The Antidote: Inside the World of New Pharma

by Barry Werth

  In early June, as Kwong left for Cambridge, Schering-Plough published the crystal structure of HCV helicase, beating Vertex, Merck, and the rest of the pack. Ten days later, on the same day the Vertex-Lilly agreement was announced, Schering signed a deal with another small biotech company, Corvas International, to codevelop HCV protease inhibitors.

  Boger forever kept one eye on the horizon, his optimism bottomless. He both dared and enabled others to think beyond their usual ideas and capabilities. He possessed what collaborators said of Apple Computer cofounder and recently returned CEO Steve Jobs, a reality distortion field, a rich talent for convincing himself and other people through a mix of bravado, hyperbole, charisma, marketing, and tenacity that almost anything can be done. Boger brought other people around to his way of thinking not through willfulness and manipulation—staring through others coldly if need be—but by an unshakable faith in himself. “I’ve never made a bad decision,” he liked to say. “I’ve just had bad data.” His exuberance was infectious largely because he seemed to embody the idea that the biggest, hardest problems were the most interesting and that an all-out, information-driven mind-set will not only get you the right solution first but also be more fun.

  “Josh didn’t sit around wringing his hands about the fact that one in three hundred ideas you have in pharma gets to the finish line, and the other two hundred ninety-nine crash and burn,” Sato says. “On some level, I think Josh says, ‘That can’t be true. Or if that is true, people don’t deserve to breathe.’ He has an outrageous sense of possibility coupled with a very deep sense of self-confidence about one’s ability to translate that into something that is actually working. And because those were his very strong values, it made it safe for the younger people to think bravely—as long as they delivered. So nothing was too hard for Thomson, as long as you gave Thomson rope, and the reason you gave Thomson rope . . . in the old Peter Drucker sense . . . is that it’s okay to be a diva as long as you get up and sing Tosca center stage at the Met—to rave reviews. Josh made it okay for people to be a little crazed.”

  Ann Kwong witnessed Boger’s leadership at her first project meetings, where he routinely posed goals that were impossible to reach by traditional thinking and methods. “But that’s so freeing,” she says. “You know you’re not going to take an incremental approach, because you know it’s not going to work.”

  Boger’s tolerance for high risk coupled with audacity drove Vertex again and again to exceed expectations, but Vertex could not go it alone—no small company could. Its corporate partners, swept up by dramatic new forces and focusing on profits and market share, meanwhile struggled to reorganize their R&D organizations to be more productive. Ever since Clinton dropped the threat of price controls midway through his first term, the pharmaceuticals sector had strained to hold its place as the most profitable industry in America. It won its long campaign to advertise directly to consumers on TV. It exploited patent extensions and the yawning opportunities beyond the narrow indications for which its drugs were approved: “off-label marketing.” It pushed the FDA hard to approve “lifestyle drugs” such as Pfizer’s Viagra and Merck’s Propecia—a low-dose version of its prostate pill Proscar, now prescribed to prevent hair loss—then pressured insurers to pay for them. The challenge to Big Pharma as it consolidated more and more was to meld cultures while trying to increase profits: not, as at Vertex, to construct a new model from the ambitions of the founders while running perennially, dangerously in the red.

  At Glaxo Wellcome, progress on Vertex’s AIDS compound VX-478 was overwhelmed by a postmerger hangover that caused Vertex fits. Generally when one company takes over another, the acquirer attempts to absorb or remake the acquired. But Glaxo, facing the loss of 40 percent of its business as its antiulcer blockbuster Zantac came off patent, took the opportunity to remake itself. It hired a human resource consultancy to conduct a global, four-phase, custom-designed leadership and cultural change program to fire up its labs, stoke an unexciting pipeline, and formularize a steady stream of new drugs. The Clinical Process Redesign project stretched on for eighteen months. With lingering internal resistance toward protease inhibition among Wellcome’s pro-nuc forces already entrenched, the reorganization only compounded its inertia, costing in all perhaps another year to get VX-478 to market—a year in which Agouron brought a fourth antiviral to patients.

  “They were just so unaggressive and internally deferential it drove us crazy,” Boger recalls. “I don’t know what Burroughs Wellcome would have done, but it wouldn’t have been as bad as Glaxo. They were just eternally frustrating. Every other drug in the field was perfect despite the facts. And every little scratch on the paint on our molecule knocked the value down fifty percent. It was this weird opposite of being optimistic and aggressive, such a mismatch to Vertex. We knew that we often ignored the scratches on the paint. But they would just stare at them and get depressed about how they couldn’t do anything.”

  As hopes dimmed that VX-478 would launch Vertex into the ranks of profitable drugmakers, the company’s aspirations shifted to other areas, most promisingly ICE and its partnership with the French drugmaker Roussel-Uclaf. Here was a wide-open opportunity, an unproven target with a highly motivated partner that shared Vertex’s passion and excitement. Anti-inflammatory drugs now more than ever were the industry’s grail, as the molecular pathways through which the immune system generates inflammation—and the seemingly endless list of painful, chronic diseases in which inflammation plays a leading part—became better understood. The ICE team quickly leapfrogged over Merck and the other leaders in advancing compounds to the clinic.

  In late 1997 Vertex and Roussel picked a clinical candidate, VX-740, derived from the original chemical series designed in five weeks by the modeling team in 1994. Since their original agreement, Roussel had been bought by German pharmaceutical giant Hoechst, which went on to buy Kansas City drugmaker Marion Merrell Dow, morphing into Hoechst Marion Roussel, or HMR, which now gave Vertex $3 million in milestone payments. As VX-740 entered preclinical testing in animals, Vertex pleasantly discovered that the Roussel team was more committed than ever. “Every partnership has its ups and down, but this one had the essentials,” Sato says. “It was an area of strategic interest and importance, and it had internal champions who stayed committed through the merger.”

  For most of the next year, while VX-478 lumbered toward approval and VX-740 sprinted toward testing in patients, Boger kept up the pressure as always to advance more compounds into development. In hepatitis C, progress was tortured and grudging, as ever. One additional intimidating and expensive obstacle for all companies weighing the costs of a full-blown program in the disease was the threat of patent litigation from Chiron, the Northern California company that discovered the virus. Chiron had chosen a novel and risky strategy for identifying the microbe, though it had no drug discovery program itself.

  After non-A, non-B hepatitis was identified in the late 1970s, and the search began for the infectious agent, numerous labs had tried—and failed—to find antibodies in the blood or grow the virus. Chiron went after the organism’s genetic material instead. Researcher Michael Houghton and his colleagues reasoned that if they could clone one or more genes from the virus, they might be able to make proteins from them, and from the protein, an antibody. The effort took seven years, during which hundreds of millions of bacteria injected with bits of DNA were screened for a putative agent by several different approaches. It was like searching for a needle in a haystack when you didn’t know what the needle looked like, only bits of it. New fragments were painstakingly compared with all known human and microbial DNA until a new viral entity was identified. When Houghton’s group finally convinced themselves and the scientific world that they had the right collection of virus proteins, Chiron claimed an estate of more than one hundred patents, staking out a vast commercial territory. Any company developing a diagnostic test or a new drug targeting HCV needed to license Chiron’s patents, for which it typically
charged millions of dollars in licensing fees during R&D alone, and made millions more each year in product royalties.

  Vertex and Lilly refused to accept Chiron’s terms. “We invited them to sue us,” Boger says, explaining how in July Chiron filed suit against Lilly and Vertex, alleging patent infringement.

  We didn’t think their patents were valid, so we weren’t trespassers on their property—we just didn’t think it was their property. I can say that they have acted outrageously in the field. I don’t think there’s any doubt—and I think you could get a hundred people outside of Vertex to agree—Chiron retarded research in the hepatitis C field by their actions. And that’s not the purpose of patent law. They went around bullying people, and they scared people away from the field. And people who wouldn’t pay their extortion-level demands just got out of the field. I’d have some modest sympathy for them, even if I disagreed with their property rights, if they had a program, but they never did. They basically sat back with their piece of paper and said, “We’re not going to lift a finger for patients with hepatitis C, we just want a piece of your efforts.” And I just find that an outrageous abuse of the patent system.

  Indignation, Boger knew, is a friend, especially to an underdog. Vertex pressed ahead against HCV. Tung and the chemists began developing new scaffolds and “warheads”—chemical groups that seek and bind to specific subareas of the active site—against the protease. Kwong and her colleagues jump-started projects in polymerase and helicase. A month later, Vertex signed a deal with German pharmaceutical maker Schering A.G. to develop drugs to help regenerate nerves damaged by neurological diseases: $28 million up front over five years, plus milestone payments of $60 million. In October, Vertex and HMR announced that they had begun signing up patients for the first clinical trial for an orally administered small-molecule inhibitor of ICE, VX-740. First in humans with a new pill designed with atomic precision against an untested but highly promising target, and with a strong global partner and US commercial rights, Boger was right where he wanted to be.

  Boger intended Vertex to innovate at every level, in every function. As the company began to brand itself as the new name in AIDS medicines, its direct-to-consumer advertising grabbed attention. Almost a year before it expected to receive approval, it wheat-pasted posters in downtown neighborhoods nationwide alongside pitches for Lilith Fair and Levi’s that screamed “Selling Hope Is Easy in an Epidemic” and “Ambition Will Cure AIDS Before Compassion Does.” One ad appropriated the Silence = Death symbol of ACT UP, the militant patient-advocacy group that led the protests over AZT. Another featured the NAMES quilt, the survivor community’s tribute to its beloved dead. Bart Henderson, Vertex’s chief of marketing, explained that the ads were meant to get people talking about the need to “push beyond the status quo to develop better drugs.” Merck’s ads for Crixivan showed, by comparison, an African-American man climbing a mountain, reaching the summit, and gazing at the view below. Its headline: “In the Battle Against HIV, There’s a Change in Outlook.”

  Boger wasn’t just promoting a drug; he was promoting ambition as a superior virtue. Radical improvement—and the drive and tenacity to make it happen—was Vertex’s paramount value. Boger wanted to infuse its public image with the idea that a revolution in medicine could be led by a coalition of advanced drugmakers and patients, together demanding more of the pharmaceutical industry. In using guerrilla marketing to define Vertex’s corporate identity as its first product reached patients, he also was broadcasting his own personal ambition to “make better drugs, faster . . . become Merck, but better.”

  In April 1999, two weeks after the Dow index closed above 10,000 for the first time, Glaxo received FDA approval for VX-478, now called Agenerase (amprenavir). Taken by mouth, an adult dosage was eight 150-milligram soft gel capsules twice a day. Fifth and last to market among the original HIV protease inhibitors, the medicine was well tolerated. With the need for flexible dosing—patients on triple-drug regimens took up to thirty pills a day, at specific times, some with food, some without, often having to wake themselves at night—its long half-life gave Glaxo a commercial advantage, with doctors trying to streamline their patients’ regimens in hopes of improving their compliance. The problem was the gel capsules. When Aldrich first saw them tumbling out of a pickle-jar-sized bottle containing a four-week supply, he doubted he could swallow them. Glaxo had been unable to come up with a more efficient way of mixing the active drug with other chemicals into a medicinal product that was stable, so Vertex committed itself to producing a follow-up compound that was smaller and better featured for a drug.

  “So we ended up with these horse pills, and we said, ‘Okay, we don’t have any expertise in formulation but we’ll make another molecule that even you can formulate,’ ” Boger recalls. “They just let themselves get beat in the marketplace even though we had the better compound. They disappointed us. It was more dispiriting than I thought. It wasn’t just the money; the fact that the royalties were half of what they should have been to us. But because Agenerase and its follow-up didn’t get to be the number one compound, we didn’t get the credit for having designed, in the face of the entire industry, the best molecule.”

  Few at Vertex wallowed in disappointment. After ten years in business, the company was well on track, even if the anticipated shortfall from Agenerase meant it would have to burn more cash and limit the number of new projects and hires. There was too much else to savor. The company threw itself a fitting launch party.

  On a warm Saturday in May, nearly three hundred employees and their spouses and dates assembled in the company parking lot and boarded a line of buses that stretched around the block, their windows papered over so the partygoers couldn’t tell where they were going. The buses deposited them at the Boston Cyclorama, a hulking brick, steel, and glass rotunda built after the Civil War to house a panorama of the Battle of Gettysburg, where there were potted palm trees and pounding music. The bartenders were drag queens, food didn’t arrive until midnight, there were a couple of fistfights involving guests; a short film spoof starring Boger and Sato and directed by the up-and-coming documentarian Nathaniel Kahn, The Lip Balm Incident, was shown. Some pot smokers felt encouraged to light up. Many would remember the party as among the best they’d ever attended, though it prompted a small human resources fiasco. The company faced numerous employee complaints: parents of young children unable to phone babysitters to say where they were going because they didn’t know; people, mostly from other countries, put off by the vamping queens.

  Aldrich felt fortunate to have ushered the company this far, adding more and more revenue streams—real and imputed—to the balance sheet. One welcome consequence of becoming more secure financially while having several programs in development was that the business was in a position to cut its losses sooner than later: it could afford to be truer both to the science and to investors. To Aldrich, this meant not having to prop up less than desirable drug candidates. More and more biotech companies, confronted with onerous burn rates, disappointing clinical results, and slender portfolios were now pursuing questionable therapies longer and longer in the face of ambiguous or even negative clinical data. Such desperation, he thought, inflated expectations ruinously, making the inevitable failures that much harder in the end.

  Aldrich’s business development strategy centered on building out the company’s clinical and commercial arms, a task that became thornier as its original partners were devoured by global players. Renegotiations were expected, and, indeed, made sense for both sides. He was surprised that he still hadn’t heard from HMR, Roussel’s global parent, about the ICE program, expecting someone there to wake up and realize that Vertex had US rights. He says:

  They hadn’t connected the dots, and finally they did. I got this nice fax from the senior VP for business development saying that as a multinational company HMR intended to commercialize its products itself. So I drafted a note that basically said, “We’re really pleased with the collaboration,
and we’re happy to go forward. As it stands, there are no problems with it from our perspective.” I remember we put it over the fax machine and said, “This is gonna be interesting.” Within an hour we got back this stream of consciousness: “We must have this, we must have that!” Guy totally lost his cool.

  We had a lot of leverage and we used it. We actually took them up to the brink of a deal where we would have shared control of North America. They could hardly stomach it but they went along with that for a long time. Then we finally said at the end, “There’s an alternative, but it’s expensive: twenty million dollars immediately, give us all these milestones, pay for our sales force, but you can be in charge of the launch in North America.” They jumped at that, since they’d been looking into the maw of shared control, which they hated.

  Disputes, lawyers say, settle for the other guy’s price. Vertex’s business, like its science, revolved around opportunity. With a best-case horizon of three to five years before VX-740 might make it to market, Aldrich settled for immediate cash and ongoing support over any potential windfall if and when the drug would be launched. Such was the innovator’s dilemma in biotech: you needed dozens of projects to make it to profitability, but in order to generate more projects you were forced again and again to surrender most of their value before you knew if your drug worked. Without proof of concept, it was anyone’s guess what a molecule was worth, so deals were sized to fit the competing needs of the partners. In the end, Aldrich extracted up to $206 million in potential licensing fees and milestone payments—provided HMR commercialized VX-740 for rheumatoid arthritis and two additional indications—but these were so-called BioBucks, contingent upon a staggering array of optimal results, and thus as sketchy and evanescent as they sound.