Rick Smith Interviews Amgen CEO Kevin Sharer

There are many differences between overseeing the nuclear reactor on a Navy submarine and running a $15 billion biotech company. But when Amgen CEO Kevin Sharer looks back on his career, he sees the lessons of his first job contributing to decisions he makes each day. In the latest in his series of interviews as part of NEWSWEEK's partnership with the Kaplan University M.B.A. program, NEWSWEEK Chairman Richard M. Smith spoke with Sharer about making tough choices in an industry whose products can mean the difference between life and death. Edited excerpts:

Smith: How did your time in the Navy influence your career?
Sharer: I went to the Naval Academy, and by age 27 I was the chief engineer of a Los Angeles class submarine. We had responsibility for the reactor plant. You learned about personal responsibility. You learned about the need to really know the details—you couldn't just skim by. You learned about honesty: when you said the engineering department was ready for sea, you better mean it.

Are there lessons from the military that don't carry over to the private sector?
Oh, yeah. In the military you're not dealing with a lot of ambiguity—you sort of knew what you were supposed to do. There was a procedure for everything, and you weren't trying to devise strategic choices. You had a mission somebody else set out, at least at the levels I served at.

Is there a difference in the expectation of entrepreneurship?
Yes. In the Navy you didn't want to be seen as having a new idea for how to operate the reactor plant—you didn't call up the admiral and tell him about it. You weren't trying to be very creative. In the civilian world, particularly in a science-based company like Amgen, a very major part of my responsibility is to be part of creating the environment where people feel safe to take risks and fail, and to explore new things and question authority.

Was it hard for a general manager to go to a science-based company?
I'd worked in a number of industries—from communications to satellites to software—so in the engineering field I was fairly confident. But I had no background at all in health care, no background in life sciences. I was a raw rookie. [But] scientists are wonderful people. If you show interest in what they're doing, they'll be the greatest teachers in the world, and I was really interested. I'm not an expert in biology at all, but I know the right five or 10 questions to ask. And as CEO I can appreciate the risks and complexities.

Is it true you assigned yourself tutors?
Yes. I found a number of scientists around my age, and I'd go down to their labs and ask them for reading materials. I would study it, and we'd talk about the biology. I went out with sales reps and talked to doctors. It was a long process.

How do you decide which R&D projects to invest in?
Early-stage research isn't very expensive, so I just allocate the money and watch the progress. Once we're in people with the product, and we've got a product that looks safe and has a positive effect, then we're [considering whether] to go into a very large-scale, multiyear, $100 million-plus clinical trial. At that point a team of people that includes me all think together about that. It's usually pretty obvious where to place the bets. Another kind of decision is when advocates say, "Hey, your drug works, and you should keep it on the market," but our scientists believe it doesn't. We had a drug like that for Parkinson's—that was the single loneliest decision I've ever made in my life. On one hand it's a financial bet, but on another hand it's a moral, ethical judgment.

How do you reinforce the importance of the safety of your products?
Safety is a profoundly important consideration. Period. It's more important in America now than it ever has been in the biopharmaceutical era. Unfortunately there is no such thing as a perfect medicine. All of our biologies are a little bit different, and so what we try to think about is whether the efficacy of the drug is overwhelmingly stronger than the possibility of a side effect. The other [consideration] we think about is the cost. Is the price of that medicine worth it to the health-care payer compared to the alternative?

After years of investors loving Amgen, lately you've faced questions about your compensation and the company's drug pipeline. What have you learned?
I had the experience of having Amgen featured in a business magazine as the company of the year a few years ago. Then last year a national news announcer said I was the worst or most overpaid CEO—something not very flattering. So I've seen the highs and the lows. What I've learned is that you really need to embrace reality when a crisis hits. You can't hope it away. You have to be very honest and open with the people that you work with.

Is it true you have a picture of General Custer in your office?
Yes, I have a picture of General Custer. When I first became a CEO, I thought it would be good to have on the wall a picture of somebody who overestimated his own ability, underestimated the enemy and lost everything. It's sort of a "watch it" picture.