experimentation is probably radically different. And it is software, so you have to remember that some of that experimentation is a little bit cheaper from an opportunity [inaudible 03:51] point of view. But Google engineers are pretty well paid.

Mike Rea: That metaphor of the windless tree, I think I wrote something about that like two or three years ago. It was based on the observation and the biased biome or biosphere or whatever the name is -- the trees grow to a certain height without wind but they fall over quickly because they need distress of the wind to grow. And I think that was an appropriate metaphor for companies and pharma’s that are doing very well despite much pressure from anywhere else. They haven't really needed to think about that innovation thing. But I wonder whether in pharma we spend too much time -- make it a quick call, "Right, well we've done the science already, now let's go to market with this thing." We stop experimenting at that point. So, I wonder whether that's a lesson to be learned. 

Joseph Owens: So, Google has made a lot of changes around how it proceeds to launch, and specifically, how it measures that. Because of its size, it's pretty hard, just statistically, to figure out whether something's successful because it's got the Google brand with it. So, it's like, what is the adjustment factor for Google [to] launch this. And I think that's been something teams have been figuring out -- how to actually [re-weight] the metrics to see whether this would have been a success on its own. And there's some interesting programs in Google right now. There's a program where they're actually encouraging entrepreneurship within Google. So, people have great ideas and they might want to leave. They're allowing them to form their own teams and startup and pitch them to internal sort of VC-like group. Not necessarily with upside for the individual, except for just being able to pursue this thing that they see is really important. And so, it's a way to catch some of those folks that might otherwise leave and start other things. Because everybody has that entrepreneurial spirit.

Mike Rea: We spoke with that a little bit [inaudible 05:54]. We covered that. It was one of the things that I thought about it over time. You look at [inaudible 06:00] with a lot of people who've left Genentech because they had to, to go and pursue their other interests. Interesting that you mention that there's no actual incentive for folks internally other than the progression of their careers.

Joseph Owens: Yeah. I think it's interesting. If you look at -- I think it's Maslow's Hierarchy of Needs or whatever -- once you're paid a decent rate -- the monetary incentive, and you're comfortable -- If you're engaged with your work and you feel like it's doing something worthwhile, I think the monetary upside can be a bit overvalued in that scenario for a lot of people I've seen. There's great engineers who have families and are comfortable and would be great on startups, but they're not going to do that. And so, I think it actually taps into, maybe it's a slightly different slice of who would do that, but they're willing to do it because if they can keep their Google job and go for it. There's other people who want to strike it rich -- go [inaudible 07:04].

Mike Rea: But that spirit of innovation is encouraged within people that join Google?

Joseph Owens: Oh yeah, definitely. So, Google still has, and I'm a product of this, the 20 Percent Program. I was a Strategy Consultant and I came into Google. I wanted to learn the main core business, how ads work. It's a lot more complicated than you think is. 

Mike Rea: It's become a big issue recently.

Joseph Owens: Google touches a lot of surfaces that you might not be aware of. Like how ads get populated across all of these different elements of the Internet, how they're sold, how they're traded in real time. All of these things. And like we talked about with the windless tree, they hire a lot of consultants, specifically from McKinsey, to come in and help them make those calls. While I was doing that, using my core McKinsey skillset, I started a 20 Percent Project. And so, for those that want to and have the inclination and [inaudible 08:01] and we formed a team, were running for six months or so, we had engineers, businesspeople, marketers -- our own little thing -- pitched it to all sorts of people. And that's actually what landed me at X. We had that drive because we saw an opportunity that Google should be working on this thing, and we can't talk about the thing. But we said we want to make sure that Google or Alphabet, actually, is working on this thing. And we pushed it until they took recognition of it. 

Mike Rea: So just let me walk through the basics of the culture -- they enabled you to put together a bunch of people to pitch it to someone else. What's that look like?

Joseph Owens: First off, to do a 20 Percent Project you need to be doing well in your role. But then the idea is -- It's based on good psychology, which is, you can't focus on one problem all the time. It's sometimes switching over to a different problem that actually helps you. And you can pull things over from that. Maybe you're going through a lull where you're bored with the implementation of your project and you're waiting for that next interesting part of your project, but you're still the right person to do that thing. Use some of that spare mental energy, connecting energy, whatever it is, on that 20 Percent piece. And instead of it being seen as lost time away from core work, it's more of an acknowledgement that you can only do core work very, very well for four or five hours a day. The idea that we can do more than that -- my background in psychology, you can't. You check your email, check the stocks, you check the news, go have coffee. And then when you look at your time across the day, whatever. But if you have something that was really driving you on the side, and you can keep up that -- The other thing is momentum. You're keeping up the momentum with the one thing that carries over the first. 

Mike Rea: So, the 20 percent time isn't like Friday, it's spread across. 

Joseph Owens: It's spread across, yeah. I don't think it would be effective if it was like everybody takes one day and puts on a different hat. There might be teams that do that. The other 20 percent thing I've done in my time is, I teach a mindfulness course. And that's actually a two-and-a-half-day course called Search Inside Yourself. And there's an org that runs that, a not for profit that now runs that. And we teach it to Googlers. And so, once a quarter I go and do that. So that sort of is a different day. Now that I've turned my 20 percent job into my full-time job, I have a different 20 percent job. 

Mike Rea: So, people internally, they have the permission to spend that 20 percent time. Are they looking for each other?

Joseph Owens: Oh yes. There's so many ways in which people find people. I just happened to be really crazy interested in this one topic. And someone introduced me to somebody else who's interested in that, and then found one more person, and then steamrolled from there. I said, "Google has to be doing this." And we just pushed it. 

Mike Rea: And then you mentioned X as a special place. What's the special sauce about X that's different from Google itself?

Joseph Owens: So, X is meant to build new companies. There is [triad] of criteria. One is that it would affect enough people. So, we think of a billion people, which means it needs to not be just U.S. So, it can't be just a U.S. business.

Mike Rea: Basic rule of thumb.

Joseph Owens: Basic rule of thumb. And it needs to be some sort of radical advancement of technology that has some real breakthrough way of solving a problem. And so, that's the three criteria, and you put X marks the spot in the middle. And it's always in the eye of the beholder, obviously, how breakthrough something is. But it has to be for good and it has to be a self-sustaining business. So, it's not [inaudible 12:07]

Mike Rea: So, the really interesting thing about the business side is that those rules of thumb are not market size. The problem [inaudible 12:17] and the benefit, those are interesting rules of thumb. 

Joseph Owens: Yeah. And all of the things that happen at X will touch regulation because they're [inaudible 12:28] business model plays, they aren't regulatory plays. We have a rule, you can't break the laws of physics but you might, for a little while, break the laws of man maybe, at least as they currently exist. So, for example, we have a project that literally launched drones into the air, called Wing, in New Zealand. And because the laws of man there were a little more friendly towards flying things, that was a good place to literally launch. And so, you have to figure those things out. Same thing with [inaudible 13:05] which is the inertial project at X, which was driverless cars -- figuring out how to get those safely on the road and get enough miles driven to train the AI. Obviously had [inaudible 13:17].

Mike Rea: Someone was telling me, actually yesterday, internal [betting] that happens at Google. Is there a market internally on which projects are going to succeed and which ones aren't?

Joseph Owens: I don't know of one. But I've only been there for three years. I've been at Alphabet for three years, about a year and a little at Google and a year and a little at X.

Mike Rea: Again, someone from pharma had heard this and felt, "This is an interesting way to see which projects are likely to succeed and which ones aren't." Because internally there's a culture of -- you know stuff internally that maybe senior management don't know about. 

Joseph Owens: Yeah. I would be interested in that. There's a company called Steam; they do video for gaming. So, it's a very engineering -ed company somewhat. It's much smaller than Google. I think what they do are sort of a platform for online games, but then they also I think, sort of video. Could get that wrong. But an engineer friend of mine told me that they vote with their feet. So literally, their desks are attached to their chairs and people just move their desks together to work together on whatever the project is. I like that model. You can see what's working and what isn't, based on where people are moving. But the betting on things, we have a different version of that at X which is, before we kick off and get really running at speed on a project or even an idea in our early pipeline, we create kill criteria. And so, these kill criteria are what would be convincing reasons to stop working on this. Because the most valuable thing is our time. And those are easier to make before you spend a lot of time on a project because you're not as invested. You haven't hired as many people and all of these things. And you try to make them as objective as possible. And the way we do it is we just [sense] test with other people. "Is this significantly better than what exists?" or "Will this out compete the current thing on the market?" And that allows you as you get further down, if you realize you're not meeting that -- and you choose when you're going to check in with your ill criteria beforehand. So, it's like good statistics, it's a priority bet. And that allows for a more objective decision later on down the road. So, it's a way to manage your bets. I guess. 

Mike Rea: And then one of the things I was really keen to recover was you mentioned the "Thank god its Thursday" and I described to you this  environment where in pharma that we spent so much time moving towards this six-monthly review with senior management of very polished, carefully curated slides that they're allowed to see. Can you describe a little bit more about this?

Joseph Owens: Yeah. So, speaking completely for myself, and I think it's well known that this exists out in the world, but the company is -- Steven Levitt, the guy from Freakonomics wrote about this in the early days of Google. Larry and Sergei and others of the founding team decided to have a meeting every Thursday with the company. And I think the first meetings were around a ping pong table, which is also like their boardroom. And that tradition has carried on. That was on Fridays. As the company grew to have enough [inaudible 16:47] components they moved "Thank god it’s Friday" to Thursday. And crazily enough, Larry, Sergei, now Sundar, Susan Wojcicki -- all these folks get up there and talk about the state of the company, weekly.

Mike Rea: Every week.

Joseph Owens: Weekly. And it's kind of funny because Sergei also does a lot of things at X, and so he is often out of breath from making the one mile, mile and a half, from X to doing the same thing at X -- going over to main campus. And I think I said this to you. That's really good, but if you're a product manager, your product's coming up this week. You're going up in front of the CEO and chairman of the board and whatever, and they'll tell you what they think. I think that level of transparency is something Google obviously has struggled with this last year, because of the leaks. And I won't talk about that. But maintaining that transparency, it's amazing. I came into the company, my first day and they give you a computer and you're on the Intranet and you're like, "I can see this?" In any other company I wouldn't be allowed to see that. And that trust in a first day Googler -- Well, maybe I'd go look at that, I'm like, "Wow!" In my last business, we were doing that a different way. "Maybe I should let that person know," And I often do. When I get launch notices from people and they haven't -- from PMs and they'd go out to all of Google -- and I see something that I have a point of view on, I'll let them know. I'll just reply to that launch notice. Not to everyone, but to the PM and say, "Hey, I noticed that you guys did something here." And I think there's a lot of people that do that. And it's not liked a trolling sort of way. It's like there's something I really care about, that maybe you should know about it. And they might ignore you. They might not. But sometimes you get really long responses. They're like, "Oh I'm so glad you pointed out that. I was really struggling with how to weight that decision. And I'd love to have coffee." whatever exactly. 

Mike Rea: And that was what struck me about that idea of Larry and Sergei and their [comfort] to do it. I'm the type to do it as well. I think we spoke about the [inaudible 19:13] book about the beginnings of Pixar and pulsing and the way that -- Pulsing sounds nice and gentle but sounds like there it's also not. You do get your animations ripped apart by everyone -- the magazine, then Pixar. That's not a destructive thing but it's a constructive, enabling, empowering way to --

Joseph Owens: As an employee, you can get an answer. If there's an issue that you believe is important enough, you can stand up at the mic and ask the heads of the company, from the beginning. You might face social feedback on that. I've never heard of anything of someone's manager getting mad at them for saying something like that. I think I would have heard that if -- Someone would tell you, "Hey, don't get up to the mic." And then they take internet questions from around company. And then they take my questions and they alternate.

Mike Rea: Okay. I've spoken to a few people in pharma about whether they could imagine a pharma CEO standing there every day, every month, every week. 

Joseph Owens: It goes with overall cultural transparency though. So, if they get at --

Mike Rea: Is it just transparency or is it something about the connection to the product or the ideas or the --

Joseph Owens: Yeah. I think you've got to be willing to go both ways. You have to defend your project, the people getting up there and talking about whatever they're launching or whatever or the bad news cycle on their project, whatever it is. That's one side of it. But then them asking like, "Hey, we did this launch and --" The thing that was in the way might have been you. Can you tell the audience why you made that decision? I don't know if I would go up and there do that, but people in the audience will. They'll say like, "Why did you make that decision?" 

Mike Rea: Right. Okay. It's interesting because part of that same conversation that we had around whether they could imagine pharma CEOs doing that, people tend to go with the ones that they've worked for, that they could imagine being that. And actually, at the same time, those people also seemed to be the most empowering and best leaders -- the people talk I'm talking about in pharma -- people like Bob Levinson at Genentech have a [proof ability] but also deep -- you'd follow them anywhere with the science. So, I wondered whether that was a --

Joseph Owens: Well you have to remember that Larry and Sergei were grad students at Stanford, in information sciences. So, the transparency piece is there. The depth of engagement is there. These are future academics made into CEOs. And I think Larry's written about this bunch, about what that transition was like for him. What they're gifted with is all these great people who can teach them these things. And so, as they were going through -- I think I've seen this written in a number of books about Google -- One of the things I did before I applied to Google was, I read all the books about Google, at least the ones that are available. When I was at McKinsey what I did was a lot of reorgs. And so, I worked on helping organizations be more effective, because I liked the novelty of that problem every time. And reading about their early history and seeing the problems they faced in changing their worldview -- I was a PhD student. That is a very different [person] to being an executive. And so, the attitude there is you have journal club. And I got to say, TGIF is not that dissimilar from journal club. Journal club, you get up, you talk about some data, you beat it up. The goal is everybody gives their opinion. And if someone is silent then you're losing out on something useful. Because all the researchers in the room are going to have different takes on that data, or maybe they have statistics or genetics or whatever it is. It's not that dissimilar. It's bringing a little bit of that academic culture into corporate; I think.

Mike Rea: There is something about pharma which I think we [could] change. We've got [inaudible 23:30] with people with project teams to say, "Well, what are all the things that could go wrong here?" Remarkably, it's the first time we've ever been asked, typically. And then they have this long list of things that could go wrong. They're not just about the product succeeding or failing on its basic parameters, but everything else that needs to be thought about it to get it there. If they're not being asked, those things will still happen and we're just going to ignore it until they do. Is there something that's enabled -- Let me describe it perfectly just from the beginning -- it always was that way.

Joseph Owens: Yeah. If you're not working [in] your culture at the beginning then you're going to have whatever culture you get. The changing it though, is that what you're asking?

Mike Rea: Well, I was wondering because one of the approaches that you have, clearly, is that you stop other cultures that are separate -- that you've created companies within Google that are different.

Joseph Owens: Yeah. That was one of the things that kept me awake the most when I was working on the 20 Percent Project. I said, "Okay, we've got five people on this. Whatever we do right now that's the beginning of the whole proto-companies culture. And those are big weighty problems to think about. So how are you making decisions as a group? How are you choosing the direction? Are you going to be monolithic based on that one engineer or are you going to be consensus driven? Those decisions are made on those teams as they form, and a lot of big projects in Google started out that way. I'd say there's an example that teams can learn from, which is what's happened at Google and maybe what's happening on their own teams. And then when they make these new teams -- like the 20 percent ones for example, or the new bets at X, or the acquisitions -- there's a lot of freedom given to them to make those calls. I think it's an experiment that keeps happening over and over.

Mike Rea: And we also discussed the accidental versus on purpose nature of the organization within Google. Which you can say about the way that it's organized and your observations on how controlled that is versus uncontrolled. 

Joseph Owens: I think Google, last couple of years, they made the switch to be a holding company, I think quite wisely, while I was there. And the reformation that happened because of that has objectively been good for at least the short-term stock price. And starting to compare some of these projects against each other, and to make some of these calls. I think those things happen in cycles. And so, they're on that cycle of it. I think the culture probably still has this exploratory way. And so, if you go through one cycle of comparing things and choosing which ones of the best ones, you'll go through a growth phase. I think the inertia is clearly there for it to be a [inaudible 26:54] thing, not like a, "It was doing this and now it's doing that."

Mike Rea: And there was an observation that you mentioned along the way about how much people want to work for Google, as opposed to somebody else.

Joseph Owens: Yeah. So, Google maintains a pretty amazing reputation, at least as a place to work, in the world. I always saw it on lists with McKinsey and other consulting companies. And I feel like those are pretty different jobs, which is interesting.

Mike Rea: Those rankings are usually done by [inaudible 27:24]

Joseph Owens: Yeah. [inaudible 27:26] does rankings too. If you want to be a world class software engineer and you want to have some of the best tools at your disposal, and obviously the [inaudible 27:43] places to work, and smart people -- I think I've got a little bit off the question -- but the attractiveness to do that, I think it's quite high. What was the question again?

Mike Rea: Well,  it's linked to that. Because we had the conversation around the pharmaceutical innovation index, on whether that leads to retention of people over time or the ability to recruit. 

Joseph Owens: Yeah, I think there's everything at Google. So, there's enterprise businesses at Google, there's consumer businesses at Google. With the cloud bet, that's a very different business than the hardware bet. And one of the things Google has is a lot of ability to move around. I think that's what I was mentioning. And so, you might work two or three years in one role and then you might change ladders as I did. I went from a strategy consulting ladder -- I'm actually on the engineering ladder now. I don't know that that happens that frequently, but I definitely see people who might go from, say, a sales ladder to PM ladder or a program management to product management, or one type of engineering to another type of engineering, as they change their skill set. One of the things I do as a 20 Percent Project is, I work on what's called G to G which is Googler to Googler training. And we have loads of that. We have an engineering school. If you want to get ML training, there's weeks of training you can go take to start teaching yourself to be an ML engineer. There's Python 101. There's everything you can imagine if you want to spend that effort to train yourself. Now there are tools that are available for online training and any person training, you can literally change your career while you're at Google. And I've seen a lot of people do that.

Mike Rea: And you can start your 20 Percent Project from any one of those ladders? You don't have to be on --

Joseph Owens: Yeah. You can be a salesperson and be the PM on your 20 Percent Project. Or like me, you can be a strategist on your normal ladder and you can be a scientist on your 20 Percent Project. 

Mike Rea: Because one of the things that we haven't spoken to anyone yet about is about the rankings that lead to companies being perceived as more innovative, and whether that leads to the ability to attract and retain all the time.

Joseph Owens: Google made a big bet on hiring ML engineers and that looks like it's paying off.

Mike Rea: That's machine learning?

Joseph Owens: Machine learning, yes. Sorry. Everything where you teach a computer to label things. That's all ML is. So, it's saying, "I give you a lot of data --" and then computers are very good at saying, "That is A and that is B." Assuming that you have good enough examples of A and B. That is all machine learning is. And Google made a big bet on that because they get a lot of -- it's an information technology. We're categorizing and making available the internet. And so, all that tagging, that's kind of the grass of machine learning. You have videos on YouTube that are labeled, and voice recognition and all these things. These were the data we were taking in. And so, not being [inaudible 30:39] ML was pretty obvious, you're not going to work. And then we happen to have servers. So, the other thing that's happened to make machine learning capable these days is something called deep learning. And that's only possible with the amount of server space, basically. The amount of little, literally, processors to throw at the problem to run these iterative models. And without that you can't do the kind of machine learning that we do. And so, we had both of those things and then we are where we are.

Mike Rea: Which is interesting, the ability to understand and deconstruct at the same time, is important. And then clearly within the health space, I know we spoke a lot about the essential problem of hundred-year-old disease definition still being part of the fabric against which we're developing new drugs and new ideas. 

Joseph Owens: I just read the outgoing NCI directors book on cancer, which was I think, Curing Cancer. And it's a labeling problem. Initially, when you go into labels, if the label's too general, well, the machine can't learn to label below that. At least, it can't learn on its own. There are machine learning techniques called clustering and unsupervised learning, and those can begin to do some of that. And we're not -- Google is not the only person doing this. Unsupervised learning without the gold standard labels with it, and clustering these things out and then saying, "Hey, this is a cluster. Let's go study that." And yeah, these were all what we were calling cancer. But [now in terms of] mass childhood lymphoma -- and this is sarcoidosis or something, whatever it is -- 

Mike Rea: But we're getting there, or we're starting to get towards that in cancer. I think probably because it's had a molecular target for such a long time and people have explored the genetic mutation mode and so forth within the tumors. My concern is that you get into areas like mental health, that we're still using broad categories like schizophrenia or major depression --

Joseph Owens: Now you're getting into my wheelhouse. I'm not going to begrudge the people who hammer these things out in committee to make the DSM. That is exceptionally hard, based on what we have. Because we don't have data. We have an empirical wisdom and we have research going in lots of different directions. Because we just don't know very much. We don't know very much about the brain. We have to admit it. We don't know very much. And I won't compare neuroscience to cancer or anything like that but taking one of these labels and deconstructing it. And then, we have loads of studies. I was doing genetics too, where we say, "Wait, why does one disease and another disease and another disease, all radically different labels, run of the same family? Are these normal curves and we're just picking out the ends of the curves? Are these bimodal curves under certain environments?" Picking that stuff out, I think computers will be very good. But we need more labeling data. So, the move right now -- and there's a lot of folks doing this -- is to get passive monitoring. One interview in a doctor's office is not enough. And if you can move towards passive monitoring and long-range continuous datasets -- And then folks are very wary of doing that.

Mike Rea: It starts to feel healthier as a way of -- if you take something like schizophrenia, we know there's genetic components, we know that there's typically socioeconomic components as well, and then the family environment components. But then also, the interventions that we've had are pretty broad brush and pretty crude measures, in terms of their effect. And if you look at the construct that you're describing of an appetite, to want to break it down into micro subsets --

Joseph Owens: I mean, it's been variously called personalized medicine, lots of different titles for it. But subcategorizing disease for neurological -- I mean, all of this -- is the next wave, I think. And hopefully we'll destigmatize it. 

Mike Rea: And then you put together, what I see from the outside, as a kind of long bet that someone like Google is prepared to take on. If you look at mapping the roads and self-driving cars, there was no business in that for a long time. There's a long-time bet. Parmer is in that same sort of 20 or 40-year cycle of discovery to development to revenue. Do you see any parallels or any differences between them?

Joseph Owens: Oh yes. I think pharma is interesting because it starts, and at the early stage if you can kill something and save you a lot of money down the road -- because the last trials were the most expensive, theoretically. We're at a point which is very different, where we say, "Let's take in as much data because we don't know what it's going to lead to." And that's a very different decision to make at the beginning. So, to take the mapping example, "Let's go out and put cameras on backpacks and on cars and take in this data." I don't think they knew exactly what product that would turn into. But when I did my interview at Google they said, "What product at Google do you admire?" And I said, "Apps. It changes my life every day." Every day I set out with confidence. I can get to where I want to go. Every day I can take a request from somebody to go meet somewhere I've never been. And I [inaudible 36:16] take that request. "Hey, come meet Mike in this building you've never been to." Didn't bat an eyelash. Before maps -- get on the internet, look up where I can find it, find a map, whatever it is. That's a radically different decision multiple times a day. I think when they first sent the cars out -- there's no way they're foreseeing that everyone would be making different decisions. At least that has, the luxury of having Google Maps. 

Mike Rea: Yeah. And that's one of the things that we talk a lot about. That idea is that exploration and value early. Because no one knew where the iPod would lead, in terms iPhones and apps and a bunch of other things. And certainly, if you try to do what pharma tends to do, which is to try to put like five decimal place forecasts around a Phase 1 asset, you're already limiting --

Joseph Owens:  False precision is --

Mike Rea: Yeah. And how does that get approached at Google? Do use those rules of thumb all the way through or is it something that someone else [inaudible 37:14]

Joseph Owens: I don't think I've been there long enough to see things from genesis to multiwave implementation at scale. So, mine would be snapshots across different projects. The decisioning that happens to kick something off at Google is, I think, laxer. So, it's experimentation. If you're really excited about, "Well, I believe in you because I hired you." or "we hired you" and you're coming to me and saying, "I really [inaudible 37:50] this." Your energy is the voting factor for a little while. At the point that you start needing additional resources, then you start to make decisions. So, then you're making prioritization. Some of the similar, "Let's make a business case for these things." pops up and you say, "Here's a design brief, here's a PRD -- product requirements document -- and here's the case." At the beginning of the product requirement document it would be, "Here's why we need the thing. And here's what the thing has to look like." From the ones I've seen, they're not trying to get to decimal places of precision. And that's probably a little bit because of the luxury of resources. I think things are allowed to flourish a little bit. 

Mike Rea:  That's an interesting word -- flourish and thrive. Because one of the things that pharma tries to do is to project ten years into the future and then bring it back to today with a huge degree of accuracy, despite us all knowing whether it's wrong every time we do it. And then the project's not allowed to flourish, despite all the evidence that most of the great drugs have got where they are through serendipity. They've pivoted at some point in their life cycle. 

Joseph Owens: My example for that is -- basic research is -- Carrie Mullins goes and works on a project which, its title, would every time get defunded. He's going to go measure proteins and enzymes in hot geysers. No one cares. No one cares about those organisms. But then you get PCR. His project, if it came up for a vote, everyone would, "De-fund." And then he's driving down the highway and he thinks -- So we have some core principles; more data, better; diverse data. So, try not to just collect data in Silicon Valley, these sorts of things. Build for scale down the road. Because everything we want to do is going to serve Google's customers. And so, things probably move more slowly than they would at a startup because we're building for scale early. That could be a headwind of saying, "We'll go get a bigger dataset than maybe a startup would want to launch their thing." Or,  "Build your pipes a little bit stronger than a startup might."

Mike Rea: So, there's some value to their being Google?

Joseph Owens: Right. But then you're slower. I mean, those are tradeoffs. 

Mike Rea: And probably the last question, because we could carry on for another few hours, would be just really around how you personally see health -- the intersections -- health and Googling -- the kind of technology that sits behind those.

Joseph Owens: So, health for me,  for Joe Owens, II vacillate between extreme jaded [inaudible 40:54]

-- like I said, we don't know anything about the brain. And we're at that moment of Newton where we can't see Einstein. When you're Newton, you can't see Einstein. [inaudible 41:05] physics, you can't move into relativity. And I feel like we're -- that moment on brain -- But in the same sentence I have to say, there's so much science sitting on the table that hasn't been brought to people's lives. We have doctors that have no time to do the thousand things that have been recommended for them to do. Well that just sounds like a platform and it's fixing the issues that happened. If that's an operations problem, that's a more McKinsey [hat] problem. So, if we can take all of these recommendations that we have for our health, and figure out a way to [massage out] the way we live to meet them, well then maybe we don't need -- we don't actually have to know all those things about the brain to actually operationalize some of that. So, I think science [hat] kind of terrified, consulting [hat], I feel like we just need to do some stuff. 

Mike Rea: So, some systems thinking?

Joseph Owens: Systems thinking, yeah. And design thinking. Changing the way, we live to be healthier. We know what to do, we just haven't done it. 

Mike Rea: Yeah. Some of those things are [inaudible 42:09]. If you've got socio economic problems --

Joseph Owens: Google, it changes every day of my life with maps. It could change every day of my life with my health. And I think there's people at Google who are seeing that. They have been thinking about it. 

Mike Rea: And actually, [inaudible 42:29] is really around the ethics with that as well. I'm aware that there's a kind of internal ethics, people looking at whether you can do harm as well as good.

Joseph Owens: Oh, yeah. First do no harm, is the first rule of medicine. So, if an IT company wants to get into medicine, they've got to follow that. One of the things we have going right now is a lot of people thinking about machine learning fairness. Do you collect first data sets? Things that work on one population won't work on another, unless you figure out the little bits. And so again, that'll be a tax for speed but it'll be in the effort of fairness. And ultimately, scale. So, the ethics of that -- I would say you probably don't see people out in the world talking about this, but teams talk about fairness a whole lot. [inaudible 43:23] would be a great example. And the computers are sometimes really good at this. They have an example where there's a woman out in the street shooting a duck with a broom. There's no way you're going to train your data [to solve] that because you could even conceive that the car would ever see that? And so, figuring out ways to end all of the niche cases via getting really diverse data sets and really good transfer learning, that's -- Computers actually may have a better shot at scale -- oh, sorry, in fairness. 

Mike Rea: Excellent. So, I think I've promised everyone that this would be phenomenal, and it has been, Joe. It's probably obvious, we could carry on for another couple of hours and debate this. And I hope you get a chance to [inaudible 44:16]. 

Joseph Owens: Yeah. That would be great.

Mike Rea: Thank you.

Joseph Owens: Of course. Have a good day.

Mike Rea: Thank you very much. 

00:20 Introduction: what does Silicon Valley Bank's Life Sciences and Healthcare group do?

01:00 Nooman's background

01:30 How does SVB fit into the innovation ecosystem?

02:00 Lending to companies who don't have products

02:15 How does innovation happen: the myth of the lone inventor; the value of connections

03:15 Parallels to non-pharma innovation models and ecosystems

03:45: Innovation as the deployment into a market for the betterment of people and society

04:10: Invention, innovation and diffusion of the innovation

06:00 How does pharma compare?

06:15 How do the incentives influence R&D?

06:30 'Pharma are largely sales organisations' Large vs small companies

07:30 'Companies are largely "satisfied"'The incentives to do differently are not there...

08:05 Analogs to the movie industry; content is knowledge; integrated model to separating out the value chain

09:50 Where is the Netflix of the pharma world?

10:30 Does the emphasis on launching 'blockbusters' affect the pharma industry?

11:30 Finding the right audience, and the right commercial model, for the right product

12:30 The franchise and the 'repeat successes'

14:00 Innovation in distribution

15:00 'We've got boots on the ground, and therefore we need blockbusters'

17:00 How important will the salesforce be? Will biotechs still need to partner with large pharma?

18:00 Why shouldn't government fund and develop (and distribute) new medicines?

19:20 The analog with US defence procurement, and the role of government funding of invention in the innovation ecosystem

20:20 Anti-microbial resistance - why the failure of the market for solving the problem?

21:00 Agreeing on important problems to solve

23:45 The government as an 'infinite agent'

25:10 Knowing that you're getting innovation within an ecosystem: how to measure?

25:45 A proxy for measuring innovation - the patent

27:00 'Are ideas getting harder to find?' Yes.

27:30 'Compared to 30 years ago, it takes 20 times the effort to deliver Moore's Law' - so there is declining productivity

28:45 Why is it getting harder? It's a diffusion problem

30:00 The silo-isation of pharma: diffusion into organisations

31:00 Comparison to banking - the role of regulation

33:30 Is there anything similar to the role of financial regulation in pharma?

34:20 Could we apply anti-trust in pharma?

36:00 Is our model the right model for the next 150 years?

37:20 Societal innovation - how do new beliefs emerge?

38:30 Sherlock Holmes - the character who's appeared most on screen - not owned by anyone

41:20 Europe vs the USA as a hub of innovation

42:00 'A lot of the inventions in the Industrial Revolution came from outside the UK'

45:00 'If your industry relies on early stage ideas, you need to find ways to get those ideas into the hands of 'ordinary' people'

45:40 Answers looking for questions

47:00 If Google is looking to disrupt itself, why not a pharma company?

47:30 Is it a question of timescales? Is there a necessary pressure in other industries?

49:20 Where does Nooman go to learn about innovation?

50:30 On macro-economists and the absence of bias

51:20 The Grapes of Wrath and innovation

53:30 Deliberative decision making

54:30 How we make choices

56:30 'patent litigation held up the development of the steam engine for two decades'

57:20 The value of the long, historical economics view

58:30 The adjacencies; the first car phone was in the 1950s...

61:20 Innovation in India, China, etc.

63:10 Are you excited for the future?

Mike Rea in conversation with Katherine Eban.

Katherine's website

The book, on Amazon

https://www.youtube.com/watch?v=AgUJQtQUrEs

IDEA Pharma: A Conversation with Dr. Menelas Pangalos of AstraZeneca

Mike Rea:                          Just a quick note this is Menelas Pangalos, can I have your official title?

Dr. Menelas Pangalos:       I am EVP of Innovative Medicines and early development. I’m at Biotech Unit and also Global Business Development.

Mike Rea:                          Okay, we’ll get on to innovative medicines. This is obviously one of the series of Idea collider interviews with people with actually very interesting thoughts on innovations.

Dr. Menelas Pangalos:       Hopefully. Hopefully interesting.

Mike Rea:                          Definitely interesting and hopefully very useful for the viewers. So, actually let’s starts with our first question, what does AstraZeneca means by innovative medicine?

Dr. Menelas Pangalos:       Yes that's probably the most difficult question because innovation is different things to many people, & I’m sure - I remember when first joined the company & was walking around the site’s; looking at project’s & people were telling me about their innovative programs & they actually - you know, if you think about this as a competitive sport, I think our view of innovation when I first joined was personal best versus world records, And when I think of innovation, I think of world records. You know, you’re cutting edge, the cold face of innovation in terms of whatever area you’re in, whether it’s a technology or whether it’s a therapy area. Disease understanding is actually - you’re making the discoveries rather than following discoveries.

Mike Rea:                          So, that was an almost an internally referenced versus external referenced.

Dr. Menelas Pangalos:       Yeah, so exactly they were very inwardly as an organization we were incredibly inwardly focused & we were getting better internally but when your benchmark is very low, you’re getting better on a very low benchmark actually it’s isn’t getting you anywhere near where you need to be. So, one of the big shifts in our culture which I think is helpful in our innovation is being much more outwardly focused. Seeing what’s happening as a consequence, understanding where we should be pushing ourselves to be even better & who we should be working with to enable us to build on whatever it is that we choose to do.

Mike Rea:                          That’s interesting & the innovative medicines group is focused on forward looking pipeline -?

Dr. Menelas Pangalos:       Yeah, So I run everything from the first target ideation all the way to proof of concept. So, we have to hand over to our latest [inaudible 02:28] organization programs that are ready for phrase III. So, everything from - you know the basic disease understanding – to therefore give you the new targets so you identify & optimizing those programs to generate molecules that are ultimately suitable for phrase III investment. So, there’s therapy area-based research, then we also have our technology platform group to support the therapy areas 

Mike Rea:                          And you’re essentially then combining ways of doing that with choices that you’ve made along the way of which areas to focus on itself.

Dr. Menelas Pangalos:       Choices all the way & one of the things - the big shifts that we made, which actually we made when Pascal joined the company at the end of 2012 is really focus down on the areas where we thought we could be globally competitive or we could be setting world records not personal bests, & so, we really focused organization down on to sort of oncology, cardiovascular, metabolic & renal disease. Which there’s a lot of overlap & than respiratory disease & there’s couple of areas that we not dabbled in but we have small – relatively small investments, less than 5% of our budget goes on there in neuroscience & infections where we tend to pawn all those program with other companies where that’s their core area of competence & where they want to be leading from an innovation perspective.

Mike Rea:                          ok, that’s interesting. So, it’s more like the British Olympic teams approach the winning gold medals. where we can win gold and… 

Dr. Menelas Pangalos:       Go deep & yes, it’s been very interesting because, as we’ve gone deep and as we’ve got more & more focused in those areas. You see that actually you’re starting to build a depth of knowledge & a depth of pipeline that really does make you quite competitive in that space, & the quality of the partnership – you can create the quality of the people who you recruit – the quality of the decision making it all gets better because the commercial organizations also lined up the same way. For me it was like the organization was never all - but I always thought of us as iron filings all going in different directions. When we focus organization on those three core areas, everyone’s thoughts then point in the same direction & they understood, well good looking [inaudible 04:44] 

Mike Rea:                          Yeah, & it’s been interesting. you mentioned when Pascal took over but it seems to be in a purposeful shift at AstraZeneca, because for a long time it wasn’t my favorite company. But this certainly - your publications & the kind of pursuit of a kind of directed improvement Has been clear from the outside. Do you have the room to do that?

Dr. Menelas Pangalos:       Yeah, look I mean - I was hired by the CEO before Pascal joined, a guy called David Brennan who was a super smart guy, very commercially driven. They’ve built a great company with an amazing brand Seroquel, Nexium, Crestor. And what’s interesting is most of those were me too or me better drugs, but nevertheless, very successful in their time & what David realized when he hired me was that the R&D organization wasn’t where it needed to be & they had to try & re-invent themselves & I was the one of the first recruits to try & help with that reinvention. 

Mike Rea:                          What was the first thing that you had to do under that new regime?

Dr. Menelas Pangalos:       Yeah, it was a challenging [blank] - activity wasn’t particularly high so one of the things that I tried to really get the organization bought into reasons why we need to change, to learn from what we’ve done before. So, we looked at all of the projects that were run from 2005 - 2010. We were spending about 5 million dollars a year on R&D. And really trying to look at what differentiated a successful project from a non-successful project. obviously, we had a lot more unsuccessful projects.

Mike Rea:                          What was your definition of successful?

Dr. Menelas Pangalos:       Launch.   your medicine launching or moving into late stage of development at least. But actually, launching is the most important one & looking at what data – what information we have & how programs actually progressed from candidate nomination all the way through to phase III. And what we saw was – actually when we did the analysis, if you measured us by the number of things that we were doing, the numbers of candidates that we’re putting into the clinic or the number of R&D's that we were filing. We were one of the most productive companies in the industry. Secondly only to Pfizer after it had acquired Wyeth. But if you measured us by the number of launches that we had – we were the second least productive company in industry. So clearly there was a disconnect. Our science was getting rewarded, but there were no medicines coming out at the other end & that’s what we had to fix it. 

                                         The take-way message from all of this work was quality over quantity. It’s the quality of what you work on not the quantity of what you do. And then as we dug further there were five things or we call a five R framework that we thought, based on the data that we analyzed would improve your probability of running a successful program and they’re pretty obvious I have to say, pretty intuitive & yet actually quite difficult I think to execute on consistently. 

                                         So, the first of the five R's is around the right target. How well do you understand the biology of the target that you work on? how well do you understand the disease pathophysiology? How it connects – relates to path whether you’re trying to modulate? What genetic validation do you have either in pre-clinical animal models or in human genetics & how do your scientists consequently try to prove or importantly disapprove Your hypothesis. are they asking those killer questions to try and invalidate, not just validate there’s something for hypothesis?

Mike Rea:                          Yeah. So how important is that almost adversarial nature?

Dr. Menelas Pangalos:       It’s really important actually rewarding your scientists for disapproving things as much as approving things & making good decisions – good kills is actually something that we’re very passionate about and very proud about & we celebrate as well.  As I’ll say in a moment the reason why we’re failing now the most is actually because of lack of efficacy in phase II, which means we still don’t understand the targets and the pathways well enough. But we’re getting better, so that’s perhaps the most important of all of the 5 R's.

Mike Rea:                          Okay. I think we talked about this a little bit before that we’ve reframed this role and we're calling it failure; we call the process of early phase – development asymmetric learning. Can you learn faster & better than the other guys?

Dr. Menelas Pangalos:       Exactly.

Mike Rea:                          And if you call it learning it’s not trying to failing anymore.

Dr. Menelas Pangalos:       It’s exactly right & making sure that you fail, you haven’t spent too much money & you don’t just keep on - cause what we were very good at what we saw as we had – our science was very creative. Finding ways of getting to the next hurdle & just for the sake of getting the next hurdle, cause that’s where we're being measured on. So right target, second one right issue. When you have a molecule whether it’s a monoclonal antibody or small molecule or the drug modality, demonstrate first of all in the preclinical models that you can engage the target & understand what your PK / PD relationships are. So, understand you’ve got to inhibit a kinase in a tumor? Do you have to inhibit that kinase for 24 hours? Do you have to inhibit it at 50%, 80%, 100%? Really understand what the relationship is in order to generate the efficacy you are after & then even more importantly you have to have a way of measuring that in the clinic. If you can’t demonstrate target engagement in a clinic, we have a big problem, because then if you fail you have no idea if it’s your molecule is cramp or lousy - excuse my French - or if your hypothesis is wrong. So, a good failure is for me is ones who I know have demonstrated target engagement but the molecule didn't work so biology is wrong. Right. And we hardly had any ways of demonstrating proof medicines – so a number of phase II that we were running. where the molecules failed and you asked the question – I remember these first six months in project meeting, so it didn't work – did we engage the target? Did the receptor antagonist get into the brain? If it’s a schizophrenia program and quizzical blank stares from everybody saying - we have no idea. 

Mike Rea:                          Oh, so you weren't learning well. 

Dr. Menelas Pangalos:       So, you weren't learning anything, not well, you weren't learning anything actually because you had no idea why you are failing, so that doesn't happen anymore. The third one is right safety, so again because our scientists were being rewarded for number of candidates, they were remarkably good - working how to lower the doses to the minimum amount, where they now – because they're not measuring target engagement, engaging the target but they still get the candidate through. And what we saw was that when you had early safety signals, they invariably came back to bite you somewhere during early development or even worse later stage development. So, waiting out your safety signals early, making sure you are working on the right series, on the right scaffolds, that you understand both your target-based toxicity and your molecule-based toxicity, really, really important. So, we spent a lot of time developing our safety models. Fourth of the five R's right patient. To find the patient population in which your medicine is most likely to work. Because if It doesn't work in that patient population, it's not going to work on a broader patient population, and we were again very good at going into broad patient populations. What we saw actually was that as the programme moved through the clinic, the commercial organization got into full steam ahead and wanted to go into broader bigger. Of course AstraZeneca was very much a primary cadre of an organization and so what we saw actually in the data was that the scientists were becoming less confident about their projects and the commercial folks were becoming more confident because the big yourselves the number is getting bigger, but you know a 100% of nothing is not a very big number. So that was the other pieces - to find the patient population and do that experiment first and develop it there and then other things will happen. This is not different, advanced for example we have been doing for quite some time, and then finally the last of the 5R’s is right commercial. By right commercial, I don’t mean is it going to be a billion dollar pick yourselves - what I mean is why would anyone want to take or prescribe the medicine and why would anyone want to reimburse it. So, understanding what your comparators need to be, understanding what the standard of care will be in the time frame that you are going to be launching. It’s a very difficult thing to do, often 10 - 15 years ahead but really challenging the teams to think about where that puck will be when the programmes moves through the clinic or when it launches to make sure they are being ruthless about the comparisons they do. This now goes back to the conversation around being outward looking versus inward looking. And then it was interesting, when we submitted the paper for review, one of the comments that came back from one of the reviewer's was - well if you do all of this you need to add a 6th R which is the right culture. Because what you are actually doing is changing the culture of the company and so you need to talk about how it back ships and he was actually, he or she was actually right because as we start to implement  the 5 R's to every governance meeting we have, through  every project review that we do, what you start to see is is the culturing shifting from one where science is being rewarded for just numbers of candidates, to they are being rewarded for proof of mechanism, for proof of concept, for launches, for diagnostic strategies and for publishing great research papers and it has shifted the culture from one that's being very inwardly focused, personal best to one that's outwardly focused, more collaborative and hopefully setting a few world records.

Mike Rea:                          Which is interesting. So, we, did you use incentive structure as a lever or was that a kind of after effect of getting people to focus in the right place?

Dr. Menelas Pangalos:       So the incentives changed and our global incentives in the company actually changed when Pascal joined where we didn't just have R&D incentives, we had incentives around R&D - which were phase 3 investment decisions, launches, phase II starts, and there's assessing of commercial goals which are around the growth drivers of the company which you can land everybody up in oncology, cardiovascular, metabolic, respiratory etc. and then  some financial goals and we were thrust to meet our objectives, we have to get all of these things - not just the R and D ones. So, the whole organizations actually got very well lined up. But for us the things that we rewarded scientists on were:- the quality of the work they were doing, so these good kills, or good moving forward in a CD package, coming forward you know a lot less candidates coming forward every year than we ever had, we were no longer the most prolific, but the quality was much higher and the teams had to be able to cover every aspect of the programme including what the developing plan looks like going forward to proof of concept. And then the successes, their rewards came and they demonstrated proof of mechanism, demonstrated proof of concept, when they get the phase III investment decision because I don't get to decide what goes into phase III, someone else has to put that through and so that you can’t game the system in that way.

Mike Rea:                          Yes. Interesting. We have always quoted the Brazil Germany World Cup final, cause as you look at the goals, clearly very big divide, but actually Brazil won the game on all of the surrogate metrics. They shot some goals, shot some targets, possession Brazil won.  

Dr. Menelas Pangalos:       But the goals count. Launching drugs count. So, the launching drugs counts and of course the challenges is, when you are in a research team launching a drug somewhere away. We were lucky that we had a few drugs that moved quite fast through the whole process. So, people got a sense that we could actually do this and then the other piece that was a very important measure actually for us is actually just the quality of the publications coming out of the organization. And if you look at where we were, I had an organization of about 5000 people when I joined and we were publishing about 200 papers and one nature or science paper. Today we are half that size, we are about 2500 people, we are publishing between 40 - 50 nature science sell papers a year. So even those, and of course when I first joined it was impossible, you couldn’t do drug discovery and good science, now it’s part of our DNA.

Mike Rea:                          It’s all the same thing.

Dr. Menelas Pangalos:       Yeah and people don't even question that, and of course what happens as a consequence of doing it is, people want to come and work with you, whether it is an academic collaborator, whether it is Biotech or whether it’s someone who actually wants to be a part of AstraZeneca. 

Mike Rea:                          Of course 

Dr. Menelas Pangalos:       So it’s made a huge shift to us and of course our move down to Cambridge is all part of that shift, it’s part of being close to an academic hotbed where there is amazing science because we have become much more open than we ever were, which for me again it’s part of my DNA in terms of being collaborative. Being collaborative in Cambridge is really, really easy because there is so many people you can collaborate with. And of course we have Oxford, London in our doorstep and the rest of the UK and the rest of the world, we have tried to join UK and Sweden together to try and create a European hub and the partnerships we have now which when we have many and some quite unusual, we actually have AstraZeneca scientists work in the same lab as an academic scientist, shared goals and they are working on basic research as well as drug discovery programs. It’s made us much, much more porous than we have ever been.

Mike Rea:                          The thing I mentioned to you before was, we have been doing the pharmaceutical innovation index for 9 years now. And if you look where AstraZeneca started to where Astra Zeneca came number 1 this year. It’s been a rapid turnaround. I think because all the things that you recognize and our index measures, did you launch and did you launch successfully? Did you get reimbursement?  So clearly you have gone from that period when you were doing a lot of internal R&D anywhere to suddenly getting somewhere.

Dr. Menelas Pangalos:       And it’s been - the wins are important. Celebrating the wins when you get them is actually one of the things that galvanized the organization. But you know, I think that are the three key things, being really focused on high quality science, being really collaborative and open, and then executing flawlessly when it comes to moving through the pipeline and launching.

Mike Rea:                          When you said, you came up with the five R’s. Was that a process to come up with or were those the five things that mattered the most or did you go in with -?

Dr. Menelas Pangalos:       No actually look, you know Pfizer had published their three pillars,  these things are very intuitive and most interesting is people ask me about - because these are you know, they're bleeding obvious, you’d think everybody would do it, people ask me - why do you publish this, because it’s like a trade secret. They're not! Everybody should be doing this and I think many companies do, but Actually many companies don’t and when I ask people that join us from other companies about what's different about the way that we do it versus others, it’s that we really do practice this. I don't let well not I; we don't let programs come forward if the odds don't look good, and if they do come forward with a gap, let’s say we’re not sure about right safety, we have a question mark about whether we’re going to have the right dose versus safety liability. It’s the first question we ask in the clinic. So, do you really understand the proof of mechanism, the PKPD and workout the margins, so it really focuses the attention is you understand where your liabilities are in a program to go there first and workout whether you can flip a red to an amber or green – 

Mike Rea:                          So, it’s okay to go at risk as long as you – 

Dr. Menelas Pangalos:       As long as you know what the risk is and you're very clear about what the killer experiment is.

Mike Rea:                          Hoping it’s not there.

Dr. Menelas Pangalos:       Yeah and then of course the first few years projects will come and you say no once, you say no twice, you take teams through it and teams change their behavior.

Mike Rea:                          Oh, you do mean it?

Dr. Menelas Pangalos:       Yeah, yeah. Doesn’t make a difference. It’s kind of important, right. There's got to be some tease to it.

Mike Rea:                          So, is there a definition of innovation at AstraZeneca? Because one of the things we always find is that everyone has a different approach to what it is and what it means.

Dr. Menelas Pangalos:       As I said earlier, it means so many things to different groups. So, for my precision medicine group, innovation would be developing the first plug-based DNA test for EGFO - it’s very different to my oncology therapy, it should be looking to identify a new target or pathway and get the first molecules or the first crystal structure that target with the molecule. So I think innovation really is different things to different groups, I think as I said earlier the most important thing is that whatever we choose to do and whichever areas we’re focusing, whether its Crispr or whether its Protacs or whether it’s a new – some other drug modanity or something around new safety models that improve our prediction, that we are aware of what's out there, so we’re not re-inventing the wheel. We’re working with the very best people and we’re pushing the boundaries of science so that when hopefully we’ve cracked something, when we publish it, people aren't saying ‘so what’. I’d really like us to be viewed as driving science forwards and not just helping ourselves but actually helping the fields that we work in also get better at what they do, and that culture piece is really important because it’s one of the things that I think can make us a little bit different. When we moved to Cambridge, our new building in Cambridge is right in the Addenbrookes campus, the Addenbrookes hospital, its next to the Papworth hospital and then on the other side we’re opposite the laboratory for microbiology, the MRC microbiology. More Nobel laureates than any other institution in the world and an incredibly, if you want high powered science that's one of the places to go in the world and I was talking to John Savalo at the time, he was the CEO of the MR center, ‘wouldn’t it be great, given that we’re going to be in Cambridge to see if we can start working with the MRC, with the LMB’ and so we put a small pot of money together that we co funded and I went and saw Hugh Pelham who was the director at the time and I said, let’s try and do something and of course his natural first inclination was well you know, we’re all very, very smart and you're from industry and we don't want you to suck our brains dry and us get nothing back. Which I think is – I think pharma has moved on a long way over the past few years but I think still in some circles the [inaudible 23:55] of what we do and how we work – and so we worked really, really hard to build a strong relationship with the LMB and to actually make it a very easy way to get – we created this pot of money that basically PI’s from AZ and the LMB, to come and apply for, and they can get a post doc and it’s a two pager and it would be very, very quick and easy and not bureaucratic and Hugh and myself would review this and we’d say yes or no. Based on the quality of the science.

Mike Rea:                          Together?

Dr. Menelas Pangalos:       Together, we did it together. And it was – of course the first round was not particularly well subscribed but today we work with more than half the PI’s in the LMB, collaboratively, and they get back as much as – because they can see that we can do things, we can create molecules for them, we have certain capabilities and technologies that they don't have access to, but more importantly there's actually a lot of overlap in terms of our common interest. And so, when you put us both together, we actually get more powerful because we’re obviously quite plad in our thinking, they're quite basic in their thinking, we put it together and actually magic happens, and we've got some amazing stuff that's going on working with them. 

Mike Rea:                          Which is an interesting – I think your comfort with ‘open’ is an interesting differentiator for you in that way that you described this long-term approach, proof of concept if you like of going in. Have you found it easy to have your scientists behave the right way in the collaboration?

Dr. Menelas Pangalos:       It’s been an evolution right, because initially we were incredibly closed. We didn't want to share anything. Everything was proprietary and you just do it in baby chunks and you chip away, you chip away and eventually people get comfortable and there's many examples, of course we had to do it – because if you think of where we were and having to try and change the culture quickly, one of the best ways of changing the culture is actually bringing external scientists in that can show you what world records they'd make. 

So for example, we did another collaboration with the MRC, we made lots of our molecules, clinical molecules available to MRC scientists to try and find new indications for which then spurred the - NCATs was happening as well, and we’re one of the companies that has the most molecules, both clinical and preclinical in those types of things, you know when we set up the bio park in [inaudible 26:17], park, we had this huge site that was half empty and I used to wander through the corridors going from one group to the other and there would be those empty laboratories, they used to call it tumbleweed labs where you could hear the winds rushing through and it was a demoralizer and from the era when everyone was investing in bricks and infrastructure, bricks and mortar and infrastructure, because they thought they could just industrialize R&D and find out the very hard way that you couldn't, so then the organization shrank and we had these huge buildings. And so, what we did was we said – lets collapse our footprint on the building and let’s bring biotech’s in. So that was actually our first bio park and in contrast to other bio park cities, let’s not have the biotech’s that come in partitioned and walled off. Let’s have them using our cafeteria, our coffee shops, our shared spaces, let’s have them potentially using our equipment if they want to, so they have to buy capital, and we can really try and share our infrastructure, make ourselves good partners, help give them advice when they need it, if they need some regulatory advice some clinical advice, without asking for anything in return, it does start to encourage biotech’s to come in, it makes us again start to forge relationships with other companies and probably most importantly it starts to fill the space up and make you feel vibrant and energetic and full.

Mike Rea:                          Which is an interestingly human approach – there's this great book called Obliquity which talks about getting what you want but approaching it in an oblique way and you're described a lot of internal and external signals about your readiness to embrace the future instead of the past. How important is that -?

Dr. Menelas Pangalos:       And treat people like grown-ups, the other thing is treating people like grown-ups, because again when we first set this up they were like – what do you mean they're going to be wandering around – everyone signs a CDA, if they don't follow what they should be doing they’ll get kicked off the side, so I think if we go in with the assumption that everybody is going to behave themselves and actually follow the appropriate principles, then actually you're pretty safe. You don’t have to have barriers and passes and everything else, and actually we’ve done it in Boston, in Wharton and actually created – we had a half empty building in Boston which is now packed and actually has a waiting list for biotech’s to come in and in Gothenburg as well. Now in Cambridge it’s a little bit different because we’re already in the middle of the biotech cluster so it’s a little bit less important, but for those sites it’s a little bit more isolated and not right in the midst in Kendall square or not in England for example, in Sweden. It makes quite a big difference having this sort of vibrant environment. 

Mike Rea:                          Kendall Square has almost become a hiring hub rather than an innovation spreading hub, because people aren’t necessarily collaborating there, just hiring the folks from – 

Dr. Menelas Pangalos:       Well the nice thing about this – what I find about us being in Cambridge is you know–  you go to a coffee shop or you drop your kids off into school, and you bump into someone, happens to be a hematologist who has just come over, is working and you can start to talk about things that we couldn’t talk about when we were in Cheshire, because the environment is just different. So, it’s actually amazing, how many collaborations and relationships have been initiated through these informal connections. So one of the things that I've been trying to do over the years is try and generate as many opportunities for our scientists to have informal connections, whether it’s with people in the bio houses where the collaborators were, you're just making it easier for the serendipitous to happen and then again innovation can happen.

Mike Rea:                          Yeah planning for serendipity. Absolutely. So, one of the things that's been apparent from the outside is the way that you've approached innovation as an active process and five hours is a very good illustration of that. Do you measure it year on year?

Dr. Menelas Pangalos:       So, we measure lots of things. I have got a great portfolio management group. I measure it but don’t necessarily incentivize on it. So, I think we measure how many proof of mechanisms we have done, we measure our proof of concepts, so obviously we get rewarded for things like phase III investment decisions and launches. We measure how many publications are coming out, from which groups. But I try not to get to, we tend to do - first full three-year holding averages, so no one is ever pressured into doing something in one year and getting a number. And actually, the focus really is on the quality of what people are doing, and how innovative is it, how inventive is it. Is it going to lead to hopefully to break through in the therapy area in terms of capability?

Mike Rea:                          So, you have got trendlines rather than timelines.

Dr. Menelas Pangalos:       Yeah so, we are quite careful about that because I just think it drives the wrong behavior if you are not careful.

Mike Rea:                          Right, People start gaming whatever they are given as a target.

Dr. Menelas Pangalos:       Sounds so brilliant doing that. You know you give whatever target you give them they are good at hitting them. Again, the CD one, it’s amazing what behave - in 2005 - 2010 period, because there were [inaudible 31:30] the number of backups we had in the pipeline. Backup number 1,2,3,4,5,6,7, then of course all the backups had exactly the same probability as the lead molecule. So, we don’t do backups anymore.

Mike Rea:                          Right, I remember sitting in Sweden once, listening to the team saying that it doesn’t matter if this one doesn’t work because you have got a backup - how does that not matter? Just because you are in a job for another couple of years, but - 

Dr. Menelas Pangalos:       Exactly right. Now unless it’s a really, really important program they know they are going to get one shot so they've got the time, they have got to work out the quality of the molecules versus taking a bit more time to get rid of a few more of the work. So, it’s a real balancing acta and for some plans we will have backups, but they are unusual. Less than 5% of our pipeline now has backups.  

Mike Rea:                          Interesting times, and what’s been the biggest learning for you as a director of all of this activity over the period?

Dr. Menelas Pangalos:       You know I've worked in different companies now, there's not a lot I would have done differently. I have seen Wyeth go through - before it was acquired by Pfizer, go through relatively similar transformations of what [inaudible 32:45] said of R&D, time was much more focused on a number of things. But he had a leadership team that was very passionate about science. And so, we were all very much focused on the quality of the science. I think the biggest piece is celebrating the wins, but also celebrating the good failures and then exemplifying them - constantly exemplifying the individuals, teams, projects. You know we were lucky that we had to grow in [inaudible 33:15] in particular, which came from our teams in Orderly Park actually which went from – you know we put the resources behind it and there was a new generation when I arrived and we moved it in the CD and then it went from CD to launch and in about three years, now that was a brilliant thing to have coming along because it was an example of what you can do.  And of course having a quick win, that also made the organization feel better about itself, Limpasa which was written off, we resurrected and brought back to line, even though we’ve never really stopped working on it and the Imed, when Pascal joined me asking me why is this not in phase III, suddenly pumped everyone's chest up and then everything we’ve been doing at Astra has been about rebuilding and then [inaudible 34:04] really well your artistic molecule. So, there's lot of really cool stuff in every area that we’re working in, of course that makes it easier to walk on and keep going. 

Mike Rea:                          So, with what you described sounds like the early stage of an exponential growth rather than just seeing the results - 

Dr. Menelas Pangalos:       I hope so. So, the other piece I love about our company is I think we are a humble company, starting with Pascal and his leadership team all the way through our leaders and our scientist. You know once we got better, I think - I have said this to you previously, we are still failing 80% of the time. Right so we have got lots of room for improvement and very few companies that have been able to continuously in 5 years cycles continue to be at the top end of the productivity chart. So, we have had a good 5 years. That is one set of 5 years so for me the huge chance is making sure we continue to do this. So, the pipeline continues to fuel new launches and new medicines, that No one in the organization gets complaced in any way- shape or form. They remain humble collaborative, open and porous to ideas whether they are from inside or outside.

Mike Rea:                          Which has been an interesting characterization of the change I think and having that humility seems – adds more to AstraZeneca, in my external perception to where it is today. So, what drives you personally in this space?

Dr. Menelas Pangalos:       I have always been - it’s difficult now not to think of myself as a leader, but I always used to get really upset when people called me a line manager or a leader versus scientist. I'm a scientist first and foremost. I get excited about seeing people’s data. Not the bullet points from the power points, the actual data. The graphs the – 

Mike Rea:                          And a scientist in your approach to the day job as well, I guess.

Dr. Menelas Pangalos:       There's a keenness, so I still have a couple of students and I don't spend anywhere near enough time with them but I’ve tried to keep my academic links, but more importantly it’s just to encouraging science, constantly encouraging science, constantly speaking to our scientists. Going and seeing their projects, seeing them present their posters, seeing and encouraging the next generation of science and scientist just to come through. To me that's the first driver is just the quality of the science and being an organization that you can say and be really proud is doing good science. 

Second one is about being collaborative. I’ve always been quite collaborative by nature and I get irritated actually by people that hoard data or think that they can't share things and so – 

Mike Rea:                          Yeah, I’ve noticed cause you're active on twitter too that that's – how do you feel about that as a collaborative exchange.

Dr. Menelas Pangalos:       It’s good so we’ve got this new thing called Workplace which is a spinoff from Facebook and its actually working really well, where you can start to post – so someone will post a bit of scientific data and then you can ask questions and you can generate – Twitter is a great place for – I see it more for news and getting people’s opinions on things that are coming out., particularly if they're from outside of AZ. But this being open to ideas wherever they come from and being porous and you can talk about being collaborative and then you can be collaborative and I really want it to be collaborative. So, I am probably being too open rather than less open. If I ever have to choose if it works for us, I think the risks are relatively small and the upside is huge. And then – there is two things, and then the other piece that I'm incredibly passionate about which – actually Katherine in the room here, was an example is developing our talent. So really I’ve seen it happen all through my career actually as I’ve grown through the industry, but surrounding yourself with people that are smarter than you are, but also pulling people up more rapidly, and I kind of think about my career journey and I’ve been lucky to have some managers that were quite – leaders that were prepared to take risks on me and sort of propelled me up the line, probably more quickly than I was ever expecting, not probably, a lot more than I was ever expecting, but some people getting there – you're sure about that? And I kind of have this same conversation with my leaders and their leaders about take risks on people. If you haven't got people in places that are a little bit uncomfortable and really pushing themselves and finding out they can really swim versus sign, you'll never accelerate people’s careers. So that's something that we spend quite a little time, with my team and their team. So, I spend a little time doing talent development and really trying to pull out the bright sparks faster than they would otherwise have moved

Mike Rea:                          That's interesting. I’m going to ask Katherine; do we have two more minutes? I'm going do the 2-minute timeline. 

Okay so, within a spurt of a 2-minute rule, so what – you clearly read a lot, what books do you go back to as your core – which books do you recommend?

Dr. Menelas Pangalos:       So, the one that's probably closest to my heart from a heartstring’s perspective is probably Roy Vagelos’s autobiography around Science, Medicine and Merck.

Mike Rea:                          That was a great period.

Dr. Menelas Pangalos:       And for me he was – apart from [inaudible 40:04] obviously a Greek heritage like I am, I’ve never had a scientist in my family, so reading his – I just read his book and it was just amazing what he did and Merck for me, as you know I was doing my PhD, that was the prototypical, what a great R&D organization looks like and I actually did a PhD that was sponsored by them and Roy was like a hero. He was one of the first science led CEO’s and he took a company and really to me he epitomized the science at organizations and so – that's probably one of my favorite discovery books that I read in kind of a – I’ve never actually met him, but I would love to meet him and I just think he did an amazing job and actually it so happened when Merck lost that science focus – they got it back now and I think it made a huge difference, that for me has been one of my guiding lights. All through my career. And then when I was at Wyeth actually I met Bill George for the first time and we’ve met him – I’ve been at AstraZeneca a few times, he’s written a book called Discover your True North and that's about what are your guiding principles, what are your true norths and sticking to them, well actually not sticking to them, knowing what they are so you can stick to them and that has been something that again I have used, when I first joined the company I wrote down my list of four or five things that were the most important things for me, but I never should have talked about over the past few minutes and sticking to those principles and not ever letting them go, because they're what define you, and have been really important.

Mike Rea:                          Fantastic. And what are your ambitions for the next five years?

Dr. Menelas Pangalos:       To do this. I think we have the best jobs in the world honestly. Scientists in the organization, we’re able to turn science into medicine and really see the impact of what we do and for me, I’ve completed part one of my journey at AstraZeneca, we now need to show that we can do it again, and that we can hopefully improve even further. It was something that we can continue through, I want to just keep doing that, I love doing what I'm doing.

Mike Rea:                          Fantastic, and one thing that you wished that I’d ask you that I haven't asked you. That's the last question.

Dr. Menelas Pangalos:       How do you relax? As I'm sure you know, you know from speaking to – these are pretty intense jobs, and so my family probably are the thing that brings me down to earth and you're talking about your kid being a guitarist, my kids they're young, they're nine and ten, my wife’s a scientist but they're all very good at when I come home to making me silly daddy and just bringing me completely down to earth and I find that the most relaxing thing out there, being with my family.

Mike Rea:                          Excellent, well thank you so much and I know there's a thousand questions I could have continued to ask you. Hopefully we’ll get to do it again. Thanks. 

Dr. Menelas Pangalos:       Thank you very much.

John Carroll can be found at:

@johncendpts on Twitter or

www.endpts.com

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