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Sounds of Science is a monthly podcast about beginnings: how a molecule becomes a drug, how a rodent elucidates a disease pathway, how a horseshoe crab morphs into an infection fighter. The podcast is produced by Eureka, the scientific blog of Charles River, a contract research organization for drug discovery and development. Tune in and begin the journey.
Mary:
I'm Mary Parker and welcome to this episode of Eureka's Sounds of Science. I'm privileged to be sitting here today with Jim Foster, CEO of Charles River Labs, who is retiring this May. For almost 50 years, Jim woke up every day and dedicated himself to leading a company with a culture that strive for the best, the best people, the best workplace, and delivering the best outcomes to the patients that rely on us.
Under his leadership, Jim transformed Charles River from a niche research model's business to a global leader in preclinical drug development. Though he is retiring as CEO, he will remain on the board of directors because he wants to help support the evolution of Charles River. Jim joins me to discuss his long career, his impressions on how the industry has changed in the last few decades and his predictions for the future of drug development.
Welcome, Jim.
Jim Foster:
Thank you, Mary. Nice to be here.
Mary:
It's very nice to have you here. Could you start by offering some perspective and maybe a few highlights about what Charles River was like during the first 50 years?
Jim Foster:
I think in a lot of ways, a lot of things have changed and a lot of things haven't changed, I guess I should say. So what hasn't changed is Charles River has always been steeped in the science. We've always been about the science. And so I think all of our clients know that we do exceptional work and we're working on more than 80% of the drugs over the last five years that are approved and probably at least 80% of the drugs are not approved, which of course is unfortunately most of them. So I think what's changed is the scale and depth and sophistication and geographic reach of our portfolio. What hasn't changed is the basic ethos of the company, which is about integrity and science and responsiveness, with regard to internally having a society and a culture where we have each other's backs and this is an extraordinary amount of teamwork.
One of the things I'm proudest of is that we have been able to maintain a relatively small familial culture. It feels like it's a private business and that that management team are the owners of the business and most of our management teams act as if they're owners. I always tell them to try to think and make decisions as if they were owners. I think most people try to do that, and so that's powerful. And so what I hope we don't become as we get larger, which of course we will get larger, is a large impersonal political company that often happens with scale. That's just not taking advantage of so much rich, thoughtful input.
Mary:
I would agree with that. My experience has been exactly that. I talk with a lot of people at a lot of different levels at the company because of the nature of my job, and I've definitely found that each of them has pride in their job and believes that they have ownership over what they do. So I would say that that would be a success.
Jim Foster:
Glad to hear that.
Mary:
Speaking of Reno, in 1999, the day after you succeeded in buying back the company from Bausch and Lomb, you announced the purchase of the company in Reno that marked Charles River's entry into the safety business. And that was a pretty gutsy move on your part. Can you describe what it was like for you taking the company in a new direction?
Jim Foster:
So it was a bit insane to do them both at the same time. In retrospect, I would say that we didn't realize the insanity of the decision, but it was a very exciting time. So a lot of people may not know what I'm about to say, but Charles River has had five structural iterations. So it was a small,, family-owned business for almost 20 years. Then it was a public company for almost another 20 years. Then we sold the company to Bausch and Lomb. We were there for 15 years and I led a management buyout in 99 to buy it back. And of course we took it public again. So that's probably unique. I don't know if it's absolutely unique, but I bet it is. So those five structural iterations are interesting.
Bausch and Lomb was a great company. I would say that the fit was unusual and they sold Ray-Ban sunglasses and contact lenses and microscopes and solutions for contacts. And they had a reasonably volatile financial quarterly situation. But a non-synergistic parent, in other words, parent companies that are in disparate businesses, different businesses than the subsidiaries, which was the situation with us, that became problematic over time. And so it wasn't a good thing for us to stay with B&L, and so I tried for years to try to do a leveraged buyout and to get out of there.
Finally, the CEO who had done the deal to buy Charles River was replaced and the new guy said that they were focusing on healthcare above the neck. So I called him and I said, "That doesn't have anything to do with mice and rats, does it?" And he said, "Nope." I said, "Then I want to buy the company back from you."
And he said, it took him a while, but he ultimately said, "Fine." So that was an exhilarating thing to do, to do a leveraged buyout. Lots of people were interested in that. And then we became an independent company. I don't know if it was a gutsy move, but it was a necessary move. We emerged from Bausch and Lomb as an independent entity. By the way, we took the company public nine months after we were private, so we were private for only nine months. Then we took it public, and then we began this process of lots of M&A, a lot of acquisitions, both in safety and discovery, and obviously a whole bunch of other areas to build out this portfolio. So a little crazy to do it all at once, but definitely the right strategic thing to do. I'd do it all over again.
And then in 2004, which was five years later, we bought a big public company, which is our huge facility in Montreal, was the principal one, and the other one in Edinburgh. And that took us from a third-tier player to a first-tier player. And we began to compete one-on-one with Covance, who was the biggest player at the time, now owned by Labcorp, now about a third our size.
Mary:
So considering that perspective and going all the way up until today, what are some of the biggest changes you've seen in the industry as a whole, both good and bad?
Jim Foster:
I guess the two fundamental changes I would say are, particularly if you look at toxicology, that was done internally by all the pharmaceutical companies. They did it themselves. They did it well. They figured out that we could do things more quickly. We could do things lower costs than them doing it themselves, probably 30 to 50% lower. That's number one change. And number two would be that there's just a huge number of biotech companies right now, thousands. We have thousands of biotech clients to use us or someone like us to do their drug development work and the safety assessment work. So that's changed dramatically, so there's a huge amount of work being outsourced.
I don't think there's a lot of negatives. I mean, the FDA can be complicated and things can be slower than we all would like. And they're slow for reason, because the FDA cares about drug safety, and of course we're in the drug safety business so I think that's fine. I think the competitive dynamic for us is probably the best it's ever been, not to denigrate any of our competitors, but we're just larger and just have a much more powerful portfolio. And so our goal has been for a long time to start with the clients as early as possible in the drug discovery process. Sometimes we help them find the target. Sometimes they've developed a drug against the target, we help them characterize the drug. Sometimes we just take the drug that they've characterized and develop it for them, or all of the above.
But as the drug progresses, we want to stay with them and they want to stay with us because it slows them down to have too many companies working on a drug. And everything's about speed to market. So the faster we can work for them, the more we know about the molecule that we're working on. And I would say without overstating our importance, we at least know as much about the molecule as the client. And in some cases, maybe more because we have the juxtaposition and comparative analysis of thinking about, "Well, does that drug look like 100 others that we worked on that made it? Or 100 others that we worked on that failed?" And so when we're working on something that looks like something that failed because the toxicity was too high or actually wasn't ... Effectively, we said to them, "You know what? You ought to not spend time on that one. That's just not a good use of your time or your money. But this other drug that you're working on, we've worked on a bunch like that that were successful and you've got to put more effort there."
So we have an increasingly more important role. I would say that's the other thing that's changed. More of this has been outsourced to Charles River and companies like Charles River. And I think that will only intensify over time that more and more work will go to us and companies like us. So we're obviously proud of our role. We're helping to make people healthier and we're helping our clients to get drugs to market as quickly as possible. And we always say that we're a bridge between our clients and patients.
Mary:
You mentioned speed to market. And one instance I can think of that happened quite recently that regulators all came together and made things happen quickly was COVID. Obviously the biggest public health crisis probably of the last century or so, and so many other laboratories were forced to pause operations. So how were we able to stay open? And how were you able to manage the fears and the expectations of the staff and the clients?
Jim Foster:
So we were able to stay open, I mean, some of it's just good luck for what we do. So most, not all, but most of our employees are PPE'd up. So most of our employees, certainly everyone in a lab, whether they're using animals in the lab or not, are gowned up, masked and gloved, and have some sort of overall lots of people shower in and shower out. And so, and I heard this from lots of employees, our employees felt safe. Many of them felt much safer at work than they did at home because you had this insane virus floating around, nobody really knew what it was or what the cause would be, or how long it would take to get a vaccine. They got a vaccine in a year, and before that the fastest vaccine ever was in four years. So that was really, really rapid.
So just the nature of our work for 80% of our employees was that they were going to be protected in work, and so that was great and that was really beneficial. So with almost no exception, we just worked right through COVID. And that obviously was important, not just for our employees to have work, but for our clients that were still wanting to work on their drugs to be able to send stuff to us and have us say we're open as opposed to say we're closed.
So we had some very small competitors I know in the animal business that didn't stay open and they didn't close permanently, but they were shuttered, and a couple of small ones and toxicology as well. So that was good luck and just the nature of what we do. And what I did, which I was happy to learn was somewhat comforting, but I only have one speed which is straight talk, and so I did the best I could to just communicate effectively as possible with what I knew. And if I didn't know anything more than what was in the public press just to say that. But we tried to chill and go about our work. And I think that worked well for us just in terms of people's confidence and not overreacting to the situation.
Mary:
I've actually mentioned this before on the podcast, but it was obviously a very scary time, but I felt good about working for a company that was working towards a solution to the problem. That made it a little easier to do all the scary things, like move all my stuff to work from home, and wash my bags of chips when you get them from the grocery store. It was a weird time.
What do you see as the current challenges facing the industry and how might they be overcome?
Jim Foster:
I mean, several things. I think it just takes too long to get a drug to market, I think it's the punchline here. It's now 12 to 14 years. Used to be, when I first started, it was like seven to eight, which is still a long time. By the way, the patent starts to run when they file their INDs. So they eat up a bunch of the patent life before the drug is even approved, which is horrible. And the total amount of R&D dollars spent in the US, it's some crazy number. It's over 100 billion a year. And you would think that lots more drugs would be approved every year, and it's kind of between 30 and 50 drugs a year. It's better than 20 drugs a year, but why isn't it 100? Why isn't it 200? Why isn't it 500?
So it's a very haphazard process. It's still one out of every 10,000 compounds gets to market. That's pathetic. And there's not a straight line to get there. So I think that's the biggest issue. The FDA is now saying that they want to do everything they can to speed it up, but it's not the first administration that said that. AI should help. So theoretically at least, AI should help design better preclinical trials, [inaudible 00:15:29] Charles River, design better clinical trials, identify the biomarkers that take you from preclinical to clinicals so you can track them. And you should be able to eliminate, just to go back to what I said earlier, but you should be able to eliminate more effectively drugs that look like lots of drugs that failed and not work on them. And conversely, ones that look much more promising, spend much more time on those.
So if that works well, you should be able to reduce the overall cost of the drug industry, speed up the process. For Charles River, that would actually mean more drugs going through the preclinical pipeline. But I do think that over time, particularly as AI speeds up, that should accelerate drugs getting to market. And so if you could take a year off or two years off or five years off, or whatever, that should generate more drugs getting into the market, more drugs for us to work on and more drugs getting into the market. So I think we're on the sort of precipice of that. Probably will happen more effectively over the next decade. I don't think it's happening tomorrow or next year, but there's lots of focus on that.
Mary:
Yeah. It definitely seems like the power of AI comes in being able to analyze data quickly, not to replace researchers, but to enhance their work, to make it more streamlined and, like you said, to design these trials to optimize them and reduce costs. So I think I agree with that.
So looking forward, what values do you want future generations to embrace as they shape the culture of Charles River?
Jim Foster:
I hope that we continue a couple of things. I hope that we continue to feel small as we get larger. So what I said earlier about this familial culture, that the teamwork which is ever present all across the company, whether you're working in a team of five people or a site with 1,000 people, or a company with 20,000 people, it's just teamwork all across company. We've had a couple of challenging years. And without me decreeing it, or without any management decreeing it, everybody has just pulled together and worked hard with less strong demand than we would have liked, particularly for lack of biotech funding has been a big issue for us, and yet we've been able to organize ourselves effectively. So maintaining that culture of teamwork, of civility, of familiar nature and having each other's backs, I think is critically important.
I would hope that that ethos and that cultural norm would continue. When we do M&A, when we buy companies, we look for those things. We look for how they treat each other, what kind of culture is that? Not just that they make money, and not just that they have great science, those two things are important, but is it a culture that's going to fit with how we interact with each other? And when we see cultures that are disparate, or very different, or not very civil to one another, those are deals that we don't do.
So you know pretty quickly, you can be in a company for a half hour just from the minute you check in with whoever the receptionist is, and whoever meets you and takes you to wherever you're going, you can just tell what it feels like by people with a smile on their face, that they say hello to people when they're walking down the hall. When they go into a lab to explain it to you, do they introduce the people in the lab? Do they let those people review things with you? Or do they just talk over them? So you can learn a lot very quickly. And I think those things have been the kind of essence of our success.
And I think I'm proud of the fact that we've been able to maintain that. We've done 50 pretty big acquisitions. And if you add another 20 smallish ones, you have probably 70 acquisitions in the last couple of decades, it's a lot. They haven't all worked, they haven't all been perfect, but they've had several of the same cultural norms, that great science, leaders in their field, meritocracy, and cultures where people are the most important thing.
Mary:
Yeah. I would think that the company's legacy over the past few decades has more than fulfilled that ethos. So last, but certainly not least, what are you looking forward to most during retirement?
Jim Foster:
What am I looking forward to? So I never thought I would actually get to this point so it's a little bit surreal, I would say. This is the only place I've worked and I've been here for 50 years, which is longer than most of the people age who are listening to this. And I'm thrilled to stay on the board, so that's a nice glide path for me to do whatever I can to help with the transition with my successor. But also to just focus on the things that we've talked about on this conversation, which is maintaining the culture and weighing in on additional acquisitions that we'll probably do in the next two or three years, and weighing in on succession as we continue to grow our management ranks and maybe do some things geographically. So I'm thrilled about that.
I have a lot of not-for-profits that I'm already involved with. Some are in the sciences, some are in the arts, some are in neither. So I want to do a lot more of that. I'll do some philanthropic things. I'll definitely make some investments, probably seed investments, so the first stage of investments in some biotech companies. Probably travel a little bit more and I'll probably focus on trying to stay as healthy as possible. It will be interesting not to have every hour scheduled as I have for the last 50 years, so I think that will probably feel good. So I'm going to try not to get overly booked and overly scheduled. By the same token, I certainly want to stay busy. So I'm not worried about staying busy.
And so I'm actually looking forward to the next chapter and even some of the unknowns that will bring with it I think can be invigorating and different.
Mary:
Well, it's a good thing I think for us that you're staying on the board, because if science teaches us anything it's that you do not overlook past data because it is definitely going to guide your research going forward.
Jim Foster:
Indeed.
Mary:
Thank you so much for joining me on this. I really appreciate you taking the time to talk with us.
Jim Foster:
My pleasure. I really appreciate you taking the time to talk to me. Thanks. Thanks, Mary.
Mary:
No problem at all.