The Antidote: Inside the World of New Pharma

by Barry Werth

  “It was bruising to the people who came into the company and worked so hard to make the launch a success—the people who are actually in the field, talking about Incivek, educating nurses, or being the sales reps for docs, or being the community liaison or what have you. All those people did a phenomenal job. Well, that ought to be rewarded. But the stock doesn’t reflect that sort of success, and the headlines are negative. That’s deflating, when you work that hard to produce an outcome, and it doesn’t carry over.”

  Pangs of disappointment and recrimination flashed through the company. Like the field force, Ann Kwong, promoted to lead the hepatitis C franchise, was whipsawed by the uncertainty. For years, using HIV as her example, she’d warned that Vertex could wind up like Abbott and Merck, pioneering developers of protease inhibitors shut out when Gilead rapidly overtook the market with a nuc-centered once-a-day cocktail. Avoiding her usual high profile at the Liver Meeting, she pressed Mueller and Wysenski hard, behind the scenes, to move more aggressively.

  On the surface little had changed but the sudden explosion in competition, not a winner-take-all free-for-all but an industrywide hunt for multiple combinations of antivirals to match with the most appropriate patients. Merck, Roche, BMS, Novartis, Johnson & Johnson—all were actively realigning. Most desperate was Gilead. John McHutchison’s team was running trials of six drugs in various combinations, but so far had discovered no category-changer to stave off the destruction when its major HIV patents all expired in 2015.

  Less than three weeks after the Liver Meeting, Gilead Chairman and CEO John Martin announced that the company was acquiring Pharmasset for $137 per share—about $11 billion. Eyebrows were raised not just by the size of the trade but the whopping 85 percent premium. Two days later VRTX closed at $26.60, giving it a market capitalization of less than $5.5 billion—a nearly 60 percent drop from the heady days six months earlier when, on the cusp of the most robust drug launch in history, everyone on Wall Street was projecting that Vertex would sell $2 billion of Incivek in 2012. Now that was history. If any pharma CEO wanted to take Vertex out, the time had become unexpectedly ripe, but no serious moves were made, or even rumored within the company. With its hepatitis C revenues up in the air, the rest of Vertex’s value, invested heavily in R&D, defied computation. It simply wasn’t the kind of risk-mitigating trade industry behemoths were seeking now.

  Emmens hoped the company’s next CEO would be Dr. Jeffrey Leiden, who joined the board in 2009 and who also sat with him on the board of Shire. Leiden, fifty-six, was a rare hybrid, a distinguished cardiologist and professor of medicine at Harvard who joined Abbott in 2000, presided over its labs through the rollout of Humira, and went on to become president and chief operating officer of the company’s pharmaceuticals group. Leiden left Abbott in 2006 to become managing director of a life sciences venture capital firm. Emmens respected him and considered him the only candidate to meet Vertex’s specifications: high-science background, major commercial and financial experience, strong judgment and leadership skills.

  He chose Boger and two other members to direct the search, telling Boger, “You’ve got to be convinced. If you’re not, I’m worried.” Boger had lobbied to have a commitment to the Vertex values enshrined in the job description, and the board agreed. He thought scientists as a cultural type were generally undervalued for the breadth of their thinking, once telling a reporter, “It’s much more likely that your top scientist can whistle the melodies from three sonatas than it is that your humanities-trained person can pass the science section of the MCAT.” Leiden, an elected member of both the American Academy of Arts and Sciences and the Institute of Medicine, won Boger over handily at his interview.

  On December 9 Vertex announced that it was initiating safety and tolerability studies with both Alios nucs. Effectively, Vertex decided to back off from its quad strategy for nulls and invest more heavily in nuc-based regimens favoring genotype 1. Mueller commented that the company hoped to advance rapidly into Phase II development during the second half of 2012, and that those studies would evaluate the compounds in conjunction with Incivek and VX-222 and possibly ribavirin. A play, if not the play in hepatitis C, the announcement was well received on Wall Street, where shares of VRTX began to recover, climbing back above $30.

  Vertex’s wild year wrapped up swiftly with the usual preholiday preparations, the wind-down to a forced two-week vacation at Christmastime before the lead-up to the Morgan Conference in January, when the cycle, enlarged by the expected launch of Kalydeco, would start all over. It was the season of prizes and surveys. On the website TheStreet, readers voted Emmens best biotech CEO of 2011, with 33 percent of the vote. But columnist Adam Feuerstein, taking matters into his own hands, retrospectively fixed the balloting, awarding a tie to Price, who came in last with 11 percent. “That’s not right,” Feuerstein wrote of the survey results. “Therefore, I’m using my prerogative as the overseer of this award to bestow upon Price special recognition for the extraordinary job he did this year. It’s easy to make the case for Price being the true Best Biotech CEO of 2011. I don’t mean to diminish anything accomplished by Emmens and the other nominees, but Price deserves praise for moving the field of hepatitis C therapy forward by a great big leap and also for helping his shareholders profit.”

  Undeniably, Price and Pharamasset had won the long/short war on Wall Street and made Pharmasset’s shareholders and employees deliriously rich. Price himself made a reported $250 million. Whether the company’s “great big leap” for patients was more than a figment of what the writer Robert Teitelman once called Wall Street’s “promiscuous imagination,” time would tell. What seemed clear was that Pharmasset’s magic story, like Vertex’s during the period right after it reported the twelve-of-twelve SVR rate with VX-950, had bedazzled Feuerstein among many others who wrote about the drug industry.

  Partridge spent his first weekend at home in months making an ice rink in the yard with his children. He pushed himself to keep it all in perspective. “They were communicating about their early-stage data aggressively, like we used to do. Should we be surprised?” he asked. “So take the position that there’s nothing you can do about it. There really isn’t. You know, we’ve done great. We developed our drug. We communicated really well up to the approval and launch of the drug. We were able to leverage those communications to generate a high market cap, avoid a takeover, and raise lots of money. Great. Launched the drug; that goes really well. Have another drug coming up behind, great; that validates the whole pipeline strategy. But you know what, hep C is a difficult market. You’re curing them, one time. You don’t see them again. People don’t have to be treated right away.”

  On December 15 Vertex issued two announcements. The FDA granted the company’s request for priority review for Kalydeco (VX-770), with a target review date of mid-April; the board also appointed Leiden president and CEO, effective, at his urging, February 1. With another launch to prepare for, Leiden wanted to start right away. Emmens, the company said, would remain as chairman.

  CHAPTER 15

  * * *

  JANUARY 10, 2012

  The annual Morgan conference “was supposed to be a victory lap for Vertex,” as the Globe’s Robert Weisman put it. More than twenty-five thousand patients had started on Incivek, nearly twice Wall Street’s consensus. Instead, the buzz and headlines were all about Bristol-Myers Squibb, which announced it would buy Inhibitex for $2.5 billion, leaving only Idenix with a late-stage nuc still in play. Vertex tumbled “from king of the hill in the treatment of hepatitis C to yesterday’s news in about six wild months,” Xconomy’s Luke Timmerman wrote.

  After being introduced by Emmens, Leiden took the podium at a peak moment in the company’s history, when it was flush with income, stockpiling cash, with a second launch imminent and a cascade of patient data on the way to clarify which diseases and clinical studies to focus on next. In hepatitis C, Vertex had quietly positioned itself to defend a major share of the future market. Though Leiden
was eager to discuss CF and the pipeline, the likely keystones of his tenure, he also vigorously defended his flank. “There isn’t one magic pill that will solve the problem,” he said. “It’s clear that the HCV space will evolve into different combination treatments for different patients. It’s not clear what the best combination will be. What you want is to have the component parts in your company so you can put them together.”

  The continuity in leadership reassured employees and investors alike, though Emmens’s accelerated departure revived a well-worn concern: What was it with Vertex’s executive revolving door? How could Vertex sustain itself through a global buildout without more stability? The handoff from Boger to Emmens had smoothed the transition to profitability, but at what cost to the culture, and the people, remained unclear. Leiden plainly was very smart, but could he lead an organization where, as Emmens put it, “the smartest guy in the room is the guys in the room”? Hard-driving, focused perhaps to a fault, Leiden bristled with energy and optimism. He recognized that his job was to steer as much income as possible from the company’s current drugs to nourish its research and development organization while giving shareholders a reason to stick with the stock. He could well envision, if he stayed five years, a half dozen more launches. It didn’t get any better.

  An AdComm for Kalydeco (Ka-lie-de-co) was scheduled for late February, as the fast-tracked preapproval machinery hurtled toward a mid-April deadline for FDA action. Three weeks after the Morgan conference—less than a day before Leiden officially succeeded Emmens and two days before the Q4 earnings call—the company learned by fax that the agency had approved the drug. “The FDA,” Porges told Reuters, “is trying to demonstrate a willingness to move quickly with medicines that make a big difference, and this is a big difference maker.”

  The agency issued a statement to the effect that after two decades of false starts and disappointments a new paradigm had dawned. “Kalydeco is an excellent example of the promise of personalized medicine,” Commissioner Dr. Margaret Hamburg said, praising the CF Foundation’s aggressive venture philanthropy as much as the drug itself. “The unique and mutually beneficial partnership that led to the approval of Kalydeco serves as a great model for what companies and patient groups can achieve if they collaborate on drug development.” Beall ringingly agreed. “We get their attention,” he said of Vertex. “We’re at the table with them.”

  At a crowded ceremony in JB-II, Mueller lustily rang the purple transformation life bell. The company priced Kalydeco at $294,000 a year, ranking it eighth among super-orphan medicines. Again Vertex ensured that no patients would have to go without the drug because they couldn’t afford it. Wysenski spent more time on the analysts’ call discussing its need-blind patient assistance guarantee than any other element of the clinical package. KOLs lauded the magnitude of the achievement. Dr. Bonnie Ramsey, a leading CF researcher at the University of Washington and Seattle Children’s Hospital, compared the approval to the first moon landing. Vertex started shipping Kalydeco to pharmacies within forty-eight hours, with a prominent warning on the label: “Not effective in patients who are homozygous for the delta-F508 mutation in the CFTR gene.” Olson, exhilarated, acknowleged also feeling “haunted” by the remaining patients with other mutations waiting for a corrector.

  Smith led the earnings call with blowout revenue numbers showing Vertex in the black for the first time, with a $30 million annual profit for 2011, compared with a $755 million net loss the previous year. Sales of Incivek totaled $951 million. Now that the company was profitable, what it had to do to satisfy the Street was prove it wasn’t at risk of lapsing back into the red. Whatever it hoped to accomplish until it pushed its next product over the finish line had to be achieved within the limits imposed by its earnings. To help the analysts value their investments, Smith said the company expected Incivek sales for the coming year to range between $1.5 billion and $1.7 billion.

  McMinn pressed Leiden on what Vertex planned to do with the money. “The exiting CEO had previously articulated that R&D investment would be first into the pipeline; second, small M&A and deals; and third, share repurchases,” she said. “ Jeff, I was wondering if you could—if I could take your temperature on your view of that capital allocation strategy.”

  “I think Matt and I are in complete agreement about that,” he said.

  “Just a quick follow-up. Anything specific on HCV, or do you feel comfortable with your HCV portfolio as is?”

  “What I like about our pipeline is we have many different swings at the ball,” Leiden said; “with the two Alios nucs, which can be combined with each other; ribavirin obviously; our non-nuc, VX-222; and Incivek. I think when we look at our pipeline, we have the component parts to create a number of winning regimens.”

  If Koppel or anyone else imagined that a change at the top would impel Vertex to jump into the sweepstakes for a late-stage nuc, Leiden meant to shut the discussion down cold. Vertex was in for the long game. There was much more experimentation to do. Two weeks later its strategy seemed prescient when Gilead announced that six of ten null responders enrolled in a dual-cocktail study relapsed within four weeks of taking a combination of what was now called GS-7977—Pharmasset’s lead nuc—and ribavirin. Gilead shares plunged 15 percent, while VRTX climbed to $37.60. “This will be a major blow to those individuals who had come to believe in the ‘all-conquering’ nuc thesis about hepatitis C,” Porges told Reuters, speaking as much to his rivals and the companies he felt had scorned his counsel as to the investing public. “It’ll be a blow to confidence in Gilead, their management of the investor expectations, and the value of 7977 and the whole Pharmasset transaction.”

  Vertex, presumed to be licking its wounds and muddling through a hasty leadership change, exploited the slightly receding headwinds. Back in the chase publicly, it answered Gilead’s stumble with its own announcement a few days later of preliminary data from its all-oral trial in hepatitis C. The study found that thirty-eight of forty-six patients—83 percent—had undetectable amounts of HCV after twelve weeks of taking a regimen of Incivek, 222 and ribavirin. With the nuc-based thesis still prevalent, a nuc-less triple cocktail might not wow the competition, but the results conveyed that Vertex intended to hold on to its market—“a small feather in Vertex’s cap,” Timmerman wrote.

  Keith Johnson followed Kalydeco’s progress with a deep personal urgency bordering on obsession, strategizing incessantly about how to get access to the drug. In January, he learned about a clinical trial combining it with the corrector VX-661, found a sympathetic nurse, and in early February got a call to show up the next morning to be screened. He blew an FEV1 near 50 to qualify. On March 8 he arrived at the hospital to receive his meds. He recalls his expectations: “I don’t care about 661 at this point. If it works better, great. I just want to get access to 770. I don’t care about anything else. There’s a real good chance I’m gonna get 770. All I want is the chance.”

  Johnson keeps a picture on his cell phone to illustrate what happened next. “So they hand me this: one pill. I said, ‘Wait a minute. Where’s the Kalydeco?’ ‘No, in part A, one in five chance of 661 only.’ ‘What do you mean, 661 only, where’s the bloody 770?’ Now I understand these drug addicts. For a split second, I have this mentality that I’m gonna break into this fucking place and steal all the 770 I can.”

  Part A of the study evaluated 661 monotherapy, twenty-eight days on, twenty-eight days off; Part B tested different combinations of dosages of both drugs. Johnson had a choice. “They said: ‘You can back out of Part A and get into Part B if you want.’ It was too much uncertainty. I thought, let me see what this is like. In the back of my mind I’m thinking, if I don’t get placebo I think this is gonna validate my hypothesis where there’s a subgroup of the double-deltas where there’s a certain amount of the protein at the cell surface. So let’s see what happens.

  “The only thing I felt was tired. After about eight hours—unbelievable fatigue. The first day I was off it I didn’t f
eel the fatigue. I didn’t feel like I did on the other one. Maybe it was placebo. I don’t know.”

  Throughout the spring, Johnson weighed his disappointment against Vertex’s need to test its medicines rigorously in patients. Even if he could find a doctor to write him a prescription, what insurance company would pay for the drug? His only avenue was to build a case that he was an outlier and thus deserving of further medical observation and testing.

  In April Vertex received interim data from a midstage study combining VX-809 and Kalydeco in patients with two copies of the delta-F508 mutation. The results were better than expected. Though the findings were preliminary, subject to revision upon further analysis, the forty-six-patient trial demonstrated robust enough effects—significantly improved breathing, substantial weight gain, sharp sweat chloride reductions—to move quickly into pivotal trials. Worried that word would leak out as the data were shared with CROs and clinicians, the company decided to disclose the findings, releasing lung-function data to show how well the cocktail worked.

  Partridge calculated that if the analysts remained true to their models, they would have to take the probability of approval for VX-809 within two to three years up to about 50 percent. The scale of the opportunity multiplied and became likelier all at once. “You’re going from a couple of thousand patients to thirty-five thousand,” he said. Running the numbers, doing a quick discounted cash flow, Partridge figured it would translate to a $12 to $20 jump in the price of the stock. The magnitude would reflect Vertex’s credibility: “a barometer of how much they trust us.”