The Antidote: Inside the World of New Pharma

by Barry Werth

  Mueller, driving Vertex hard to deliver a second drug, remembers being “incredibly stunned” by the data. Far and away the company’s most seasoned drug hunter, he had seen dozens of proof-of-concept findings over his career, but none remotely as dramatic and powerful as this. Even the Vertex swoosh paled. The implications for patients, for Vertex, for the possibilities of taking on larger problems and harder diseases—even for the way certain diseases could now be viewed—were epochal, he thought. Mueller recalls:

  I think this is the first time ever that any company has had a small molecule that is able to correct—in a subpopulation, at least—the gene defect those people have. It was proof that Vertex is really doing transformational medicine. Cool as HCV is, from a reputation point of view, this drove it home. CF is a lot more complicated in nature than hitting a virus over the head. It shows the commitment and also the capabilities that we have as an organization, to go after problems that nobody else really has ever done. They always stepped away: it’s too complicated, not doable. The seven, eight years of hard science that we did finally paid off.

  And that gives you a feel that there is an evolution going on in Vertex that is beyond rational drug design. It’s the new-century approach where biology drives the effort, and it’s not just the chemistry. I believe that the twenty-first century has a mandate, and the mandate is that you make an advance in health, not just a drug. This is what you get with transformational medicine.

  It took a few days for the euphoria to recede and the larger reality to hit full-on. Sabine Hadida, the chemistry leader, didn’t sleep for a week, she said. Team members were alternately elated and terrified that they might fail the other 96 percent of patients, that they might never produce a corrector as effective or, apparently, as safe as 770. Olson flew to Washington to tell Beall and the foundation the results before Vertex announced them publicly.

  “Bob and I and a few others were on this BIO panel in DC,” Olson says. “We’d gotten the data. They knew the data were coming sometime. Ken wanted me to tell them in person what we had. I said, ‘Bob. Can we go back to Bethesda after the panel? I’ve got some things we need to talk about.’ I think he kind of got a sense, because instead of going back to his office, they had a room at the Hyatt, which was just a few blocks away, and he suggested we go there. So we go into this room. I had a sealed envelope. They opened it. I said, ‘Here are our first data.’ They were just stunned. Bob was so ecstatic.”

  For Beall, the results vindicated a decade of all-out heterodoxy and entrepreneurial risk taking: his determination to push venture philanthropy into for-profit research; his refusal to yield to established opinion that CF drugs could treat only the symptoms of the disease but not its cause; his insistence on going after CFTR; his recruitment of Aurora; his faith in Olson and the company; and, especially, his willingness to foot part of the bill for Vertex’s clinical development. If the determination of an individual to make a big difference can be measured by volume, the significantly improved FEV1—forced expiratory volume in one second—that measured the exhalations of patients taking VX-770 was Beall’s deliverance. Calling the findings an “unprecedented milestone,” he said in a press statement: “The results from this trial are among the most important announcements in the history of the foundation. Although we are still early in the process, we have increased confidence that we can treat the basic defect of CF, and these data show that we are on the right path to cure this disease.”

  At the end of April, John McHutchison presented the data from the two PROVE trials at the European Association for the Study of the Liver (EASL) meeting in Milan, Italy. The cure rate rose to 68 percent in one arm of the second study, when telaprevir was given for twenty-four weeks. A tolerable number dropped out due to rash: 7 percent. McHutchison also reported on a Phase I trial evaluating the oral availability of a nuc, a polymerase inhibitor developed by Pharmasset, a ten-year-old New Jersey company with early-development programs in antivirals and cancer. McHutchison told the audience that after four weeks, the Pharmasset compound showed an ability to knock down the virus “similar to HCV protease inhibitors, and [it] has an encouraging short-term clinical safety profile.”

  Mueller, like Boger, thought nucs made bad drugs, and so far, that had been borne out by the data. All types of other compounds had failed routinely against the virus: nucs, non-nuc polymerase blockers, IMPDH inhibitors, humanlike antibodies, gene regulators, therapeutic vaccines. A much higher percentage of follow-on protease inhibitors were still proceeding in the clinic, strongly suggesting that as with AIDS, the protease was the most inviting target. Ann Kwong, keenly aware of Gilead’s conquest of the HIV market, was less dismissive of Pharmasset’s approach. She began to press Mueller to consider nucs more seriously in planning for second- and third-generation cocktails, but Mueller was unimpressed.

  With skin rash turning out to be a manageable but not insignificant problem, Kauffman was working with the FDA to shorten telaprevir’s treatment time still further, eventually winning the go-ahead for an eight-week treatment arm. Enrollment in the two late-stage trials was filling quickly as word got out about the Phase II data. Meanwhile, the company was rapidly advancing expanded trials of VX-770 and VX-809, also expected to start by summer.

  Alam, after eleven years, put down his torch. He had helped elevate Vertex from a research organization to a clinical leader with breakthroughs against two major diseases, but his relations with the FDA had become a liability, and he didn’t have the “tactical rigor” Boger knew he would need to manage the expanding wheel of Phase III trials and the filing of new drug applications with the regulatory agencies. “I love John to death,” Boger says. In the usual Vertex fashion, personal affection and loyalty were not enough when measured against where the company needed to be in five years. “It came as a shock,” Kauffman remembers. “John came into a staff meeting one morning with a sort of Cheshire cat smile on his face and said, ‘I have news for you.’ ‘What’s that?’ He said, ‘I’m leaving.’ They had been conducting a search, it turns out, that I didn’t know anything about. I had not been told about this at all, nor had anyone else in the room.”

  News of Alam’s departure was wrapped inside the announcement that Vertex had hired Dr. Freda Lewis-Hall as executive vice president for medicines development. Formerly of Bristol-Myers Squibb, Lewis-Hall would lead the company’s buildout of its regulatory affairs and medical affairs teams in addition to running all clinical and nonclinical development, but her real urgency was to improve relations with the FDA’s Fleischer. Tracking him down at medical meetings, engaging him in conversation, she became the company’s “Russ whisperer.”

  Since Sato retired, more and more frequent turnovers in senior management had rattled investors, perplexed analysts, and confused employees. Boger believed it was the price paid for forever blowing out functions to create the future. In relentless succession, the company had built a research organization, a development organization, and was now rushing to create a commercial organization to launch two drugs. The ET staggered from move to move. First, Tony Coles had left when Boger hired Victor Hartmann. Then Hartmann left when Kurt Graves joined as the seeming heir apparent. When Boger started at Merck in the mid-1970s, it was assumed that he would retire there, but in biotech, if people didn’t change jobs every five years, they felt they weren’t advancing fast enough. Companies adapted to the abrupt comings and goings like a sloop catching a side gust, entering a state of perpetual disruption where head-snapping departures became the norm. “Thrills and chills,” Ken calls it.

  A month later, Emmens retired as CEO of Shire, although he remained the company’s chairman. When he took over in 2003, Shire’s flagship product had been the attention-deficit drug Adderall XR, a reformulated amphetamine under patent threat from generic drugmakers. Soon after, its most promising late-stage-development prospect was rejected for FDA approval. With most of his business in the United States, Emmens moved Shire from England to the Philadelphia area, settled
the legal standoff, acquired smaller companies with innovative technologies and franchises in rare diseases, and encouraged them to develop their own cultures and programs. Now Shire ranked near the top of specialty drug firms worldwide.

  Emmens, fifty-seven, anticipated getting back to his garage to work on his fleet of restored sports cars, flying around the Caribbean, keeping up with his directorships, visiting his adult children, maybe getting a new dog to train. He thought Vertex’s revolving door belied a larger problem—Boger’s hub-and-spoke leadership model—and he told the other directors in his firm, accentless monotone that he didn’t think it was a scalable design. Development of telaprevir was ongoing. The company had its first FDA submission coming up. It faced scores of inspections, both of its supply chain and clinical activities. It had no commercial organization. And it expected to launch a drug into a highly specialized market in eighteen months to two years. Without thorough integration and alignment among its senior executives—not to mention the faith of the board—Emmens doubted that Boger could succeed.

  “Did I think it was time to put somebody else in? Yeah,” he recalls. “I said, ‘If we don’t do that now, leave Josh in. I know what it’s supposed to sound like. You can have the greatest sense of urgency in the world, but unless that team works together, you’re not gonna make it.’ ”

  In July, Charlie Sanders was named to head a special committee of Genentech’s board of directors to assess a surprise takeover bid from Roche, thrusting him into strenuous high-stakes negotiations. In 1990 Roche had bought 55 percent of Genentech, which went on independently to become the most productive R&D organization in pharmaceuticals. With some shares still trading publicly, the company had been able to attract entrepreneurial-minded researchers with stock options and promises of autonomy. Now Roche wanted to own everything, and there was deep unease at Genentech that losing its independence would destroy the science-focused culture that had led, over a five-year period, to the rollout of Roche’s three biggest-selling drugs: the cancer breakthroughs Rituxan, Herceptin, and Avastin.

  Hiring Goldman Sachs as advisor, Sanders and the special committee evaluated the bid. They rejected it, saying it “substantially undervalues the company.” As spokesman, Sanders said the board would consider a higher offer, and he tried to dispel the notion that Roche’s takeout proposal was unwelcome. “We look forward,” he told the Times, “to the company maintaining its successful relationship with Roche, regardless of the ownership structure.”

  A case-hardened truth in industry is that the only sure way to avoid being taken over by a bigger company, or “taken out,” is to become too costly. Vertex, with a market cap of $5 billion, a harrowing burn rate, and no immediate prospect of profits, seemed safe for the moment. Ken and his team had negotiated a “standstill” agreement with J&J: a contract barring one partner from making an unsolicited offer for the other. The company’s antitakeover provisions, including a poison pill, had been in place since the public offering in 1991. Taking another look to see that they hadn’t forgotten anything, the brothers agreed they were as well defended as possible. “Like trying to eat a blowfish,” Josh Boger said.

  In mid-September, two days before Vertex planned to announce another stock offering, Wall Street shuddered again. This time the disruption engulfed the global economy. The prominent securities firm Lehman Brothers hurtled toward liquidation after it failed to find a buyer because Washington, unlike with Bear Stearns, refused to step in. Merrill Lynch agreed to sell itself to Bank of America to skirt the same abyss. Less than a week after the government took control over the troubled, government-sponsored mortgage finance companies Fannie Mae and Freddie Mac, the insurance giant American International Group (AIG) sought a $40 billion federal lifeline, without which it said it might have only days to survive.

  On Monday Smith told Boger, “We need a constant supply of capital. If the system goes down we’ve got a real issue.” With Vertex heading into the completion of pivotal trials of telaprevir, expected losses for the year of around $400 million, and less than $500 million in surplus cash, Smith “needed to top off the tank.” Vertex decided to go ahead with the offering, announcing the sale of more than eight million new shares as Wall Street teetered. Goldman Sachs, one of the two remaining investment banks, acted as the sole book runner for the sale.

  Since the last time Smith had raised money, in February, Vertex’s share price had ridden a whirlwind, driven down more than 50 percent by a few prominent analysts touting fears over telaprevir-related rash and concerns over competition from Schering, before regaining everything and more in the wake of the company’s scientific publicity blitz after the PROVE and VX-770 results. Doubling down on telaprevir, Smith had sold the rights to Vertex’s royalty stream for Agenerase and Lexiva for $160 million in cash—the company was no longer in the business of treating AIDS. Heading into the teeth of the worst capital market in seventy-five years, Smith, with his usual brio, approached the fund managers he hoped to shepherd together to complete the offering.

  The following week, Paulson and the White House submitted a $700 billion bank bailout to Congress, which was now considering it. McCain, declaring it was time to “put politics aside,” said he would temporarily stop campaigning so that he could return to Washington to help forge a deal. In the maneuvering, he suggested postponing the upcoming presidential debate. Obama rejected the delay, saying, “It is my belief that this is exactly the time when the American people need to hear from the person who, in approximately forty days, will be responsible for dealing with this mess. It is going to be part of the president’s job to deal with more than one thing at once.”

  Smith’s urgency reflected the nation’s financial instability and Vertex’s make-or-break race to market with telaprevir. He compared the company’s situation to a road trip into barren, unknown country. He thought, “This might be the last gas stop before our destination.” When one fund manager from LA protested the price of the offering in the face of the larger crash, Smith cut him off. “I’ve got to call a few other investors,” he snapped. On the same day that Vertex completed the sale, netting $225 million at a share price of $28, the Dow plummeted 650 points.

  Defying gravity had long been Vertex’s unofficial scientific credo. Now it became its financial signature as well. Starting the third week after Black Monday, the Dow shed 2,400 points—22.1 percent—in eight harrowing trading days. Trillions of dollars of wealth were wiped out as volatility raged. Despite Washington’s apocalyptic rhetoric and roiling discomfort, Wall Street got its bailout. By Election Day, VRTX shares were up almost 30 percent on the year, making it the top-performing stock in the NASDAQ 100.

  Boger realized that Emmens wouldn’t stay retired long. After thirty-five years in pharma, Emmens was receiving approaches from headhunters and venture capitalists alike, and he was entertaining them all. If he returned to business, Vertex would surely lose him as a director. He had recently written and published a business primer in the form of a fabled quest, coauthored with an illustrator, an old friend. Titled Zenobia, after novelist Italo Calvino’s mythical city on stilts, it tells the story of a young heroine who gets a job at a former industry giant bedeviled by paralyzing hierarchies and who triumphs over “yes-men, cynics, hedgers, and other corporate killjoys.” He believed passionately in the power of individuals to rescue organizations by inspiring them, and having just proven his thesis again at Shire, he wasn’t through. “Anyone who hasn’t read Matt’s book doesn’t understand Matt,” Boger says.

  Sanders was preoccupied by the Genentech takeout, which had “taken a big toll on him,” and he was “fading in strength,” Boger believed. No longer intimate with the pulse of the board or the directors’ thinking, Boger sensed a growing vacuum, a free-floating anxiety: “background noise,” he recalls, especially about Graves’s ability to pull together and manage a commercial team. “The board fell in love with Kurt and then fell out of love with Kurt and blamed me for it.” Despite Vertex’s all-around positi
ve results, there grew a sense of crisis. Members, taking seriously the succession issue, worried that Vertex needed more commercial leadership—now. Sanders was unable or unwilling to rein in their apprehensions.

  “Remember, there’s lots happening in Charlie’s life,” Boger recalls. “A company where he had spent a lot of time on the board was getting engulfed, and their mission was going to get derailed. . . . A lot of Genentech people were very upset with Charlie for not taking a harder line. I don’t blame Charlie at all, but it did go on for a long time. There was a lot of back-and-forth. It took a lot of Charlie’s energy and time. He was worn out.”

  In late fall, Sanders invited Boger to breakfast at the Harvard Club of Boston in the Back Bay. “We’re thinking of making the transition now to Matt because Matt’s available,” he said.

  “Is he interested?” Boger asked.

  “Yeah, he’s interested.”

  Boger weighed the news as he did any new data point. He was discerning and dispassionate. “So at first I was thinking to myself, that’s a pretty good idea,” he says. “I wasn’t happy with the way that Charlie presented it. I wasn’t happy that there had apparently been—by the way, illegal—board meetings without me. They had called all the directors, except me, together to have a discussion about this, so by the time Charlie told me, it had already been decided. I’m a director, so how can they exclude me from those discussions? Would I have opposed it? I don’t think so, because I think it was a pretty good idea.”

  Boger thought of Vertex as his company. He had imagined it, realized it. Had he named it Boger Pharmaceuticals—had he given it the family name as, pre-biotech, generations of founders had done when they entered what was then called the “ethical drug” business—his stamp on it could not have been more personal. In seconds he knew it had been completely taken over by others without his even being asked what he thought. “Too many roads had been crossed before I even had a chance to have an opinion,” Boger says. “Charlie was not playing a strong role there, and I was cut out of the discussions. It was so obvious that Matt had effectively managed the whole process so that he was completely in the driver’s seat, and so that anything he was asking for they were saying yes to, even things that they had told me—like being chairman—were off the table. I just didn’t understand this.”