by Geeta Anand
An hour later, as they stood in line at the checkout counter, Aileen noticed that Megan was still holding the angel cards. While she unloaded the cart, she casually took the cards out of Megan’s hands, setting them aside.
“My cards. Don’t forget my cards,” Megan said, pointing to them.
“Megs, we’re not getting those cards today,” Aileen said, patting her head. “They say, ‘Thank you for the baby gift.’ Do we have any babies in the house anymore?”
“I want those cards,” Megan said.
“We’re not getting them, honey.”
“Oh yes, we are,” Megan insisted, tears beginning to well up in her eyes and her face turning a deep shade of red. A moment later the piercing alarms on her ventilator went off.
“Look, Megan—enough, do you hear me?” Aileen shouted, pointing her finger in her daughter’s face. “Megan, look at me. I don’t care if you need a goddamned machine to help you breathe; you’re not getting the freakin’ cards.”
Megan wailed louder, throwing her arms back and twisting in her seat, the alarms continuing to shriek.
Aileen looked up and saw the checkout lady staring at her, mouth open. She glanced to either side and saw everyone at the other registers staring, too. Flustered, she hurriedly paid for the picture frames and fled—as much as someone pushing a cart with a child and a fifty-pound ventilator could flee, anyway.
When they got home twenty minutes later, Aileen carried Megan inside and handed her to John. “Here you go,” she fumed. “I’m done.”
“Daddy, Mommy wouldn’t buy me anything at the store,” Megan said sullenly.
“You wait, young lady, until I tell Daddy about the scene we just caused,” Aileen said. She turned to John, shaking her head. “I totally lost it. I don’t know if I can ever be seen in that place again. They’ll probably call the police.”
“The unflappable, perfect mother lost it?” John teased. “I can’t wait to hear this story.”
Aileen stomped upstairs, took a shower, and burrowed into a new book she had just bought on child discipline. When she came back downstairs an hour later, Megan was sitting on her father’s lap.
“Mommy, Daddy’s going to get me the cards tomorrow,” she said. Her tone was sugar-sweet, and her eyes had regained their customary sparkle.
“No, he is not,” Aileen said. “John, I am not going to let you spoil that child. The nurses are all complaining that she has to have her way. She has to learn that you don’t go to the store and get everything you want just because you have a meltdown.”
John wiped the smile from his face and somberly agreed. “Mommy’s right, Megan.” Two sets of eyes stared at Aileen contritely.
“I promise I won’t do that again, Mommy,” Megan said.
As Aileen turned away, out of the corner of her eye she saw her husband lean toward Megan and give her an exaggerated wink. “That was supposed to be a secret, silly,” he whispered. Her daughter squeezed both eyes shut in a brave, sweet attempt to answer his wink, and Aileen bit down on her lips to suppress a smile of her own.
20
The Deal
Spring–Summer 2001
Cambridge, Massachusetts; Pennington, New Jersey
Henri Termeer spent the next two weeks pondering what to do about Novazyme. The question was whether he should pay a significant premium for the company in order to move his own drug development program for Pompe disease forward. Henri was a seasoned chief executive, having spent seventeen years at the helm of Genzyme, and before that a decade at a big European drug company, Baxter International. The choice he faced, Henri believed, was either to buy Novazyme or to put his Pompe drug development programs on hold and wait to see what happened with Novazyme’s product. He had already invested more than $50 million in his two drug development programs, including acquisition costs for Chen’s and Pharming’s enzymes, and he couldn’t justify investing more money in them believing, as he did, that Novazyme was likely developing a better one. On the other hand, he hated to lose momentum, having learned that once lost, it was virtually impossible to regain.1
Still, Novazyme was not a sure bet. The technology was early in its development, and even the animal data had not been replicated. His own scientists doubted the results and had repeatedly advised him not to buy the company. Wait and see how the science develops, they said. Buy it in a year or two after there’s more data.2
Henri might have waited, had not Novazyme’s recent presentation and van Heek’s urging forced him to think about the acquisition more broadly. Van Heek repeatedly reminded him that Novazyme might be able to use its enzyme targeting approach to improve upon Genzyme’s big-selling Cerezyme, and that the same approach might improve upon another drug candidate that Genzyme now had before the FDA, awaiting approval. Henri concluded that tiny Novazyme would not only force him to delay his Pompe drug development program, but could also grow into a real threat to his company’s bread-and-butter market product.3
“If they’re right, what we’re doing in all our programs is irrelevant,” Henri finally concluded to van Heek two weeks later. “Let’s go for it.”
The next week, at van Heek’s invitation, John was back in Cambridge, Massachusetts, sitting with him at the Charles Hotel, where they’d met several times over the past six months. The two men had an easy rapport, and they were beginning to like and trust one another. At six foot four, van Heek towered over John. He had a warm, earnest, and affable manner that John trusted. Like Henri, he had been raised in Holland and spoke fluent English with a strong Dutch accent.4
For his part, van Heek found himself charmed by John’s sense of humor and moved by his passion and drive. “You mentioned a number in your meeting with Henri,” he said now. “One hundred million. I think I can get Henri close to your price.”
John, looking nervous, said he had no idea if his board would do the deal for $100 million. Having decided not to go to the board with the $48 million offer, he had been waiting to see if Genzyme would come back with something higher before approaching his investors, sensing that they would have wildly divergent opinions, some of them completely unrealistic. “I threw it out as a number. I think it’s an absolute minimum.”
“Oh, c’mon, John,” van Heek said, aghast.
“Jan, if it was up to me, at $100 million I’d sign right now,” John said, embarrassed that he couldn’t be more enthusiastic about what was already a very generous offer. “But I need to talk to my board first. Let’s take the next week and see if we can get a deal done.”
John scheduled an emergency meeting of his board for the following Monday. Then he called the directors separately on the phone to see where each was leaning. As he had expected, the board members’ opinions varied considerably, with some wanting to consider the offer and others dismissing it outright. “I can tell you now, we’d never do $100 million,” said Steve Elms of the Perseus Soros group, recalling the BioMarin deal.
At the meeting, John discussed the valuations of comparable deals that Genzyme’s lawyer had first presented. He told the board about Genzyme’s first offer of $48 million and the current one of $100 million. “I need some direction from you on what price would be acceptable,” he said.
The venture investors, who only a few months ago had thought Novayzme might be a fraud, were convinced they owned something very valuable. If Genzyme wanted Novazyme, it must be onto something.5
“A hundred million dollars—that’s only a twofold return for us,” said Elms. “That’s not going to be acceptable. Any buyer would have to pay at least $500 million,” reminding the group that BioMarin’s stock market value had reached $1 billion with one drug in clinical testing. If they waited a few more months until Canfield’s enzyme was in human testing, the company’s value would skyrocket.
“Steve, we’re a preclinical company,” John said. “If we crossed the $100 million range, we’d be the most expensive preclinical sale ever.”
“Look, if $100 million is the offer, we just built an enormous amount of value
in the company,” Gus said, jumping in to side with John. “And the markets could get colder.” He reminded the others that they would need to put significantly more money into Novazyme to get it far enough to go public. “And don’t forget, drug development is fraught with risk,” he finished grimly.
John looked from Gus to Steve and said, “Can I get you guys to cut the difference?”
“If you can get $225 million, we should close this deal tomorrow,” Gus declared.
“You’re right, Gus. If we get $225 million, we should sell,” John said—and with that, an unspoken consensus emerged that $225 million was the target number.
John called van Heek after the meeting to report the board’s $225 million selling price.
“John!” van Heek said, taken aback.
“Let’s see how close we can get,” John soothed. He knew he would never get Genzyme up to $225 million, but he hoped that if he could get the company higher—maybe up to $150 million, he might get his board to go for the deal.
In a flurry of phone calls, van Heek increased his bid to $125 million; John stuck to $225 million. Van Heek proposed $137.5 million. They were stuck at that number. Van Heek said Henri would never go higher, and John said it wasn’t nearly enough to get his board’s support.6
At home over the weekend, John thought of a compromise. He phoned van Heek and said, “Bill and I want to do it, but you’ve got to help us.” He laid out a plan for a purchase price of $137.5 million up front with the balance of the $225 million—$87.5 million—coming years later, and even then only if Canfield’s approach produced two new drugs for Genzyme.
“That way I can tell my board I got them $225 million—even though part of it would only come later. And you can tell Henri you’re at $137.5 million, and you would only pay more for success.”
“Henri thinks he’s already paying for success,” van Heek said morosely.
“C’mon, Jan. You only pay more than $137.5 million if one or two of the drugs is approved. If even one is approved, you get back the full value of the deal in one year’s revenue.”
“All right, John, I’ll talk to Henri one last time,” van Heek agreed.
A few hours later, he called back excitedly. “Henri says we have a deal.”
John phoned Canfield with the news, but neither of them celebrated yet. It was one thing to get Genzyme to the convoluted calculation of $225 million; it would be quite another to convince his board to go for it.
But suddenly the little company was hot. No sooner had Henri agreed to the deal than Genentech Corporation, one of the two biggest biotech companies in the world, and admired for its pioneering cancer drugs, jumped in with an offer. John had been coaxing Genentech along in parallel discussions for months, not just as a backup, but also because like most people in the biotech industry, he was dazzled by the company’s science. He was also friends with Myrtle Potter, the company’s chief operating officer. The two had worked together at Bristol-Myers, and John liked and respected her. Potter proposed a collaboration in which Genentech would invest $22.5 million for 10 percent ownership of Novazyme and pay the majority of the future cost of developing the drug. This was a way for John and Canfield to get the money to develop the Pompe enzyme without having to give over near-complete control to another company. It also offered investors an infusion of cash while holding out for the potential bonanza of going public in a couple of years.7
From a financial point of view, it seemed at first like an impossible choice. John talked to his board members and found that they differed widely on which way to proceed. He asked his investment bankers at Morgan Stanley to quickly produce a financial analysis of the two deals, and scheduled another board meeting for the following Monday.
On Sunday night, at home in his study, John groaned as he read the report from Morgan Stanley, sent only an hour earlier by e-mail. Even for an objective third party, it was a decision without a clear answer. Closing the door to his study, he read the report slowly a second time. Canfield wouldn’t be there for the board meeting the next day because he was hiking with his son in the mountains of New Mexico, but John had bought him a satellite phone to take along and turn on every night at 10 P.M. so they could talk for ten minutes. He still had a few hours before that call in which to make up his mind about the deal he would recommend.
John knew he would need to be clear and persuasive to get Canfield on his side. But which side was he on? Putting down Morgan Stanley’s presentation, John began making his own list of pros and cons on a legal notepad. Under the pros for the Genentech deal, he wrote “great science.” Next, John wrote “mutual respect among scientists.” Genentech’s scientists had met with Canfield, and were excited about his scientific approach. Genzyme’s scientists, by contrast, didn’t bother to hide their disdain for Canfield’s science. John also knew he could work well with the business side at Genentech. Having known Potter for several years, he trusted her implicitly.
Under the Genentech proposal, Novazyme would remain a separate entity. That meant that if Novazyme were successful, it could go public at some point at an enormous profit, just like BioMarin. He wrote “significant upside—like BioMarin” as another pro.
Below that, he wrote “control.” He and Canfield would undoubtedly have more control over the future of the company under the Genentech scenario, since Novazyme would remain independent, with John as the CEO. However, he wouldn’t lose all control if he went with Genzyme; early on, John had told Henri he would sell to Genzyme only if he came with his company—as a senior vice president in charge of all drug development programs for Pompe disease. Henri had readily agreed, deciding that John’s energy and motivation outweighed the downside of his enormous conflict of interest as the father of two patients. Still, he would have nowhere near the power of being CEO of Novazyme.
Under the “pros” for Genzyme, John also wrote “money in the bank.” The Genzyme acquisition would give investors $137.5 million right away. With Genentech, the investors would have to wait for a couple of years until the company was ready to go public.
Rubbing his hands over his weary eyes, John sighed and set the notepad down on the table. He didn’t know that only a couple of years later, Harvard Business School students would use this very dilemma as a case study and vote on whether John had made the right choice that night.8 Many CEOs have to make such difficult strategic choices, but perhaps never in history had the survival of his or her own children also rested on the decision. Setting aside the merits of the business deal, John arrowed straight to the question closest to his heart: Which deal was better for his Megan and Patrick?
In the months since Disney World, they had grown noticeably weaker even to John, deeply immersed and distracted as he was by Novazyme’s problems. He had also noticed that Aileen didn’t point out the children’s lost milestones to him anymore. Like John, she had begun to try to keep the worries about “her” area of their lives—the home and the children’s day-to-day well-being—to herself, unless there was something she thought John could do to help in the short term. But it was hard for him not to notice that Patrick could not sit up at all now without support, and that Megan, while she could still sit up, fell over more and more frequently. How much longer could they go on?
Which company was most likely to get a treatment to his kids quickly?
Genzyme, he reiterated mentally once again, was the only company in the world that sold a treatment for a lysosomal storage disease—Gaucher. Genzyme had also developed a potential treatment for another lysosomal storage disease and taken it through clinical trials, where it was currently awaiting FDA approval. There was no question that Genzyme was expert at manufacturing these types of drugs; Genentech, on the other hand, had thus far been focused on treatments for cancer and other diseases.
From his year at Novazyme, John knew that any drug development program would run into obstacles. When that happened, he asked himself, which company, Genzyme or Genentech, would fight harder to keep the program alive?
“This program will keep Henri up at night,” he said out loud.
And what if Canfield’s enzyme didn’t work? It was easy to believe your own corporate spin, but despite his eternal optimism, John was at heart a realist. Canfield still hadn’t fine-tuned his process for using human PTase and the DMJ replacement, kifunensin, to produce the Pompe enzyme. The results he was touting to Genzyme and the investors were from experiments using Pompe enzyme made the previous year with bovine PTase, and the FDA might never accept that.
If John were at Genzyme, he’d have backups: the Pharming and Duke enzymes. Even if they were far from perfect, they had saved the lives of some patients. If Canfield stumbled, these enzymes might be a bridge for his kids, keeping them alive until something better came along. They could be his insurance against the failure of his own company’s product.
With that thought, John knew where he stood. He put his feet up on his desk, looked at the clock, and waited for 10 p.m. to call Canfield.
The next day, June 18, John awoke feeling clearheaded. Canfield had agreed with the decision to push the Genzyme deal, and John had slept well, confident that it was the best. Now he had to focus his energy on convincing his venture investors to go with Genzyme. He knew that the investors at Perseus Soros and Catalyst were leaning toward the Genentech proposal, but that Gus at HealthCare Ventures was an advocate for the Genzyme deal.
John was in the shower, going over his arguments in favor of Genzyme, when Aileen burst through the door, her face panic-stricken.
“Where’s John Jr.?” yelled Aileen, who rarely lost her cool. “I can’t find him!” John raced outside, pulling a towel around him. He ran through the children’s bedrooms upstairs, leaving splotches of soapy water on the walls and floor. Megan and Patrick were in their bedrooms, waking up, but John Jr. wasn’t in his. He dashed through the first floor of the house screaming his son’s name, then opened the front door and sprinted around the outside, still clad only in his towel, calling, “John!”