The Antidote: Inside the World of New Pharma (8 page)

As head of the business side from Vertex’s earliest days, and a veteran of other less successful early-stage biotech firms, Aldrich understood acutely its assets and liabilities. He represented it in a rapidly globalizing world that retained a strong belief that leading-edge science would deliver drugs, and he never felt that Boger’s exuberance about Vertex’s goals was unsupported by the quality of its research. He also knew that if you looked at biotech investments on a rational cash flow basis, they were “ludicrous”—Vertex’s less so, but not appreciably. Aldrich’s ancestors had arrived in Massachusetts in 1630 and remained in New England, mostly in law and banking, ever since. Behind a casual demeanor, he was a disciplined Yankee, a bachelor who worked murderously, hit the gym, ate at a university club, then allowed himself one chilled vodka and a single cigarette before bed. He wasn’t surprised when none of the first-line companies he and his people approached returned any real interest. “What we were asking for was pretty outrageous, since we had nothing, really. We didn’t have a clinical candidate, we just had a research program, and they were gonna be footing the bill for everything, yet we were saying, ‘Yeah, but we want roughly half the economic value.’ ”

Wall Street was in the thrall of the Internet boom. It was anticipated that the Next Big Thing in biotech would be genomics, but the patchwork government consortium to assemble and analyze the entire human genetic code was progressing fitfully, and the revolution in breakthrough drugs that it promised remained far beyond the horizon of all but the most patient investors, a vanishing category. Boger intended to be in the vanguard of that revolution but didn’t know how, so he joined the board of directors of an early DNA sequencing company, Millennium Pharmaceuticals. Since genes encode proteins, he was eager to figure out ways that the coming flood of genetic information could help Vertex better understand its targets and design drugs.

In March Vertex raised $157 million by selling almost 3.5 million shares of new stock at $45.50 per share. “We caught the price just right,” Aldrich recalls. “It spiked up. We were out there. It was an easy offering.” The company also began talking more seriously with Eli Lilly and
Company, the Indianapolis drugmaker, about HCV protease. Lilly had nothing in antivirals, but its head of research wanted to get into the area, and Vertex’s protease project seemed like an excellent vehicle. Enthusiasm built rapidly throughout Lilly’s labs.

Aldrich leveraged their excitement by being tough and sticking firm. R&D still carried a lot of weight at drug companies, and he knew that the Lilly scientists were pressuring the business side to make a deal. Vertex’s business development person had resigned, so Aldrich directly handled the “hand-to-hand combat” of getting the agreement worked out. The negotiations were contentious: “a lot of teleconferences with people yelling at each other,” he recalls. Under the terms of the final deal, Vertex received $40 million up front; Lilly agreed to pay all development costs, buy $10 million in Vertex stock, underwrite a hundred-person Vertex sales force, and pay a steep royalty rate. Any drug would carry both companies’ names: Lilly-Vertex.

In other words, on a program that had no drug candidate, and was, at best, many years and hundreds of millions of dollars from the market, Lilly would be paying the full cost of development and launch, while Vertex stood ultimately to get 30 percent to 40 percent of the profits. An anticipated but still unfortunate collateral price was a pool of ill will. “They were paying for everything,” Aldrich recalls. “Their business guys were pissed at us. They just felt like they had been beaten up. I never like to see that in a situation because it’s not good for us, it’s not good for anybody to have people on the other side who feel like, ‘Yeah, we finally rolled over and made the deal, but we didn’t like it.’ ”

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.