The Sykes' Solutions

Richard Sykes by Bob Dob Illustrations Richard Sykes, rector (CEO) of Imperial College London, the number one university for international class research in the United Kingdom, is making a habit of remolding great institutions. He almost single-handedly created the world's second largest pharmaceutical company GlaxoSmithKline (GSK) through merger and acquisition during the 1990s before returning to his academic roots with Imperial College in 2001. This was the second time in eight years that

Jun 30, 2003
Philip Hunter
Richard Sykes by Bob Dob Illustrations

Richard Sykes, rector (CEO) of Imperial College London, the number one university for international class research in the United Kingdom, is making a habit of remolding great institutions. He almost single-handedly created the world's second largest pharmaceutical company GlaxoSmithKline (GSK) through merger and acquisition during the 1990s before returning to his academic roots with Imperial College in 2001.

This was the second time in eight years that eyebrows were raised by Sykes' career move. His appointment as chief executive of GSK's forerunner Glaxo in 1993 was criticized on the grounds that someone with a pure research background would lack the commercial acumen to run a large multinational company.2 He quickly proved his critics wrong by responding to an impending collapse in sales of the drug Zantac by masterminding the takeover of the Wellcome group in a move described by many analysts as the boldest in British corporate history.3 Wellcome was deemed impregnable to acquisition because a national charity, the Wellcome Trust, held 40% of the stock. But Sykes turned this to his advantage by persuading the Trust to back him before launching the formal bid.

ENGAGING OPPOSITION Sykes' appointment as rector of Imperial College also met initial opposition from some academics, for almost the opposite reason. This time Sykes was suspected of being insensitive to the peculiar requirement that a university support long-term research that may have no obvious commercial payback. Sykes confounded his critics yet again by his acute awareness of the distinctive priorities of a university. The chance for Sykes to exhibit his sensitivity came only a year after his appointment, during the fall of 2002. An opportunity arose for Imperial College to merge with the nearby University College London when the latter's provost (CEO) departed suddenly. The merger would have created the largest UK university, eclipsing both Oxford and Cambridge universities in total research funding, and enabling more successful competition with the US giants such as Harvard and Stanford universities.

The merger foundered on opposition from UCL academic staff, however, and even within Imperial some staff fretted over the likely disruption to ongoing research during the inevitably protracted and difficult merger process. "It just seemed sensible to ask the question, 'Should we think about some sort of merger,' and we got the answer pretty quickly (i.e., no)," says Sykes. He adds that even if he wanted the merger himself, he could not just crack heads together as he had at GSK. "In a business merger you make a decision and do it. That's not true for a university merger, which you cannot do if the people don't want it."

Such reticence might not have come easily, for Sykes has a reputation, both at GSK and now at Imperial, for bending people to his will. Even two years after departing GSK, his opinion weighs heavily among both directors and investors of the company. This much became clear during recent controversy over the large payout of at least $20 million (US) that would be made to GSK's chief executive Jean-Pierre Garnier, if he were forced to leave the company. Sykes confirms that he was quoted correctly in the UK Sunday Telegraph, exhorting institutional shareholders to vote against such overgenerous rewards for relative failure. The vote did indeed go narrowly against such packages, to the acute embarrassment of GSK's board.3

The collapse of the ICL-UCL merger talks forced Sykes to pursue a policy of organic growth towards fulfilling his ambition of turning Imperial into one of the top global universities and the dominant UK public-sector research institution ahead of Oxford and Cambridge. An assessment of his progress so far depends in large part on the method of measurement.

Judged on the basis of world-class research, Imperial College is already closing in on its target, ranking number two just behind Cambridge. The United Kingdom has a ranking system for university research, with the top grade of five stars awarded to departments in which more than 50% of the staff are deemed world-class scientists at the cutting edge of their fields. Indeed, according to Sykes, Imperial College is clearly number one if judged purely on the basis of its proportion of five-star scientists. "Seventy-five percent of our people work in five-star departments. That's unrivalled in the UK," Sykes says.

FINANCING INNOVATION Imperial College does not have a problem attracting good people, although Sykes is clearly determined to increase its attraction further. The main issue he is tackling, and a major reason why the college lured Sykes in the first place, lies in establishing an independent financial base similar to that of the major US universities. It is not that the college is grossly underfunded at present; indeed Sykes welcomes a shift in UK government strategy announced in a white paper in February 2002, reallocating funds towards the top universities. On the contrary, the college's income is derived from a combination of modest student tuition fees, and short-term, mostly three-year, research grants from government and industry. This, says Sykes, can make it relatively difficult to pursue long-term research that is not allied to a particular project for which funding has been awarded. It also means that leading scientists have to worry about funding, and waste time writing grant applications for relatively small amounts of money to keep their projects going.

Courtesy of Imperial College London
 Imperial College London

The best solution, says Sykes, would be a healthy endowment whose income could be drawn on for research projects of the college's choosing. But the college has a long way to go even to catch up with the two runaway UK leaders, Oxford and Cambridge Universities. Imperial's endowment currently stands at £40 million (~$64 million). "That brings in an income of £2 million a year, which means effectively zero compared with our £400 million annual turnover," Sykes explains. By contrast, Oxford and Cambridge both have endowments worth about £1 billion (~$1.6 billion), while Princeton, Yale, and Stanford weigh in at $6 billion to $10 billion, and the world leader, Harvard, has about $17 billion. Even US state universities have significant endowments exceeding $1 billion in some cases.

Endowments come mostly from grateful, and wealthy, former students. Yet when Sykes joined, Imperial College did not have a single person dedicated to establishing and maintaining relationships with its graduates. Sykes quickly remedied this omission by appointing a director of alumni relations reporting directly to him. But it will take a long time to bear fruit, for UK alumni are notoriously reluctant to give money back to universities. "If you look at the statistics, most of the donations to Oxford and Cambridge came from Americans," Sykes notes. This is one good reason, he adds, to encourage rather than penalize overseas student enrollment at UK universities. In any case, Sykes is resigned to a long period of reliance on other sources of funding. His target of raising the college's endowment to £100 million by 2007 may be realistic, but it is certainly modest and suggests that the bulk of research income will continue to come from other sources throughout Sykes' likely period of tenure.

Sykes has had a much greater and more immediate impact on the college's ability to attract short-term research funding from industry. His influence is opening up a gap between Imperial College and other UK universities, according to Peter Cotgreave, chief executive of Save British Science, a lobbying organization. "However much money the government puts in will never be enough, so there's always a need to go to business for extra funding," Cotgreave adds. "Imperial is looking pretty good at doing that now, and whether the rest of the UK university sector can do that as well remains to be seen." Leading academics at Imperial share this view, including Mike Hassall, head of the life sciences' faculty, who has worked for the college since 1971. "What we have seen is a new boldness and confidence in the way we go out to fund new projects and secure loans," Hassall says.

CAPITALIZING ON RESEARCH This new boldness also perm-eates the college's strategy for technology transfer and creating companies that exploit its innovations. "I think that because it's Richard Sykes, there's been a perception change, and that's just as important as reality," says Brian Graves, head of marketing for Imperial Innovations, the company charged with creating and nurturing spin-off companies for ICL. "Not only spin-off companies, but also the broader technology transfer agenda, has received a boost," Graves says.

Because the college will continue depending on relatively short-term funding for the foreseeable future, it also faces the challenge, in common with many other UK research institutions, of maintaining the support infrastructure underpinning its multidisciplinary strategy. Sykes spends a great deal of time ensuring that the infrastructure and support services are sustained better than they have been in the past. A major initiative was the creation of a bioinformatics center in 2001, providing both the computational support and the three-dimensional structural-modeling service needed in contemporary life science research. According to Michael Sternberg, the head of this new center, who joined Imperial in 2001, no other UK university can now match the level of computational and analytical support provided by this center.

The bioinformatics center also has pooled its resources with nearby UCL, exemplifying a growing level of collaboration between the two colleges in the wake of the failed merger attempt. "There's more communication and collaboration between Imperial College and UCL, in part because people have gotten to know each other [as a result of the attempted merger process]," Sykes says.

However, the failed merger did expose considerable hostility to Sykes' perceived strategy of pursuing efficiency through scale, which was derided as "Sykomania" by a committee set up by UCL to oppose the merger during the fall of 2002. His record in merging Glaxo with SmithKline Beecham, with subsequent redundancies among research staff, was attacked repeatedly by the committee and exploited to inspire opposition to the merger, mostly within UCL but also among some academics at Imperial.

In the wake of the failed merger, Sykes now enjoys the virtually unanimous backing by Imperial's academics. Projects are now benefiting from the newly created bioinformatics center and the Flowers Research Building, designed to encourage multidisciplinary collaboration. But great challenges remain, notably the ongoing one of space, and the long goal of financial independence.

Philip Hunter (phunter@philiphunter.com) is a freelance science writer in London.

References
1. D. Green, "How to get the chemistry right--Glaxo wants to do the decent thing in its merger with Wellcome," The Financial Times, April 24, 1995.

2. "Glaxo cures R&D gap," The Financial Times, May 13, 2003.

3. J. Wrighton, "Will Glaxo Wellcome make sales?" Investment Dealers' Digest, 8:3, Jan. 30, 1995.

4. R. Murray-West, B. Barrow, "Glaxo's 'fat cat' pay deal rejected," May 20, 2003; available online at news.telegraph.co.uk



SPINNING THE IMPERIAL FUTURE

Spin-off companies present an opportunity for achieving independence from grant funding at Imperial College London (ICL), but only as a long-term prospect. At least in this regard, Imperial is little worse off than other leading universities, observes Peter Cotgreave, chief executive of Save British Science, a lobbying organization. "The best university in the world for spinning off businesses and licensing technology is MIT [Massachusetts Institute of Technology]. It gets, I think, 3% of its research income from that," Cotgreave says.

But, Richard Sykes, ICL's rector (CEO), expresses confidence that in the longer term, companies spawned by Imperial will contribute significantly not just through their stock value, but also by placing research contracts with the college. Sykes realized quickly, however, that companies in the delicate business of technology transfer need careful nurturing through their formative phase.

This led to the creation of a holding company, in partnership with two London-based investment houses, to encourage the creation of spin-offs and nurture them during their delicate early existence. During the early transitional phase before becoming a fully independent business, the holding company assists the spin-off with management and instills rigorous accounting and reporting practices, according to Graves. "The corporate governance of the companies themselves has become much more professional," Graves says. Among the few spinoffs so far is an interesting life sciences company, Biogeny, whose business is transferring technology from universities to the public sector. The company wants to harness one of the most exciting discoveries to emerge from Imperial's Life Science's faculty in recent years--the first genetic engineering of the Anopheles mosquito, which transmits the malaria parasite Plasmodium. "This raised the possibility for the first time of engineering a vector that would stop the mosquito transmitting malaria," Hassall says. Biogeny is currently exploiting this development in an attempt to do that.

Imperial's technology program got a boost in May 2003 with the announcement that a new £50 million fund to invest in 12 to 15 startup healthcare companies was being established in partnership with Bioscience Managers, a specialist firm nurturing new life science companies. The increasingly prevalent enterprise culture is helping to lure PhD students and junior researchers. And the concentration of multiple disciplines within a single compact campus is highly attractive to fledgling companies, according to Matthew Howard, projects manager of Imperial's startup, Delta Dot. "We're developing novel proteomic and genomic analysis systems based on a cross-disciplinary approach between physics and biology," Howard says.
--Philip Hunter

 



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