When These 3 Healthcare CEOs Speak, We Listen

Our Motley Fool contributors think these CEOs have a track record worth paying attention to.

Brian Feroldi
Brian Feroldi, George Budwell, and Todd Campbell
Oct 11, 2015 at 8:43AM
Health Care

Image by geralt via Pixabay.

We Fools tend to pay particular attention to the people running the companies we invest in, since they can have a major influence on the long-term success of an investment. Better yet, when we find a leader with a long track record of success, we tend to listen when they have to say, as their pearls of wisdom can often translate into future investment opportunities. 

We asked our team of Motley Fool contributors to highlight three CEOs from the world of healthcare who have a long history of success at the top and who we think are well worth the time to pay attention to. Read on to see if you agree.

George Budwell: As the CEO of the world's largest drugmaker by sales, Pfizer's (NYSE:PFE) Ian C. Read is one of the most closely watched figures in the global pharmaceutical industry, and for good reason. Since he took the job on Dec. 5, 2010, Pfizer's share price has nearly doubled, and investors have enjoyed a clockwork-like increase to the dividend about every 12 months to boot.

What's most impressive about his track record in regard to creating value for shareholders, though, is that Pfizer's total revenue has fallen by 23% during his tenure because of the loss of exclusivity for several former blockbusters. This is a noteworthy feat that not all Big Pharmas have been able to pull off.

I think Read's success during this particularly tumultuous period can be attributed to his ability to keep investors focused squarely on the future. To do so, Read and his executive team have placed a heavy emphasis on buoying the company's bottom line through billions in share buybacks. And he has astutely avoided overpaying for gigantic acquisitions simply to juice the company's top line in the short term -- a common trait among many his predecessors that eventually led to their downfall. Read has thus been able to start replenishing lost revenue through organic growth, such as the highly successful launches of the pneumococcal vaccine Prevnar 13 and the breast cancer drug Ibrance.

Looking ahead, Read's slow-but-steady approach to returning to growth may ultimately give the company a competitive advantage in the emerging fields of next-generation cholesterol-lowering and cancer drugs. In short, Pfizer's CEO has smartly allowed his competitors to identify the main challenges in these groundbreaking areas of medical research and subsequently put the drugmaker's vast resources to work to develop best-in-class therapies designed to overcome the competition's first-mover advantage. That's a fairly ingenious move, and a lesson other pharma CEOs might want to take to heart.

Todd Campbell: Some CEOs have track records so good that investors shouldn't ignore them. One of those CEOs is Patrick Soon-Shiong, the head of a family of biotech R&D companies that includes the publicly traded NantKwest (NASDAQ:NK).

Soon-Shiong has built and sold not one but two separate companies, and each time he's made billions of dollars for his investors. The first time around, Soon-Shiong turned American Pharma Partners into a successful maker of generic injectables, and the second time around, his Abraxis BioSciences developed Abraxane, an encapsulated formulation of paclitaxel that should achieve billion-dollar blockbuster status this year for Celgene.

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Soon-Shiong's latest project attempts to unlock the power of natural killer (NK) cells to reshape cancer treatment. 

NK cells are part of the body's innate immune system, and as such, they're first responders tasked with destroying abnormal cells. Although a lot of industry effort is focusing on re-engineering T-cells so that they bond with antigens expressed by cancer cells, T-cell engineering is costly and time-consuming, and it relies on harvesting T-cells specific to the patient. 

Unlike T-cells, NK cells can recognize errant cells that don't express antigens, and they don't require patient matching. Using technology that would allow NK cells to target various proteins called neoepitopes that are found on cancer cells, but not on healthy tissue, could lead to NK therapies that are less costly to develop and safer to use than T-cell therapies, which have been associated with life-threatening cytokine responses

Soon-Shiong seems to believe that this kind of a NK therapeutic approach could be biotech's next big thing, and given his track record, we should probably give him the benefit of doubt that he'll be proved correct. 

Brian Feroldi: One healthcare CEO I always listen to is John Martin, the current chief of biotech blue chip Gilead Sciences (NASDAQ:GILD). Martin has decades of experience in the healthcare world and has held various leadership positions at Bristol-Myers Squibb and Syntex Corporation. He joined Gilead in 1990 and took over the top seat in 1996, and the performance of the stock during his tenure speaks loudly to his tremendous track record of value creation.

GILD Total Return Price Chart

Unlike many other healthcare CEOs, Martin came up from the research side of the drug-discovery business, so he understands the science of the industry better than many other CEOs in the space, and his background has helped him to make great deals over time.

Over the years, Martin has spearheaded many successful acquisitions, many of which have been for well under $1 billion but helped to bring important compounds into Gilead's pipeline, and several of those acquired drugs are currently producing huge revenue for the company.

Martin also isn't afraid to bet big when he sees an attractive asset, as he did in 2011 when he paid $11 billion to acquire Pharmasset. At the time it looked as if he overpaid for the company, but that acquisition proved to be a stroke of genius, as Gilead acquired Sofosbuvir in the deal. That compound would later turn into two blockbuster drugs: Sovaldi and Harvoni

Those two drugs rang up sales of nearly $9.5 billion in the first two quarters of this year alone, so that $10 billion price tag looks like a steal in hindsight.

Martin now believes that Gilead can find cures for both Hepatitis B and AIDS, and given his long history of success, I wouldn't bet against its success here.