The Lowdown: McKillop gives his opponents the treatment

AstraZeneca's boss is a pugnacious defender of the drugs industry, as Heather Tomlinson discovers
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The Independent Online

The photographers want animation - so you've got to get me angry," jokes Sir Tom McKillop, chief executive of AstraZeneca, the UK's second- largest pharmaceutical company. Sir Tom is bending to the will of two photographers who are snapping away at his office in London's Mayfair.

It's not difficult to rile the Glaswegian. Simply mention a critical City analyst who rates the company a "sell". Sir Tom calls his views "rubbish" and you get the feeling that if he caught up with him, said analyst would meet with a Glasgow kiss.

Sir Tom doesn't take lightly any criticism of his company, formed by a merger four years ago between the UK's Zeneca and Sweden's Astra. "This has been an extremely successful merger by any criterion you choose to consider," he enthuses.

The ardour of the fit, resolute 60-year-old, who says he has no plans for retirement, is not quenched by the company's sales figures. They have fallen from £12bn in 2000 to £11bn last year, and the share price is at similar levels to when the merger was completed in April 1999. Sir Tom points out that at the time of the deal, AstraZeneca was facing the loss of sales from three of its top products: Prilosec, the bestselling ulcer drug; Zestril, a heart drug; and the breast cancer treatment Nolvadex (tamoxifen). The patents for all three have now expired, so generic drugs companies are busy selling them at knockdown prices.

But Sir Tom takes a positive view: "No company I know of has faced losing half of its sales in a relatively short period, and come though it the way we have."

The saviours have been Nexium, another ulcer drug, the asthma drugs Pulmicort and Symbicort, and the schizophrenia treatment Seroquel. AstraZeneca also has potential "wonder drugs" up its sleeve that could take the place of its former blockbusters. Iressa, a treatment for lung cancer, is in its first few months of sales in the US, and the anti-blood-clotting drug Exanta is in the final stages of clinical trials.

Tthe drug that investors are most excited about is Crestor, which lowers cholesterol levels. A big sales push started in the US last week, but the product is up against Pfizer's Lipitor, and critical analysts question if AstraZeneca has the financial firepower to spend the estimated $1bn (£620m) or more needed to advertise and market it in the US, the most lucrative of pharmaceutical markets.

But Sir Tom is adamant: "We have all the firepower we need." The reason for the mega-merger that created AstraZeneca was to gain the resources to launch such blockbuster drugs. "Both Astra and Zeneca had grown from nothing at the end of the Second World War, to good medium-sized pharmaceutical companies," he explains. "But the amount of sales and marketing effort needed to go out and reach a global audience had gone up dramatically. Both companies had products coming through in their pipeline that could not fully realise their value if we had stayed at the size we were."

Sir Tom, who holds a PhD in chemistry, became chief executive in 1999 after running Zeneca's pharmaceuticals division. He says AstraZeneca has no intention of doing another big merger, but predicts that his rivals may be forced to take this route.

The European pharmaceutical industry is going through troubled times because of the price restrictions set by governments, says Sir Tom. "Let me tell you how dramatic it is," he exclaims. "Ten years ago, the European market was bigger than the US market for pharmaceuticals.

"That has completely changed now. If you look at the products introduced in the last four years in the world, then you find that 70 per cent of the sales are in the US. Something like 20 per cent are in Europe."

Whatever the profits to be made in the US pharmaceutical market, it also has a big drawback: litigation. Companies face a myriad of class action lawsuits from aggrieved users of medicines. "Everyone sues everyone else all of the time, it would seem," sighs Sir Tom. "If anything is going to undo America's success, it is this legal system. If the market was not so large and so successful, you would not operate there."

The US authorities are also crossing swords with the pharmaceutical companies. AstraZeneca has had to pay out $335m to settle allegations of fraud against the country's health insurance system for the poor and elderly.

The high prices charged in the US are often criticised, especially when compared with prices over the border in Canada. But Sir Tom says that is not the fault of drugs companies, which must recover development costs, and points to the differences between the open market in the US and the government-dictated prices that apply in most European countries and in Canada.

"Companies do not choose their price in most markets," he says. "It is a kind of blackmail. If you don't make the product available, the company gets highly criticised, [but] it's the government stopping it going on the market at the price the company wants."

In developing countries, however, the full prices of patented drugs are out of the reach of most people. The cost of Aids drugs to Africa has left pharmaceutical companies facing particular criticism. AstraZeneca does not sell any treatments for Aids, but Sir Tom defends the industry and puts the blame at the door of African governments. "Many companies have been desperate to make their products available for nothing," he claims. "There are much more fundamental questions in Africa, such as the healthcare systems that deliver these products. Of course, it is much easier to write the other kind of article, with a picture of a wee boy with Aids. It tugs at the heart - it is very hard to counter that."

AstraZeneca's only project for diseases affecting the developing world is to research treatments for tuberculosis. If a drug is found, says Sir Tom, "we would be expected to make that available at a very low cost to some of the poorest parts of the world".

AstraZeneca's main focus, however, is on drugs for the chronic ageing diseases that mainly affect the Western world, such as Parkinson's, Alzheimer's and MS, and for conditions such as a stroke. "The cost of treating an ageing population, if we have to nurse them or have them in hospital, is absolutely horrendous," warns Sir Tom.

"I believe that society has got to invest in understanding these diseases."