Online Extra: Boston Scientific's "Professional Worrier"
Boston Scientific said it needed help, so Jim Tobin answered the call. That was in early 1999, when the medical-device maker was shaken by a coronary-stent recall and accounting trouble in Japan. Tobin had recently given up the CEO post at Biogen (BGEN ), and he was hoping to ski more often and maybe learn to fly. Instead, he started to clean house at Boston Scientific (BSX ).
Now the company is on the brink of a billion-dollar market opportunity as it awaits Food & Drug Administration approval for Taxus, its new drug-coated coronary stent. Tobin spoke with BusinessWeek Boston Correspondent Faith Arner about his busy four years at Boston Scientific and the challenges ahead. Edited excerpts follow:
Q: What opportunities did you see when you considered taking this job in early 1999? A:
Q: What opportunities did you see when you considered taking this job in early 1999?
A:I didn't really think of it in those terms. I thought I had retired and was going to go ski or learn to fly. I had a long list of things I was going to do. So I was talking with Pete [Nicholas, Boston Scientific's chairman], and he said "Look, I need help." What are you gong to do, say no? Somebody was asking for help, and I said O.K., I'll help.
Q: This was just after a product recall. Is that what they needed help with? A:
Q: This was just after a product recall. Is that what they needed help with?
A:Well, there was one important recall, and there was something that had happened in Japan. There were a series of things that had happened that had them on their heels. And I didn't really know what I was getting into. When somebody asks for help, you say yes.
Q: When you first got here, was it mainly a housecleaning operation? A:
Q: When you first got here, was it mainly a housecleaning operation?
A:No, not so much. The company had outgrown itself. It kind of hit the wall in terms of managing all the things they had acquired [in the 1990s]. So when I got here, it wasn't so much a matter of housecleaning as it was taking what was there, organizing it right, filling some empty chairs.
There were significant positions that were empty: Here we are, just had a major recall, and there was no head of manufacturing when I walked in the door. There was no head of quality. There was no head of regulatory, there was no head of clinical.
So filling the empty chairs was the thing I had to do first and then organizing around that. We had had a series of divisions that were allegedly vertically integrated businesses. What I did was turn divisions into sales, marketing, and R&D operations, and take the plants and quality and regulatory things and made those corporate functions.
There were no problems that I hadn't seen before. It's just a matter of working through them, and it takes a while. It took longer than I thought.
Q: How long? A:
Q: How long?
A:It really took three years before I felt we had things moving off in the right direction.
Q: And now you're on the verge of doubling revenue and earnings next year with the launch of Taxus. What are you doing to prepare for the launch? A:
Q: And now you're on the verge of doubling revenue and earnings next year with the launch of Taxus. What are you doing to prepare for the launch?
A:We have put in place capacity to handle 75% of the current market with surge capacity over that so if you find your size mix is skewed in a direction you didn't anticipate, you can react quickly. And when I told people that in January, people snickered in the audience. Everybody knew we were fifth out of four. We were the gang that can't shoot straight, and we had a cytotoxic drug, and we're stupid. All these things. J&J is J&J [Johnson & Johnson (JNJ )], and if we were lucky, we might get an approval, and we'd get 20% market share. I've never believed any of that.
Q: You think you'll get 75%? A:
Q: You think you'll get 75%?
A:I don't know if we'll get it or not. But if we're going to get it, we have to be able to handle it. J&J has 100%, but they could be selling twice what they're selling if they could make twice what they're making. If you're going to get the most out of the product, you have to have the capacity. So I'm spending about $130 million just on capacity. That's a lot of money, but if this turns out to be multiple billions of revenue, you'd get that back in a hurry.
Now we have to prove to the [FDA] it's ready for prime time. Presuming we can do that, we get approval around the end of the year or early next year and then we launch. Most people believe it'll be in the first quarter of next year.
Q: What are you spending your time on now? A:
Q: What are you spending your time on now?
A:I go where the fire is. And the fire is what do we do for encores. So I'm spending time on that. And I do spend time on making sure that we get approval and that we can make this stuff when it happens.
Q: What's your biggest worry? A:
Q: What's your biggest worry?
A:I suppose the biggest concern is what you don't know. Until you have done this for a while, you don't know where the potential gremlins are. Obviously you don't know what you don't know, so I just worry. I'm a professional worrier.
Q: Several risks are out there -- the FDA, patents, the Justice Dept. inquiry. Could any of these trip up the launch? A:
Q: Several risks are out there -- the FDA, patents, the Justice Dept. inquiry. Could any of these trip up the launch?
A:The [FDA] piece can always take longer, it can always go wrong, but so far so good. And the other things have been around for years. They're important things, but after a while, you just live with them. You never know how these things are going to roll forward. The legal process is slow and sometimes convoluted, things don't always appear to be as predictable as you'd like, so there's always uncertainty.
Q: Analysts say J&J seems to have the stronger patent. Could you end up paying royalties? A:
Q: Analysts say J&J seems to have the stronger patent. Could you end up paying royalties?
A:What do you think the analysts know? They're wrong.
Q: So you'll fight it out in court? A:
Q: So you'll fight it out in court?
A:Yeah. The real issues are: Does it work, can you prove it statistically, will the agency and the customers believe you, and if you get an approval, can you make it? That's all there is to it. And all this other stuff is a sideshow.
Q: Why is the Justice inquiry suddenly picking up? Because the statute of limitations is running out? A:
Q: Why is the Justice inquiry suddenly picking up? Because the statute of limitations is running out?
A:I think so. Though there are some procedural issues being fought out now in front of a judge. They call it time-out on the statute while the judge figures this out. So it could go beyond the original time the statute ends. It probably will. It goes on as long as Justice wants it to.
Q: Does the scope of the investigation include the Express stent, the basis of Taxus? A:
Q: Does the scope of the investigation include the Express stent, the basis of Taxus?
A:That has been mentioned, but the focus has been on what happened in '98. That's where the time has been spent. But it has come up.
Q: Is there a threat to the Express that would affect Taxus? A:
Q: Is there a threat to the Express that would affect Taxus?
A:The Express is ours. It doesn't matter what anybody else says or thinks. It's ours. We developed it from scratch, and the risk there is just the random risk that always is there if there's something going on in court. That's a fact.
Q: What's your second act? A:
Q: What's your second act?
A:There's a list of things. There aren't going to be any more multibillion-dollar opportunities like Taxus is. But there are lots of $500 million opportunities. There are initiatives in women's health, abnormal uterine bleeding, endoscopy. And so on and so on. There's a list of a dozen of these things.
There are a lot of opportunities, not all in cardio area. Some in the endosurgery area as well -- the one-third of our business that just keeps trucking along and people don't think about because it's fragmented.