by Geeta Anand
“These guys either have no idea what they’re doing or they are frauds,” Roth declared, steaming at the memory of the meeting.
Gus almost couldn’t believe what he was hearing. He had thought he was the only one with a bad feeling about John and Novazyme. What these Neose guys were telling him was far worse than any mere confirmation of similar feelings.
“I’ve thought they were inept, but I never thought that they were intentionally misleading us,” Gus said. “Have you talked to Dennis yet? It sounds like we have a real problem here.”
Roth said he and Neff were scheduled to talk to Dennis the next morning, when they planned to fill him in.
The next evening, Friday, the phone rang in Novazyme’s satellite office in Princeton. Dennis was on the line, apoplectic with rage.8
“What the hell is going on?” he shouted at John. “Neose doesn’t believe any of your data. Are you going to begin clinical trials in September or what? Neose is saying there is no way you’ll be in the clinic in September.”
“I can explain,” John said.
“Save your breath,” Dennis boomed through the earpiece. He told John to show up with Canfield at his Manhattan office at 9 a.m. that next Tuesday, in just four days, prepared to explain the experiments. Without wasting breath on closing courtesies, Dennis banged the phone down, and John was left holding an empty line.
17
Novazyme Time
Winter 2000–Spring 2001
Princeton, New Jersey; New York, New York;
Oklahoma City, Oklahoma
Undaunted by the possible disaster looming above their heads, John and Canfield spent the next four days working late into the night pulling together a report on the company’s progress—John out of his satellite office in Princeton, Canfield at headquarters in Oklahoma City. John said he would organize the business side of the report and Canfield was to pull together the science part.
“Let’s overwhelm them with the facts,” John said to Canfield, cocky even under daunting pressure. “We’ve achieved more in four months than any other company in biotech history. Sure, we’ve made mistakes, but every day has been two steps forward and only one step back. We’re far ahead of where we were when they made their investment just four months ago. Let’s show ’em, Bill.”
They had convinced themselves that the venture investors were interfering, even bullying them. On the phone several times a day, they fed each other’s anger.
“This is an absolute waste of our time,” John complained, and Canfield, naturally skeptical of East Coast finance types, grunted in agreement.
On Monday evening, John came home and went right to his study instead of coming upstairs to say good night to the kids. Aileen knew that meant trouble with the company, and after she had put the kids to bed, she found John still at his desk, surrounded by stacks of papers.
“What’s going on?” she asked, leaning against the doorway, framed by the light in the hallway behind her.
“Canfield’s flying in tonight. I have to pick him up in Newark and drive him into the city for a meeting with the investors tomorrow.”
“Something’s wrong,” she said, hearing the fatigue in his normally optimistic voice. “You sound terrible. And you look even worse.” She moved behind him and began to knead his shoulders gently.
“The sons of bitches think we’re frauds,” John said bitterly, his muscles tense. “They don’t believe the science anymore. Bill and I have to go in there tomorrow and convince them we’re for real.” He twirled a pen on his desk restlessly. Aileen’s hands didn’t slow on his shoulders.
Abruptly, he threw his pen across the room and slumped forward, head in hands. “I hate this, Aileen. I just don’t want to do this anymore. I hate talking about, thinking about, and agonizing over Pompe disease all day long. And then I have to come home to live it. There’s no escape. I just want to quit. I’ve had it. I’m done.”
“Oh, John,” Aileen said, pulling him back against her belly and letting her arms loop around his neck and shoulders, rocking him lightly. “You’re working way too hard,” she whispered. In this moment where all her husband’s weariness and pain lay bare, everything else melted away, and all she could think of was easing his strain. “This is too stressful for you. I don’t know how long you can keep doing this.” Where some saw overreaching or overconfidence, she saw his fierce dedication to his children.
She pushed his papers to one side and slid onto the desk, unbuttoning his shirt and whispering. “It’s okay if you’re a little late to pick up Bill, isn’t it?”
“I’ll tell him my wife seduced me as I was heading out the door,” John said, looking at her with gratitude, knowing that she understood his tiredness, that she didn’t blame him for his weakness. Aileen smiled and hit the switch to turn the lights low.
An hour later, John—more than a little late—found Canfield outside the arrivals terminal at Newark Airport, scanning the crowd wearily. John picked him up, and soon they were in Manhattan checking into their hotel. They left their bags and headed to a Kinkos, where they remained for three hours, struggling to print out the briefing material for the meeting the next morning. It was past midnight when they returned to the hotel with a dozen inch-thick binders.
The day before the meeting, Gus was on edge, fiddling with his blue tie and pacing back and forth on the somber gray carpet of his office. “If they don’t know what the hell they’re doing, that’s one thing—but if they’re lying to boot, we’re in real trouble,” he told Chris Mirabelli, a partner who was a scientist by training. Gus had asked Mirabelli if he would fly down with him to the meeting to help determine whether Canfield’s science was a fraud. While Mirabelli might not be able to determine this from just one meeting, his science background at least gave him a better platform to evaluate from than Gus had. HealthCare Ventures had entrusted Gus to make good on the Novazyme investment, and now it looked like the venture firm would not only not make a profit, but might also actually lose money. His first assignment could not end in failure.
The next morning, Gus and Mirabelli showed up early for a quick premeeting with the Perseus Soros and Neose teams to discuss strategy for questioning Novazyme.
“We need to know if we were hoodwinked,” Gus said bluntly, opening the discussion. “Was the scientific presentation to Neose a deliberate attempt to deceive?”
Dennis said he hoped they could come out of the meeting with a plan to get Novazyme back on track. “We need some mouse experiments comparing Canfield’s enzyme against Genzyme’s. It’s worth moving forward only if Canfield’s enzyme is better.”
When the ten-man group emerged on the twenty-ninth floor of the Perseus Soros building, they found John and Canfield waiting, laptops powered up, in a small conference room with a view of midtown Manhattan. With small, tight smiles of greeting, the group settled around the table and picked up the thick binders in front of them.1
Canfield, hoping to dazzle the group with his recent scientific achievements, went first. With slide after slide of a PowerPoint presentation, he detailed the results of four months of nearly round-the-clock experiments that had led to his incredible breakthroughs—producing PTase and finding a replacement for DMJ, the chemical inhibitor that wasn’t widely available. But instead of being amazed, the group grew fidgety.
“Stop—just stop,” Dr. Roth finally burst out, after thirty-nine slides and one full hour had passed. “We’ve heard enough. Now get to the point. Please explain the data John and Tony presented.”
Canfield paused, frowning and looking over at John, annoyed that the investors seemed so uninterested in his science. “All I will say is that mistakes were made. But that experiment was just a prelude to the animal experiments we have planned.” He explained that they had commissioned a series of experiments with an outside investigator, Dr. Barry Byrne, the University of Florida scientist-physician who had worked with McKinney during the summer to design the company’s animal studies.
“We will, in a
few weeks, have outside validation that our enzyme works in mice with Pompe disease,” Canfield concluded weakly. He sat down heavily and wiped a line of sweat from his brow.
Then John, a more succinct and lively presenter, detailed the company’s business successes, his eyes scanning the ten men for any sign of encouragement. But their faces were like masks—grim, unmoving, impenetrable. “In the four months since we completed the A Round in September, we have begun a dialogue with the FDA on how to conduct the animal studies,” he finished. “We have nearly completed construction of the manufacturing plant, and we’ve hired sixty employees. And we believe we’re still on track to go into clinical trials in September.”
As John sat down, Gus looked around at the table at the other investors, feeling annoyed. He hadn’t heard anything from John or Canfield to allay his fears that the whole thing was a sham. Instead of explaining why their scientific presentation to Neose had been so flawed, the two men had delivered a sales pitch on Novazyme’s scientific and business achievements. They had made an astonishing amount of progress in four months, Gus had to admit, but he didn’t trust them not to lie about their results.
“You guys are still going to be in the clinic in September?” Mirabelli, Gus’s partner, asked at length, breaking the uneasy silence.
“Absolutely,” John said, smiling. Canfield gave a quick little nod of agreement.
“Are you telling me you are still struggling with basic scientific questions and you think you can begin testing in humans nine months from now?” Mirabelli pressed.
“I agree, the timeline is ambitious,” John said. “It would not fit the drug development timelines you are used to. But Novazyme doesn’t have time to do the science first and then the drug development, given Genzyme’s position with two enzymes already in clinical trial. We’re going to do everything in parallel. We’re working faster than anyone else. We’re operating in a different time frame. We’re working on Novazyme Time.”
Gus, shaking his head, whispered to Mirabelli, “Are we ever going to get a straight answer on the timeline from Crowley?” Again, an uncomfortable silence descended.
Finally, John looked around the table and asked, “Are you less anxious about Novazyme than when you came here this morning?”
Gus, clearing his throat, said, “Well, let me say I’m not more anxious than when I got here.”
“Well, we have lots of problems and plans to figure out,” John said brightly. “But I’m very optimistic.”
Dennis, who had been sitting silently during the whole presentation, his hands locked together on the table in front of him, looked up at this cheery reassurance. “You better figure them out,” he snapped, “or you’ll have a big fucking problem.”
John looked down, his smile gone.
Gus knew then that Dennis had finally come over to his side. If John didn’t get things back on track, he would be fired.
The meeting had ended without Gus and the group being able to determine for certain whether or not Novazyme’s science was fraudulent, and Gus wasn’t ready to let the question go. To know for sure, Gus thought, they really needed to hear from an insider at the company. He and Mirabelli flew back to Cambridge that afternoon, having arranged for the physician-scientist, Dr. Pedro Huertas, whom John had hired a month earlier to be Novazyme’s chief medical officer, to fly up the next morning for a secret meeting. Gus had prevailed upon John to hire Huertas as part of his campaign to raise the level of experience of senior management. Huertas came from Genzyme, where he had been involved in developing a drug for a disease similar to Pompe. His academic credentials were stunning, with a doctorate in biochemistry from Harvard University, a medical degree from Harvard Medical School, and an MBA from the MIT Sloan School of Management.
Gus had asked Huertas to come prepared to provide an off-the-record assessment of Novazyme’s science, hoping the scientist would be candid since he’d gotten the job through Gus and because his mentors at Harvard Medical School were scientific advisers to HealthCare Ventures.
The next morning, Huertas sat with Gus at one end of a long conference table in his firm’s bright second-floor conference room. Sunlight streamed through the windows, which overlooked the courtyard of One Kendall Square and, beyond that, the long brick buildings of Genzyme.
“I don’t know how much I can help you, Gus. You must remember I have only been at Novazyme for about one month,” Huertas began.2
“Well, just tell me your feelings so far,” Gus said, smiling. He was wearing a rumpled tweed jacket and glasses, and looked more like a professor than the hard-nosed venture capitalist that he was.
“My feeling so far is that Canfield is a really smart guy, but he’s as dogmatic as they come,” Huertas said, his Chilean background still evident in his accent. “He’s suspicious of outsiders, keeps the details of his work to himself and a small group of scientists. I think his approach is right, but my feeling so far is that neither Canfield nor anyone else has a clue of how to develop a drug.”
“Do you think there’s fraud going on?” Gus pressed.
Huertas drew up short for a moment. Gus had asked him to prepare to be candid, but he’d had no idea that Novazyme’s backers were worried that there might be deception. “My feeling is these guys are just inexperienced, but I don’t think there’s fraud,” he said carefully.
Gus leaned back in his chair, breathed deeply, and said, “I have to say, Pedro, any amount of incompetence seems like a blessing compared to the alternative. I appreciate your feedback very much. I know this isn’t easy for you, but you have to appreciate our position here.” Relieved, he smiled at Huertas as he walked with him to the elevators, saying, “And of course, as I said before, nobody knows we had this discussion.”
Less than a week later, Gus was shocked to learn through the investment grapevine that John and Canfield were traveling around the country trying to raise money from other venture funds. Instead of improving relations with his existing investors, John appeared to be trying to blunt their influence by finding new money.
“I have to admire the guy’s gumption,” Gus said to Mirabelli, with a kind of amused exasperation. Then he added seriously, “But it’s another sign of Crowley’s inexperience that he thinks he can get new investors without the support of the existing ones. Doesn’t he know the new guys will wonder why the existing investors aren’t in the next round?”3
The venture capital world was an old boy network. Soon, partners at the funds John approached were on the phone to Gus asking why HealthCare Ventures wasn’t leading, or at least participating.
“John Crowley is a problem,” Gus declared to each caller. “The company has an inexperienced chief executive and an inexperienced chief scientific officer, and they don’t give a damn what their investors think.” The company was struggling with scientific questions, was behind in animal experiments, and had deep feuds between management and the board, Gus told the callers. Before signing off, he made sure to tell them that he was as close to giving up on a business relationship as he’d ever been.
It worked. In less than two weeks, John was getting nowhere. John saw fifteen different firms in two weeks, and despite his considerable powers of persuasion, failed to convince a single one to give him even a tentative commitment.
When the last one turned him down in a call to his cell phone on Friday afternoon, John looked at his watch. It was nearly 5 p.m. He had literally minutes to reach someone before offices on the East Coast closed for the weekend. Novazyme was almost out of money, and he didn’t want to lose the weekend. He picked up the phone and dialed the Perseus Soros office, reaching Steve Elms. “We’ll do the financing with you guys on the terms you think are fair,” John said, getting right to the point.
Steve had already heard through the grapevine that John was making no progress with his venture capital road show. “All right, John, but you know you’re going to get your ass kicked,” he said.
“I’m prepared,” John replied grimly.
&
nbsp; On Monday, John showed up at the same Perseus Soros conference room where his venture investors had berated him two weeks earlier, prepared to grovel.
“I told you this was going to happen,” Dennis began, shaking his head. John capitulated immediately, saying, “There are some things I’m good at, and some things I’m not.”4 He had learned to be humble when he had to be.
Dennis proceeded to lay down the terms of the deal. “The premoney valuation will be $35 million,” he said. That was within the $30 million to $40 million range John and Canfield had rejected earlier, but John didn’t dare argue. He was just relieved that he hadn’t gone any lower.
“Whatever you believe would be fair is fine with me,” John said.
“It’s not quite so easy,” Dennis stopped him. For this deal to even happen, Dennis said, he needed Gus’s firm to participate.
Soon Dennis was on the phone telling Gus about John’s change of heart. “I’m inclined to give them more money,” Dennis said. Novazyme’s management’s blunders didn’t take away from the reality that its science represented an enormous threat to Genzyme. If Novazyme could just complete one or two experiments validating Canfield’s science, the venture investors might be able to sell to Genzyme and bail out with a big profit.
“I don’t want to throw good money after bad,” Gus replied warily. “But before saying a final ‘no,’ I’ll talk to my partners. I’ll be back to you in a few days.”
Meanwhile, Gus and the rest of the directors arrived in Oklahoma, where Novazyme was holding its board meeting for the first time. Gus noted with relief that the idea of in-licensing a new drug, which he had so vehemently opposed, was not on the agenda. Maybe, he thought, Crowley was finally coming to heel.
The early morning was all routine board business. In the late morning, John had scheduled the ribbon cutting on the new $2 million manufacturing facility. Gus and the other board members followed John on a tour of room after room of sparkling stainless steel equipment across from the company’s research labs in the same office complex. Then they joined Novazyme’s sixty employees crowded into the corridor outside, talking excitedly.
