Today, we're pleased to welcome Tom MacMahon to the podcast. Tom may be best known as the chairman and chief executive officer of LabCorp, the largest medical testing company in the world. It's a role he held between 1997 and 2006. Prior to this, he was the president of Roche diagnostics group and a member of the executive committee of Hoffmann-La Roche.
Among the many other roles, he has held since Tom also serves on the boards of multiple nonprofit organizations. Over the course of his career, Tom has been recognized both by Forbes magazine and the Harvard Business Review as one of the best performing CEOs in the world.
Over the course of his career, Tom has been recognized both by Forbes magazine and the Harvard Business Review as one of the best performing CEOs in the world.
We pick up the conversation in the 1980s when Tom was president of Roche and the AIDS epidemic was headline news.
You talked about a story from the mid-eighties; you were president of Roche. There was the AIDS epidemic, at that time. And I really liked that story and I want to hear it again and want others to hear it.
And there's a correlation why I'm interested in that story...there's talk of a COVID pill, and I've seen Dr. (Anthony) Fauci talking about this in terms of it's reminding him of the antivirals that had come out of the work he had done with Roche, I believe, but I thought there was an interesting connection between then and now. Some lessons learned, perhaps?
Dr. Fauci worked with a lot of the big drug companies. He worked with Roche, he worked with Merck, he worked with a group of companies that obviously were desperate - I would use the word desperate - to find out how we could block this epidemic, which you know, is back as early as the mid to lower eighties, we had this disease that nobody understood.
We didn't know what it was. We didn't know how you acquired it. We didn't know where it came from. And over the course of many years, even the name evolved - we heard AIDS, we heard HIV, we heard all kinds of different terms to describe it.
And I will say that Dr. Fauci in his, I think same job, was at the top of the government encouraging the drug companies to get a cure for this thing. But at the same time, there was no real test other than antibody tests to figure out if somebody even had it (AIDS). And that really was one of the most powerful reasons to develop something called DNA tests, which ultimately of course became PCR.
So we have all these different terms and all these different acronyms because we really didn't know what we were dealing with in 1983, 1984, 1985, as it related to AIDS.
...at the same time, there was no real test other than antibody tests to figure out if somebody even had it (AIDS). And that really was one of the most powerful reasons to develop something called DNA tests, which ultimately, of course, became PCR.
And there's something you described in an earlier conversation we had. You learned about Cetus, a biotechnology company from Emeryville, California.
In the Bay area and a biochemist and a Nobel prize winner named Kary Mullis. You described to me an introduction you had to Kary Mullis and his invention of the polymerase chain reaction technique. Can you revisit that for us?
Sure. Roche was a massive pharmaceutical company, in 1985 as they are in 2021...in my opinion, the greatest healthcare company in the world.
And we had a small diagnostic company of which I was president of the United States operation. And I was interested in finding out how we could leap forward and become a larger and more successful diagnostic company. And we heard of this technology called DNA probes.
And we heard of this company, which was well-known in the days, as a biotechnology company in Emeryville, California called Cetus. And their primary attention at that time was in the pharmaceutical area, but they had a technology called polymerase chain reaction.
Fast forward months, years, decades, and that's PCR and a group of scientists, Kary Mullis, Tom White, and Henry Ehrlich were working on this technology while another famous scientist by the name of David Gelfand was working with something called Taq polymerase.
And we went out there and we tried to convince them, which ultimately we did to license this technology to Roche for use in diagnostics. And the big difference was that PCR apparently, at that time, was a technique that you could use to directly find a virus in the body. Until then, the only way that we found out if somebody was sick was the use of antibody tests.
So, basically with AIDS, you do a blood test, you'd look for antibodies for AIDS that sometimes would not develop and it would take six, eight weeks, nine weeks, 10 weeks before the antibodies would grow in the body so that you could find them to fight against the AIDS virus.
So, there was this period of time, which could be anywhere, depending upon the human body. I'm not a scientist that somebody had AIDS, but you didn't know you had AIDS and that was the way that the disease was transferred so easily because people didn't even know they had AIDS.
So, PCR was able to find the virus immediately.
So, by the early nineties, Roche acquired PCR, and with it the scientists from Cetus who came to work at Roche, which expanded your team of scientists to between 400 and 500 people with PCR as a sole focus.
When we originally licensed the technology, we licensed it for diagnostic use only. We did not have rights to the research world. And over a period of time, we recognized that it was very challenging to be able to define PCR only for diagnostics because scientists, particularly outside of the United States and Europe and Asia, and all over the world, they didn't distinguish PCR for diagnostics versus the research market.
So, our ability to only have rights to diagnostics was a real problem for both the research world and the diagnostic world, particularly in Europe, because the scientific labs of the big medical centers and companies in Europe didn't have the same model that Roche had.
So, eventually, this caused Roche - again, the great wisdom of Roche - to say, we need to understand and own this technology. We can't just have a license for it. And then we can apply all these great scientists that we have to not worry just about diagnostics but to use our knowledge for every opportunity available, for PCR, which included the massive scientific world and the research world that I think you probably spend all your time selling chemicals and materials to the pharmaceutical industry, to the academic centers, and to the research world of government. And that's ultimately what we owned by the early nineties.
So, you've touched on a key point there, and that is the scientists. And I wanted to spend a moment asking what challenges did you remember from when you merged scientists from different cultures?
The greatest challenge and it was a very great challenge was that we own patents to PCR, meaning we Roche did, but scientists didn't really distinguish what we own from what we didn't own. And Roche again, in the halls of Basel, Switzerland, with some recommendations from myself and other key leaders in the diagnostic area, decided we couldn't keep this to ourselves. This technology by then in the early nineties was so important to governments, to scientists, to academic medical centers, to the diagnostic world, even to forensic science and the best example is the OJ Simpson case - that we decided we would not limit this only to Roche. And we licensed this technology to every group of scientific people in the world that wanted that, which then opened up even greater than it had been - the use of PCR - to every scientist in the world that wanted access to this wonderful technology.
So, the issue was never scientists having knowledge of it. It was always, in the early days, of scientists having access to it. And Roche recognized that it was the right thing to do. So, we launched massive programs on the commercial side to make sure that any scientists that wanted the right to use PCR was granted that right by Roche.
...we launched massive programs to make sure that any scientists that wanted the right to use PCR was granted that right by Roche.
So, I just want to fast forward a bit to 1996. Roche decides to exit the clinical lab business and company leadership came to you and asked something of you. Can you bring us back to that moment?
What happened in the early 1990s, Roche had a clinical lab business, it had a diagnostic business, which by then was growing, but we had never really commercialized anything from PCR. What you did, Greg, as you said to me at the beginning in 1985, you did this and what wasn't really until the mid-nineties, almost 10 years of all these great scientists working together, where were you able to finally get these products on the market.
So we had these businesses and Roche felt it was time to exit the lab business, but they wanted to maintain a position in the lab business and they asked me to go over and run LabCorp, which I did. And the great - again - wisdom of the leadership of Roche is that it kept us on course because we had created a center for molecular biology in Research Triangle, North Carolina. We had a diagnostic company, and of course, we had a massive pharmaceutical company. So all of these entities had great reasons to want to be involved with PCR. The pharmaceutical business needed it for research and development, the diagnostic business needed it for commercialization of kits, reagents, instruments, and of course, the laboratory business, which ultimately became LabCorp, needed it to do testing on human beings.
And that's really what began in the mid-nineties, down at LabCorp, because Roche had this strategy that we wanted to get this commercialized as quickly as possible. And the first two products we put on the market in the mid-nineties were a test to detect cystic fibrosis and a test, of course, to detect AIDS, right away.
And there's where Fauci, once again, got back involved because he was so eager to get these products on the market - particularly the infectious disease product for AIDS.
Now, I'm just going to switch gears slightly here because you described the frustrations of working on the same deal for 10 years - perhaps the entire tenure of your time at LabCorp, and some of those deals never coming to fruition. And I think that was a frustration.
Yeah, that really related to Institutional customers.
The real challenge of the independent clinical laboratory market, to me, is our ability to secure more customers out of the large hospital networks and the large academic medical centers. And while it was frustrating to me. I understood it. These great, particularly academic, medical centers understood that they were at the forefront of the development of diagnostic tests just like LabCorp was (and) just like Roche was.
So, it was always very difficult for us in the lab business to convince the big customers that they should be shutting down their laboratories and using a much better technique that we may have had at LabCorp and where we could save them significant amounts of money.
I'm sure there are great customers in the research market for you but they were always challenging customers to the large networks of clinical labs. And probably today still...half the testing, in the medical diagnostic area, is done by independent labs and probably half is still done by the big hospital networks, which I suspect rely on companies like ZAGENO to provide them with the materials in order to do those tests.
So the most challenging customers in those days for the big labs were hospitals, obviously the other great opportunities, but had to be convinced where the managed care organizations.
I want to get back to the scientist.
You ran large research groups. As you described it to me, they wanted supplies quickly, overnight, and they didn't care about costs. You also had purchasing agents without a clue about the actual supplies who really only cared about getting bids and securing the best price.
So as a CEO, you had a vantage point and understood there were a lot of risks involved in science, and a lot of times it doesn't work. This is obviously a central theme of ZAGENO’s challenge. But your insight is so valuable here in your time at Roche and at lab Corp, what did you witness between these two teams?
I always felt that I was responsible for innovation and I was responsible as a business person to make sure that we could get the products out in a timely manner.
And having said that you have to be fiscally responsible. So while the scientists understood clearly what they wanted in terms of reagents and scientific materials the ultimate decision for a lot of these complicated purchasing situations was me because I needed to hear both sides of the story.
...ZAGENO (is) dealing with two types of groups...people that you have to convince you're providing a great economic opportunity for...and scientists that are always under pressure to get things done more quickly...
I would think that ZAGENO has to balance that because you're probably dealing with two good two types of groups. You're dealing with people that you have to convince you're providing a great economic opportunity for the securing of the materials you want to sell to them. And then you're dealing with scientists that are always under pressure to get things done more quickly, always in need of scientific materials and usually know pretty well and are pretty demanding about the product and materials they want to use.
So the only thing I could ever say to you about that is, you need to get people in the same room, you need to have a rational conversation, and you need to include both, if you can do it. Because both groups of people - the scientists who are under the pressure to get things done, and the financial people who are under the pressure to get things bought at a great and reasonable pricing - have something to say. And ultimately, senior executives in the companies that you work with, need to appreciate that and understand that and need to make the right decisions.
So you, Tom MacMahon, former CEO of LabCorp, in the boardroom...you've got your chief scientific officer or your head of research and you have your chief financial officer. They're both talking about their particular needs; they seem to be opposed to one another and it's up to you. You've got to make the call. Who has the stronger voice for you, in that moment, as the CEO?
The scientist does...the scientist does because don't forget there's the CEO of any company, who is probably spending billions of dollars to get these new products out into the marketplace, has relied so much on believing what the scientists say in believing in them individually that it's difficult to deviate from that strong belief that you have, yourself.
PCR is a wonderful example. We bought a technology, meaning Roche in the mid-eighties, that was the most expensive and we thought the most powerful technology that we had ever seen in diagnostics. But the rest of the industry didn't believe that the other major international diagnostic companies were stunned that Roche would make such a move.
So we believed in the people we believed in the science, we believed in the hope that PCR could do what we thought it could do. So you can't deviate once you're on that path, in my opinion. From believing in these people that convinced you to do this. And at the end of the day, when you look back, you say to yourself, probably that it was a pretty good decision and the decision really was not an economic decision because the economics work out for themselves, but believing in the materials and the ideas that these scientists have, in my opinion, is always the best thing to do.
I just have a final question for you, Tom. You mentioned earlier, you're not a scientist, but somehow you are able to generate or develop an interpersonal relationship with these teams of scientists.
You were able to listen to them and do your best to understand their needs. Speaking to business leaders of today, who may be in a similar position, they didn't come up through the lab, but are finding themselves in the same kind of situation, were there things that you did to try and help the scientists that you worked with throughout your career to have a stronger voice, to make more clear their needs and to be more successful in those boardroom moments?
Yeah, I think there were things I did to help myself more than to help my scientists. I am a business guy that saw science work and I'm a business guy that believed in people. So I spent a lot of time dreaming about what, in this particular case, PCR could be and if we had to believe in the scientists. Because in the early days...PCR...you couldn't even quantitate it - it was just a qualitative test to give you a yes or no answer.
And these people helped me believe that they could do certain things. My great advice to leaders in the scientific business world is to get in the lab, get to understand the promises that people make, hold them accountable for those promises, but you also need to believe in them.
My great advice to leaders in the scientific business world is to get in the lab, get to understand the promises that people make, hold them accountable for those promises, but you also need to believe in them.
And sometimes you close down programs, sometimes your sense is it's just not a timely thing to do, but if you don't give them the chance to succeed and you put too many restraints around them, it's hard to expect them to reach the objectives that they've laid out for you. So you need to give them a chance,
Tom, this has been fascinating.
I want to thank you for taking time out of a very busy and full schedule to go back in time with us to share some of these moments. I think this is enormously valuable, some important lessons for our audience to consider, think about, and employ in their own environments.
Tom, thank you again.
Good. I wish you the best. Go PCR!
All the best bye-bye.