Parexel cofounder Josef von Rickenbach will retire as CEO
WALTHAM — Josef von Rickenbach has run one of the biggest life science companies in Massachusetts for 35 years, one that helped make the biotech industry possible. Yet it has remained all but invisible to the public.
With nearly 19,000 employees in 51 countries, Parexel International Corp. shepherds experimental medicines through the maze-like clinical and regulatory process, crucial work that many firms can’t afford to do themselves. The multibillion-dollar global juggernaut has overseen tens of thousands of clinical drug trials since von Rickenbach helped start it in 1982 in his basement in Watertown.
On Friday, von Rickenbach, 63, will retire as chief executive of the Waltham company, a move hastened by last year’s $5 billion purchase of Parexel by a private equity firm, he said. But he hardly sounds eager to walk away.
“You can tell I’m still enthusiastic about the company,” he said recently after describing how Parexel helped to pioneer the industry of so-called contract research organizations, or CROs. “We built a very great culture in our company that I’m very proud of. And none of this happens by accident. You have to be very proactive about it.”
Still, the Harvard-educated, Swiss-born businessman said it’s time to put his “head above the tree line” and decide what to do next. He isn’t entirely leaving the company; he will stay on as chairman of the board of Parexel, which went public in 1995 and was bought in September by Pamplona Capital Management.
Von Rickenbach has promised not to meddle in the day-to-day affairs of his successor, Jamie Macdonald, who has worked at two of Parexel’s rivals.
Nonetheless, he isn’t shy about expressing his opinion on the international business climate. Nationalist and anti-immigration sentiments in the United States and overseas, he said, are creating a far less hospitable atmosphere than the one he encountered when he immigrated in 1979 to attend Harvard Business School.
Biotechnology is a global business, he noted, and so is Parexel, which operates in places once closed to US companies, from China to the former East Germany.
“Throughout most of my career, barriers came down, walls came down,” said von Rickenbach, who displays a piece of the dismantled Berlin Wall in a cabinet in his office. “It was just a fantastic time for somebody like me.
“And I’d have to say that in the last two, three years there has been headwind against that — basically, the ugliness of nationalism, all the ‘isms,’ started to come back.”
A generation ago, pharmaceutical companies did most of their own work testing potential medicines on patients and then directly seeking approval from the Food and Drug Administration and foreign regulators. It was a long, expensive process that could end in big layoffs if the experimental drugs fizzled out somewhere along the line, as most do.
Von Rickenbach, who worked at Schering-Plough Corp. in Switzerland before he came to the United States, founded Parexel with Anne Sayigh, an organic chemist.
Initially, they wanted to help foreign companies navigate the US regulatory process. But they quickly realized that the biggest challenge for many companies was running costly clinical trials to determine if experimental drugs were safe and effective.
They decided Parexel could do that, too — everything from finding hospitals where drugs could be tested on patients to recruiting participants to overseeing the trials.
Their timing was auspicious. In 1984, Congress passed the Hatch-Waxman Act, a federal law that encouraged companies to introduce generic drugs, with a goal of fostering competition. Drug makers were eager to cut costs, von Rickenbach said, and one way to do that was to outsource clinical trials to Parexel and its competitors.
Around the same time, the biotech industry began to emerge, producing innovative medicines that relied on living organisms. The trend would upend the pharmaceutical industry. It also gave contract research organizations new customers. Typically, the new biotech startups were small research outfits that worked hard to raise cash and couldn’t afford to run clinical trials themselves.
Robert J. Mulroy, a veteran biopharma executive who now heads Partner Therapeutics, a Lexington oncology startup, said that Parexel and its competitors relieved biotechs of that duty. That enabled biotechs to focus on developing the next potentially life-saving molecule rather than hiring doctors, nurses, administrators, and statisticians to work on trials.
“The biotech industry wouldn’t be the industry that it is today without CROs,” Mulroy said. Because of Parexel and its competitors, he said, “You can now run biotechs from your home office in your pajamas if you want to — not that anybody does it.”
Parexel’s competitors include IQVIA, Pharmaceutical Product Development, Covance Inc., and Syneos Health.
Although a recent study by Tufts University concluded that it’s actually taking longer than it did 10 years ago for the pharmaceutical industry to get clinical trials started, the researchers found that contract research organizations move considerably faster than drug makers who do it themselves.
Parexel officials boast that their company has worked on 99 percent of the 200 top-selling biopharmaceutical products in the world.
The company has more than 1,200 employees in Massachusetts and has been involved in more than 40 mergers and acquisitions. But because of the nature of its work, few people in Massachusetts outside of the life sciences field know anything about Parexel.
Von Rickenbach himself has prospered. He earned over $5.7 million in salary, bonuses, and stock awards in 2016, according to documents filed with the Securities and Exchange Commission, and was due to receive more than $14 million in severance payments as a result of the Pamplona deal.
Macdonald, a native of Scotland who worked previously at the companies later renamed Syneos and IQVIA, said he values the institutional knowledge that von Rickenbach brings as chairman.
Although Parexel has a “great footprint and backbone,” Macdonald said, the company needs to do a better job of attracting new drug companies as customers and retaining the ones it has.
Overall, the company should be growing by 5 percent to 7 percent a year, he said. In the last three fiscal years, annual growth averaged 3 percent.
“We have not seen the organic growth that some of our competitors have,” he said, a view that was shared by activist investors who pressured the company to pursue the sale to Pamplona.
Von Rickenbach said the move by Pamplona to take Parexel private “certainly was a catalyst” for his retirement.
“They usually want to bring in their own people,” he said. “They have their own ideas. But having said that, I have a good relationship with these guys . . . I’m actually quite happy in the way this all turned out.”