Takeda Breaks Tradition in Naming Outsider as Heir Apparent

Takeda Breaks Tradition in Naming Outsider as Heir Apparent

Takeda Pharmaceutical Co. (4502), the more than 230-year-old Japanese drugmaker, is starting to make a practice of breaking with tradition. The drugmaker last week named Christophe Weber, a French national who has never worked at Takeda, as chief operating officer and the planned successor to CEO Yasuchika Hasegawa. Weber would be the first non-Japanese to lead the company and among the first outsiders brought in to helm a major Japanese company.Takeda is betting on the 20-year GlaxoSmithKline Plc (GSK) veteran to execute a global expansion plan as rivals’ inexpensive generics cut into sales of its mainstay Actos diabetes drug. Weber’s pharmaceuticals career has taken him to France, the U.K., Belgium and Singapore and now Japan, where a history of promoting leaders from within can make it difficult for CEOs to overhaul operations or lay off employees.

“The defining fact isn’t so much that he’s a foreign national; he’s not from Takeda,” said Robert Dujarric, director of the Institute of Contemporary Asian Studies at Temple University in Japan. “A guy who’s not from Takeda, whether he’s Japanese or foreign, can much more easily fire people, restructure and close businesses, start new ones.”

Takeda has been buying companies and stakes and hiring senior executives from overseas to expand internationally. Weber, who will join the company by April, has the advantage of entering a global management team that’s already mostly non-Japanese and holds all top-level meetings in English.

Outside Hiring

Takeda hired Francois-Xavier Roger as chief financial officer in September and has named David Osborne global human resources officer. Frank Morich has been added to the company’s board, which had only Japanese members until 2009.

Tachi Yamada, who joined Takeda’s board in 2011, was formerly head physician at the University of Michigan, head of research and development at Glaxo and leader of global health programs for the Bill & Melinda Gates Foundation.

“Weber’s appointment will further raise Takeda’s profile in the global arena,” said Atsushi Seki, a health-care analyst at Barclays Plc (BARC) in Tokyo.

Takeda has gained 31 percent in Tokyo trading this year, trailing a 50 percent jump in the benchmark Nikkei 225 Stock Average. The drugmaker fell 0.8 percent to 5,060 yen as of 9:01 a.m. local time. The Bloomberg World Pharmaceuticals Index of 69 companies has climbed 28 percent this year.

The drugmaker gets more than half of its revenue outside Japan, and about two-thirds of its 31,500 employees are overseas.

Ghosn’s Path

The hiring of outsiders as CEOs, while common in markets like the U.S., is rare in Japan. In the U.S., Yahoo! Inc. recruited Marissa Mayer from Google Inc. and Hewlett-Packard Co. appointed Meg Whitman. While Ford Motor Co.’s choice of former Boeing Co. executive Alan Mulally is among the success stories, there have been failures, including J.C. Penney Co.’s recruitment of Ron Johnson from Apple Inc.

While as a non-Japanese, Weber follows a path trod by Nissan Motor Co. CEO Carlos Ghosn and Howard Stringer, the former Sony Corp. president, the latter were promoted from within.

Ghosn has been credited with turning around Nissan, while some top executives from overseas have struggled to fit into Japan’s management culture. Last year, Craig Naylor resigned as CEO of Tokyo-based Nippon Sheet Glass Co., citing a clash with the board.

Naylor’s departure from Nippon Sheet Glass cut the number of non-Japanese executives heading Nikkei 225 companies to three at the time including Ghosn, Aozora Bank Ltd.’s Brian Prince and Trend Micro Inc.’s Eva Chen. Prince stepped down as Aozora’s president last year. Chen still runs Trend Micro, which isn’t among the 100 largest listed Japanese firms.

Governance Question

Stringer, 71, was raised to the top job at Sony in 2005 after his success running Sony Pictures Entertainment Inc. The Welsh-born executive stepped down last year after overseeing four straight annual losses.

In October 2011, Michael Woodford was fired after just six months as president of Olympus Corp. after questioning the company’s accounting practices. The Tokyo-based camera maker eventually restated five years of earnings and took a $1.3 billion cut in net assets after admitting it paid inflated fees on takeovers and overpaid for three companies to conceal investment losses totaling $1.7 billion over 13 years.

The scandal brought calls for improvement in Japan’s corporate governance, including the appointment of more outside board members.

Woodford, in a phone interview, called Takeda’s hiring of Weber a positive sign.

“Takeda is doing things in the right way,” Woodford said. “They are already putting together a global management team.”

Showing Results

Weber needs to show results quickly while pushing Takeda’s growth strategy, said Hiroshi Nakamura, a professor of economics at Keio University in Tokyo who specializes in health care.

“If he doesn’t, not only does he lose trust, but people will also begin to question Takeda’s fundamental strategy of focusing on emerging markets,” Nakamura said.

The company forecasts “mid single-digit” annual revenue growth through 2017 and annual operating-profit growth of 20 percent or more over the same period. It aims to cut annual costs by 100 billion yen ($970 million) by 2017, in part by reducing staff.

Emerging Markets

Takeda must grow in emerging markets, now the source of a majority of growth for the drug industry, using infrastructure gained through its acquisition of Swiss drugmaker Nycomed, according to Hasegawa. Weber’s job, in addition to running Takeda’s existing business, is to use that network effectively and sell the company’s novel medicines efficiently in those markets, outgoing President Hasegawa, 67, said Nov. 30.

Takeda must embrace diversity and choose talent without regard to age, race, or nationality, Hasegawa told reporters.

Weber, head of Glaxo’s vaccine division in Belgium, has a doctorate in pharmacy and a master’s degree in finance from the University of Lyon. He previously held Glaxo posts in France, the U.K. and Belgium, working in positions ranging from sales and marketing to corporate strategy, and served as Asia-Pacific regional director, based in Singapore.

Weber won’t comment on his appointment prior to formally joining Takeda, Hasegawa said Nov. 30.

“The real growth has to come from outside Japan,” said Reed Maurer, president of the International Alliance, a Tokyo-based pharmaceutical advisory firm, who previously worked as an executive at Eli Lilly & Co. and Merck & Co. “Takeda is no longer a Japanese company. They are very much an international company now.”

To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net