SAN FRANCISCO - Industry leader and self-made man Roy Vagelos, former chairman and CEO of Merck & Co. Inc., offered words of wisdom about keeping talent in the coming half-century, which he told attendees of Allicense 2005 will be vastly more "productive and exciting" than the previous 50 years.

"What you need in every company," including the large ones, Vagelos said, is "individuals who believe so strongly in their science that they're willing to bet their careers."

He was talking about risk takers. They "make all the difference in every company and every field - people who are willing to bet the house." Management, Vagelos said, must "be in position to reward people when they score and not be hard on them when they fail, to scoop them up and support them and say, Look, that was a good try. It was worth it. Let's move on.'"

Vagelos' fine-sounding verbiage came last week during a two-day conference sponsored by Recombinant Capital, the San Francisco-based consulting firm.

"The last thing you want to do is blast someone at a failure, because that gives a signal within the laboratory and within the company that is not missed by anyone, and that is, Keep your head down, don't take risks'" - an attitude "that in the long run is the drying up, the slow death of the company," he said.

To many ears in the room, his words might not have sounded much like typical corporate life, where failure is punished, conservatism is rewarded, and fear is the order of the day. But Vagelos said his approach, long given lip service in leadership manuals, will be vital for the decades ahead.

"We will look back at today and say, My God, they didn't have anything really good for Alzheimer's disease, [and] the drugs for cancer were rudimentary,'" he predicted. "Treatment for neurogenerative diseases will blossom as we're getting to understand the brain. I'm looking forward to great times and I think you'll be in a very exciting position."

On a panel with Vagelos was Stelios Papadopoulos, vice chairman of SG Cowen, "a very savvy follower and leader, in terms of how biotechs have changed over the years and how they must continue to react to changes," said Recombinant Capital's managing director Mark Edwards.

Papadopoulos named two oft-cited examples of startup models to follow, Genentech Inc. and Millennium Pharmaceuticals Inc., both of which have become mighty forces in the industry.

"I've been an enormously huge fan of Genentech's from day one, for reasons that will take a long time to outline," he said, declaring that the firm "exemplifies what is a fundamentally sound company" with its careful building on science.

"Flexibility and the adherence to the scientific drivers is critical," he said. "If you had asked anybody in 1990 - or in the late 1980s, to be precise - what would be the great source of fortunes for Genentech, nobody would have told you antibodies and cancer, and that is their triumph, I think, in many ways," Papadopoulos said.

Millennium, he noted, developed a platform and advanced itself by "selling the same thing many times to different people and earning capital," which was used for drug development and more buying, so that the firm turned into "basically a commercial enterprise, which is essentially all acquired" from elsewhere.

Vagelos echoed Papadopoulos on Genentech, pointing out that "the science of vascular endothelial growth factor grew up" there. He called the firm a "wonderful example of long-term investment in something you believe in and first-rate science."

Papadopoulos warned about the "fine balance" needed for boosting creative people.

"You need to encourage people to take out of the ordinary ideas and pursue them but don't let them run loose and have an unmanaged corporation, where everybody does crazy stuff," he said. "This is really where the leadership of the company comes in."

Papadopoulos mentioned Robert Swanson, founder and former CEO of Genentech. Though Swanson "was not a trained scientist in the sense that he had a Ph.D. in biochemistry or microbiology or genetics or worked 20 years in the lab," but he never had an office in the corporate part of Genentech, Papadopoulos recalled. "He kept a little office in the labs in a corner, wearing a white lab coat. The power of symbolism is critical. He told everybody, Science is what matters to Genentech.'"

Chairman and CEO Art Levinson is "carrying [on] very much the same tradition," he added.

Moderating the panel was Rick Winningham, CEO of Theravance Inc., who asked about "the effect investors can have on the risk-taking profile," given the volatility of the sector.

Vagelos said the effect of large investors on small companies' plans "can be pretty damaging."

A firm's leaders should "do as much as they can to take the product far enough along, before they try to milk it," he said, adding that his inclination is "to hold products until I am secure that we have products to talk about" - although he has been "told directly that it's easier to sell dreams than to sell product news."

Papadopoulos said the promise of short-term gain can be a blessing and a curse.

"Thank God for the investors looking to make a quick buck or a lot of money out of biotech, because they managed to create this enterprise we are all more or less a part of," he said, even though "the aggregate returns [on biotechnology shares] aren't exciting."

That doesn't matter, since no one owns all of the industry's stocks. "To the extent anyone in a reasonable amount of time will invest in a handful - 10, 20, 30, 50 stocks, whatever - what really matters now is what the return of that basket will be," Papadopoulos said.

And what counts even more is the potential gain, he added, using the analogy of the state lottery drawing. "When we win, we want to win big."

The two-day Allicense conference ended Wednesday.