The Antidote: Inside the World of New Pharma

by Barry Werth

  What worried him most, short term, was a severe adverse event with Incivek. Until the company could treat tens of thousands of patients, any such reported event, even a one-off, would be statistically meaningful and reputationally a major setback. Early on, it could stop a drug in its tracks, so however promising Incivek’s ramp now looked, everyone on the ET worried about one. “I don’t want to blow up a patient,” Smith said. “We’ve built a big tanker here that doesn’t turn in tight circles. Our operating costs are close to $1 billion annually. And we need this launch to keep going. We need a good strong top-line for 2012. We’re living by this drug.”

  Where Smith and Emmens were in strong agreement was on the company’s long-term outlook and the need to balance strategy and opportunity to outthink Wall Street now and over the next several years. The challenge came down, as Boger had posited to the Harvard Business School team, to managing portfolio risk. Looking a decade out, Emmens couldn’t envision Vertex’s expanded product line, in what new diseases, but he thought he had an idea of what it might look like in say, 2016. “It’s probably what you’re seeing,” he said. “If we have the best anti-inflammatory for inflammatory diseases, including RA, it’s a six-billion-to-ten-billion-dollar product. Flu could be a billion or two per year. Epilepsy could be five hundred million bucks, but the market has no clue about that, because when there’s no model the market doesn’t know what to do with you.”

  Of all the scenarios clouding Emmens’s forecast—besides, of course, an unanticipated late-stage failure—the most ominous was the one where Vertex, beaten to market by an all-oral treatment for hepatitis C, suffered a sharp drop-off in sales of Incivek before its JAK-3 inhibitor or its flu molecule, now just starting to be tested in humans, reached approval. Each week the rapidly increasing prescriptions grew into a sales curve with a trajectory that would generate for several years at least enough cash to grow the company and reward investors. But what if an all-oral regimen came sooner, or the drugs furthest along in the pipeline failed, or were delayed? Three and four years into the future could open a yawning gap between what the company was bringing in and what it was spending.

  Smith jauntily started most visits to Emmens’s office by offering his preferred solution, also the preferred solution of every analyst: “So where’s our late-stage nuc?” The Alios drugs trailed by at least a couple of years compounds being tested, singly and in combinations with partners, by Pharmasset, BMS, Gilead, and several other companies. If nucs would eventually overtake protease inhibitors, as they had done with AIDS, Smith thought Vertex needed to be far more aggressive. Emmens saw the future differently. His urgency was less about satisfying those who considered that scenario as a major threat than about positioning Vertex to be in the right place in 2020 and beyond.

  “We’re working on a midterm play,” he said. “One of the things we could do, with a lot of money, is buy one of these companies and change the game. There’s two reasons you do things, and you’re often doing them both at the same time. You either do them offensively or defensively. We’ve done some defensive moves. We haven’t done the offensive move yet. Ian wants to cover the bases, and he knows Wall Street will respond positively to that. But I think the market will be chopped up, with all these tie-ins. I’m not so sure I want to be in this market in 2017, to any great extent. I don’t want to depend on it, because gradually you get chopped away. Even if we’re the market leader, as these guys come in, you ain’t going up, you’re going down. And Wall Street kills you.

  “I constantly fight with Ian on that. He wants today to make the market happy. I’m worried about ten or fifteen years out.”

  Porges didn’t rely solely on IMS data and Vertex’s sales figures to generate his projections. A month after the launch he and his Bernstein colleagues had conducted two focus groups with ten high-prescribing physicians from across the New York area to gauge their preferences, which strongly favored Incivek over Victrelis. Now in mid-August, he wrote a note advising investors that the drug was doing even better than predicted. He said sales for the year—with only 222 days postlaunch—could top $1 billion.

  Porges outlined three scenarios. If prescription growth froze, sales would total $725 million, slightly exceeding the Wall Street consensus of $700 million. If the rate of increase tailed off slightly, the figure would be about $900 million. If sales kept growing at their present rate, he said, the drug could hit $1.2 billion, which would make it easily the most robust drug launch in history, exceeding Celebrex, Vioxx, and Lipitor. Investors would be able to see which outcome was most likely by looking at Vertex’s third-quarter results. There had been no resistance on price, and Incivek was outselling Victrelis 4 to 1. Cumbo’s force was crushing the opposition. A few days later Canadian regulators approved Incivek.

  “It doesn’t get any better than this,” Emmens commented again and again. If he was worried about the risk of complacency, he seemed more concerned about making people inside and outside the company appreciate how exceptional a position Vertex was in. More than anything, he believed the launch validated a formula for success that prized heterodox thinking, improvisation, boldness, a tolerance for the messy uncertainties of leading-edge science, and the nimble strategic vision that Boger and the other early adopters had had the moxie to dream up and see through.

  When you think of this industry, of all the successes there are, it’s mostly opportunism, either scientifically or from a commercial sense. Very little of it can be planned. Every time we’ve tried to plan—say, “I’m gonna be the best at lipid-lowering agents, or I’m gonna be the best at hypertension, or something else”—it’s never worked. Not once. Lilly was the company that sold antibiotics in the fifties, sixties, and seventies. Then they invented the antidepressant Prozac. So they had anti-infectives and Prozac, and they said, “We’re gonna build those divisions. We’re gonna be the best in the world. And we’re gonna shut everybody else out.” Guess what happened? Nothing. And they’re sitting there today with their patents expiring, and thirty years of research, and no productivity. I could tell you the same story about a dozen other companies.

  I mean, what are the chances of our first drug being able to pay for our current size? What are the chances that you’d get through all the trials unscathed? If I told you ten years ago that we’re gonna go up against Merck the very first day on our first drug, you’d say, “Well, you’re gonna fail.” If I told you you’d be the fastest drug ramp in history, you’d say I was insane. So when I look at this in a retrospective way, it’s a pretty incredible story.

  The analysts always say, “What’s your model? My model, I need to plug in numbers.” Our model here is, “Let’s just find people who are really sick, see if we can mimic the disease in the laboratory, and see if we can make an effect on that disease.” People ask what’s our strategy. You know what I say to them? “Find sick people and make drugs for them.” You get too fancy on the strategy you’re gonna screw yourself up. It takes away from the opportunism. The strategy is simple: Are you in the health care business to treat patients with serious diseases, and not be afraid of really tough targets? That’s good enough for me.

  Just after Labor Day, Vertex announced the results from a Phase IIa study demonstrating that its JAK3 inhibitor, VX-509, substantially improved the signs and symptoms of rheumatoid arthritis, solidifying the company’s late but competitive position in the race for an oral Enbrel. Almost half the subjects on the drug showed a better than 50 percent improvement. Unlike Pfizer’s less specific experimental JAK inhibitor, which appeared slightly less potent but had completed late-stage testing and was on track for FDA submission by the end of the year, VX-509 seemed to have fewer side effects. With Enbrel, the original injectable for crippling joint disease and other autoimmunities, fading over time, the market leader was now Abbott’s Humira, which with sales approaching $8 billion verged on replacing Pfizer’s Lipitor as the world’s top-selling drug as Lipitor’s patent protection expired. Vertex said it would move the molecu
le into a larger, six-month Phase IIb study.

  Eleven analysts published opinions on the protocol. Across the board, they concluded that VX-509 was at least as effective as any of the more than a dozen JAK inhibitors in clinical testing, as well as Enbrel and Humira. The Street ascribed little or no value to the compound yet, but most analysts saw considerable upside. Where they differed was on safety. Porges called VX-509 “a promising asset and significant driver of incremental value,” adding, “we regard the lack of hematological side effects, and the potential for once-daily dosing, as being the main sources of potential differentiation.” ISI Group’s Mark Schoenebaum echoed: “the lack of neutropenia for VX-509 could be an eventual differentiator . . . we see only upside potential for the stock if the detailed data are convincing.” Even Morgan’s Meacham, perhaps Vertex’s most influential doubter, was impressed: “We view the VX-509 data as encouraging . . . however, at this point, not enough is known about the clinical profile of VX-509 to identify a clear point of differentiation relative to other oral RA compounds.”

  A notable dissenter was David Friedman of Morgan Stanley. Friedman had joined the firm in 2006, left to manage a hedge fund in 2009, then returned a year later to launch coverage of small and midcap biotech stocks. When he’d initiated coverage of Vertex in April, the stock price was $56; skeptical, Friedman set a target price of $22. Now he seized on a small increase in a liver enzyme called alanine transaminase in patients taking VX-509, which also rose in the placebo arm. “From a safety perspective,” Friedman advised investors, “ALT elevations seem to be the most concerning AE noted. Those elevations paired with the lipid elevations make the safety profile start to more closely resemble [Pfizer’s] tofactinib.”

  The next Tuesday, Emmens spoke at Morgan Stanley’s Global Healthcare Conference in Manhattan, to a room packed with investors. Friedman introduced him. In his remarks, Emmens made a point of noting that the Incivek launch had been successful, then added that Vertex planned to file for regulatory approval of VX-770 in the next couple of months—a repeat performance unprecedented within the industry. He turned to Friedman. “I think we’ve done a little better than you thought we would,” he said.

  “I absolutely agree.”

  Emmens kept going. He had as little tolerance for analysts as Boger had. His contract as CEO expired in May and he relished the knowledge that he would soon no longer have to bother with the standard industry script at such events, which, as Xconomy’s Luke Timmerman observed, was designed not to offend at any cost and could be reduced to “politically correct platitudes about novel technology, helping patients, having a ‘good working relationship’ with the FDA, and constructive partnership talks.” Emmens leapt at the opportunity to admonish a critic in front of an audience accustomed to excessive deference.

  “Do you understand this company? I don’t think so,” he said. “By what I read, I don’t think you understand our company. I’m going to do the best I can to prove you wrong again and again, because it’s been fun. But when does it stop?”

  Emmens appeared jovial, but his underlying frustrations with the financial oddsmakers were keen. He thought Friedman was reckless and made his feelings known more pointedly in a private meeting afterward with Morgan Stanley’s CEO. His public remarks were so uncommon that they were reported by the Dow Jones Newswires, then picked up extensively by industry bloggers, a case of man-bites-dog but also a refreshing acknowledgment of the chasm between what went on inside companies and Wall Street’s predisposition either to overrate or discount it, depending on your thesis. Friedman responded by saying he was “trying to do the work that we see.”

  Having made his point, Emmens was ready to move on: “Okay,” he replied. “You do your job, we’ll do ours. Keep it up.”

  CHAPTER 13

  * * *

  SEPTEMBER 23, 2011

  With nearly twelve acres of contiguous indoor exhibition space, an eight-story media tower, and a video wall twice as wide as the one Vertex displayed at Launch Week, the Boston Convention and Exhibition Center in a former industrial corridor in South Boston normally hosted trade shows and professional meetings. The largest building in New England, it was one of two facilities in the city equipped to host 1,750 employees—about 90 percent of Vertex’s global workforce—for a daylong “milestone meeting” followed by a formal gala headlined, it was promised, by two top-name musical acts. After registering and mounting the escalators to the glass-enclosed top-floor foyer overlooking the innovation district where the company’s new home office was going up and, beyond that, the resuscitated harbor, early arrivals, half of them jet-lagged, milled around the coffee stations, speculating on the entertainment. The dominant rumor was Aerosmith, whose lead singer, rock legend Steven Tyler, was cured of hepatitis C in 2006 after eleven months on peg-riba. “It about killed me,” Tyler said afterward.

  The company had invited every employee and a guest and had paid for them to travel to Boston for the weekend, Emmens feeling strongly that it would be the last time before Vertex got too big that such an all-company outing would be feasible, much less affordable. As it was, the tab was $4 million. Emmens considered it well spent. Never again would Vertex be in a position to celebrate its past and present while laying out its future. The previous week Science ranked the company number one in the magazine’s list of top employers in the biopharmaceutical industry, beating out the previous year’s winner, Genentech. That Friday, Ken retired, signifying the start of a new era without any Bogers involved in the company’s operations. It was a good time to acknowlege progress, take stock, paint a vision, back-pat, then feast, drink, and kick out the jams.

  If Emmens had not been a hero to his troops earlier, his takedown of Morgan Stanley’s Friedman in front of Friedman’s clients and bosses instantly had become lore. He evoked the episode in his opening remarks. Roaming the stage like a talk-show host, riffing nonlinearly, he told them he had two recurrent dreams about the future. To illustrate his “bad” dream, he showed a slide of a mock magazine cover from GoogleUniversal’s BusinessWeek dated September 23, 2036. It was a blow-up of the eighteen-story Fan Pier headquarters (on which construction had halted minutes earlier after a load of rebar fell on three construction workers, briefly pinning two of them) draped with an “office space for lease” sign and bearing the caption: “Vertex Pharmaceuticals; What went wrong?” “I hear a rumor that Morgan Stanley is taking over the building,” Emmens said, pantomiming a hunched, churlish Friedman, “and there he is: ‘I told you so.’ ”

  In his “good” dream, he said, he and Boger strolled together along a beach as old men, doddering, their trousers rolled, dousing for coins with metal detectors. Emmens acted out the scene. “What’s that?” he asked Boger, his voice creaky and drifting. “A pen,” Boger said, bending over slowly to pick it up. Emmens: “What’s it say?” Boger: “Merck.” “Merck?” Emmens said, as if struggling through the haze of time to recall something. “Isn’t that the company we put out of business with Incivek?” Laughter erupted across the audience. But Emmens, once going, was gone, segueing into his next impression: Mueller as front man for an Elvis tribute band. “He ends every song, ‘Zank you very much!’ ” More laughter. Then it was back to Wall Street. “Our plan in ten years is to buy Morgan Stanley.” He smiled conspiratorially. “We’ll have a layoff the first day: ‘Here’s your synergy!’ ”

  Every CEO, to motivate and inspire, needs foils. But Emmens had a larger, more serious purpose; he wanted the whole company thinking about where it was headed, not just in the months and years ahead but decades from now. With the ET arrayed on café stools behind him, he invited each to speak briefly and to provide a visual metaphor—a snapshot of Vertex in transition, linking past to future. HR director Lisa Kelly-Crosswell offered a close-up image of hands at a loom, weaving a tapestry, the human warp and woof of a growing worldwide health network. Wysenski put up a grainy black-and-white slide from the 1880s of the uncompleted iron lattice foundation of the Eiffel Tower, sug
gestive of the pinnacle to come. Sachdev put up two pictures—a racing bike and a racing motorcyle, a stripped-down monster—noting that Vertex would only speed up as it evolved. Smith, as he often did, showed sheep in a pen, his preferred analogy for corralling investors. Gazing out over the sea of tables, awed, he marveled that the company had made it this far.

  Mueller, the team’s ranking futurist, recalled the company’s twentieth-century origins as a trailblazer of “rational” drug design, then spun a superseding vision for the next fifty years, one that was not only smarter and more target-based than the old hunt-and-peck drug discovery methods but more integrated across intellectual realms, disciplines, technologies, and continents. “Rationalism is good,” he said. “Integrism is better.” The new scientific reality, he said, must transcend symptomatic treatment in favor of a new paradigm: “repair, replace, restore, regenerate.” Many of his slides were of fluorescing stem cells, artificial organs, virtual limbs, and bionic prosthetics. “Health is value,” he said. “It’s not just about pills anymore.”

  At night, the crowd descended to the cavernous exhibition hall, a cement-floored ballroom the size of two football fields lit up warmly from the rafters by ten-foot colored globes and giant luminous squid-like balloons. Nearly four thousand predominately tall women in minimal dresses and festively attired men, a spectrum of nationalities, mingled around constellations of low white couches near the arena-sized stage, cruised the bars and groaning food tables, or else loitered in the back amid a small carnival of Wii setups, photo booths, and hyperenergetic foosball games. Boger, wearing a tuxedo with a glittery gold bowtie, circulated with his wife, Amy, sculpted into a sequined cocktail dress, rock-steady on spike heels. When he took the stage briefly for a few off-the-cuff remarks—“One of the things we learned was, don’t put your baby in the arms of a big pharmaceutical company”—the milling throng overwhelmed him. “It’s the first time,” a veteran scientist remarked, “I ever saw Josh look small.”