by Barry Werth
Vertex, playing catch-up, suddenly caught up, not to Gilead or Abbott in the next phase of what FierceBiotech called “the hep C pill race”—coming to market with the first interferon-free regimen—but the phase after that, when people with encroaching liver disease would likely choose among several treatment options based on a combination of viral genotype and their own genetic profile. Even if, as Wall Street assumed, Gilead introduced an all-oral cocktail in 2014, how many patients could the company treat? Seventy-thousand a year would be a stellar number. Yet in the United States alone, more than 3.2 million people were infected, 75 percent of whom didn’t know it. With hepatitis C, as always, the larger prize was the demographic bulge of millions of people who weren’t sick now but whose livers would become scarred and cancerous as they aged.
In late August, six years after Boger and Sachdev sat down to figure out how to leverage Washington to address the public-health dimensions of hepatitis C, the Centers for Disease Control urged all baby boomers to get a onetime blood test for HCV. CDC officials said they decided to issue the recommendation after they calculated that the number of Americans dying of hepatitis C–related disease had nearly doubled between 1999 and 2007 and because two drugs had hit the market in 2011 that promised to cure many more people than was possible before. “Unless we take action,” CDC director Thomas Frieden said in a call with reporters, “we project deaths will increase substantially.”
Boger’s plan had come together: get to market with a breakthrough drug in time to wake up the government and the world to the fact that unless infected people get treated, they will develop serious liver disease, costing everyone dearly. In fact, it may have worked too well for long-term investors and some inside the company. By leading the industry across the threshhold to effective, direct-acting antiviral drugs against HCV and promoting the expansiveness of the opportunity beyond, Vertex emboldened competitors who, for the moment, seemed to be racing ahead, costing the company its dominance and forcing it to scale back its plans while exposing it to takeover threats for longer than it preferred or was healthy. Still, there seemed to be no question that Vertex’s aggressive, all-in scientific program and astute government lobbying had led the way in sparking a remarkable boon for patients, taking the world from one in which you had to suffer miserably for a year to have a 4-in-10 chance of being cured, to the likelihood in a couple of years of only having to take a few pills for twelve weeks for a 9-in-10 chance. Few areas of medicine have improved so dramatically in so short a time.
One problem, perhaps, of being a visionary leader is that once you’ve pried back the future, your vistas don’t just end. As much as you’ve advanced things, what stirs you is the next challenge, and you’re prone to be impatient and disappointed with a world that doesn’t keep up. So long as Vertex didn’t get taken out, Boger could content himself with its strategy in HCV. What worried him was its decision to be less brash in its public ambitions, to yield to gravity. Internally, the company still expected itself to do what others wouldn’t, or couldn’t, do, but as it presented itself to the Street, its arrogant insistence on being both exceptional and right seemed to be lost.
That’s always what we did. I was always accused of giving guarantees that I never uttered. People read their own narrative onto those: “Telaprevir is gonna be monotherapy, absolutely.” I was just painting you a vision of what the data said at the time. This is a possibility, and until it’s not a possibility, it’s a possibility. Why is that not the thing we still should be doing? It worked pretty damn well, and works pretty damn well for people that have high p/e ratios in other industries. Apple gets its high p/e ratio not because people have analytically projected out that they will control cell phones through 2020. That may be true, but why does Apple get that presumption? They get it because they take that ground. Apple doesn’t promise that ground. They just act like that’s true.
We don’t externally act like it’s true anymore. We don’t act like we have the best ideas in, say, JAK3 anymore. We get caught up in “Well, I can’t prove it. No, we have to get data.” That’s not inspiring. I think we’re in a perfect position. Don’t overpromise at all about HCV sales. Don’t even get into that conversation. Just keep blowing the numbers out. But absolutely be incredibly excited about all the things that are coming along. Why can’t those two live in the same world? I don’t know why we have to be similarly buttoned down on our research. Research is all about hope. It’s about possibility. It’s not about certainty.
As summer slouched into fall, Vertex approached the run-up to the Liver Meeting, back in Boston this year at the Hynes, as the next engagement in a long war of attrition. The memory of last year’s humiliation no longer stung. If Gilead or Abbott took away the company’s lead in hepatitis C in a couple of years, Vertex would find ways to cope. Cumbo stoked the morale of the sales team, which had the most to lose from an onrushing, interferon-free world. To motivate them to promote Incivek while the drug remained the standard of care—and to keep them from defecting—he negotiated a generous retention package, winning support from Smith and Leiden. Meanwhile, the company announced partnerships with GlaxoSmithKline and Johnson & Johnson to test VX-135—formerly Alios’s ALS-2200—with their antivirals. A disappointing quarterly earnings report in late October dragged the stock price back into the low 40s. In the airwalk between JB-I and JB-II the company added a colorful new banner alongside the three Vertex values: Patients First.
The more things sped up and changed, the more they remained the same. Kauffman, after a brief respite from investor relations, plunged back in during the weeks leading up to AASLD, becoming once again the company’s incorruptible avatar, sanctifier of all data. Unlike Boger, he was immune to grandiosity. Asked by FierceBiotech’s Ryan McBride about the breakneck, roller-derby-like “rush toward pharma gold” in hepatitis C, Kauffman commented: “It’s not just crowded, but the speed of change I think is very unique. It’s really quite remarkable and we are very happy to have been at the forefront of this. Incivek paved the way for direct-acting antivirals.”
Cumbo felt upended as Vertex evolved quickly from a twenty-year-old development-stage company staking its survival on a quick rout in hepatitis C to a cash-rich profit maker with a coming bonanza in cystic fibrosis and a smorgasbord of pills in mid- and late-stage trials for other diseases. He had built the Incivek sales team to last a decade, marketing multiple drugs. But the onrush of the first all-oral regimens meant that for an indefinite period, starting as early as 2014, they would have no competitive product to sell. Meanwhile, Incivek sales had peaked, down 40 percent year-to-year and projected now to slump steadily until they cliffed. “The tide is going out,” Cumbo said, “and I got caught in it.”
He had been all-in for two and a half years, coming to understand as well as anyone else at Vertex the thankless challenges and inevitable crises of operating a business driven, at its core, by research. Neither Wall Street nor the marketplace had shoved Vertex off its stance that R&D was paramount. Mueller’s clinical strategy maintaining telaprevir as its cornerstone and his aversion to nucs had momentarily beggared Smith’s determination to finance as broad a pipeline as possible, leaving Vertex to face a period of unexpected austerity without a midterm play in HCV and with little clarity beyond that. The field force would not have a chance, as Cumbo put it, to “kick Gilead’s ass”—not for several years at least. CF was expected to pick up the slack.
A builder builds. In August Cumbo flew to San Diego to dive with great white sharks, descending in a battered steel cage off Guadalupe Island, Mexico, to come face-to-face with their prehistoric snouts and razor teeth. What did he learn? “To stay in the cage.” Fending off feelers from Abbott and other large players in hepatitis C, he quietly edged throughout the fall toward joining a seventy-person company, Sarepta Therapeutics, as head of business development as it prepared to launch an orphan drug for muscular dystrophy. In early December, Cumbo turned in his notice, delaying his announcement to his team until after
the first of the year.
The so-called “fiscal cliff” loomed in Washington. Obama’s reelection clarified the near-term prospects for the $2.7 trillion US health care economy, meaning Obamacare would soon take effect, and the drug industry, for the first time in a decade, introduced a bumper crop of new medicines. Nearly half the year’s thirty-nine new drugs approved by the FDA, like Kalydeco, treated rare diseases, signaling the coming-of-age of the new post-genomic paradigm in pharmaceuticals: the prevalence of eye-wateringly high-priced medicines that transform the lives of a handful of patients. As Vertex had learned, the vision of finding such drugs, the reduced obstacles to market, and the incomparable value to be derived from them were irresistible to nearly all companies now, smaller ones especially.
On December 19 Vertex issued two product updates, each in its way reflecting the company’s maturation under Leiden. The National Health Service in England, after pushing back on price, agreed to pay for Kalydeco for the 270 patients in the United Kingdom with the G551D mutation. The decision, which was expected to consume half its budget for all cystic fibrosis patients, was cleared only after Vertex agreed to an undisclosed discount. It was one thing to convince American insurers and managed care companies to pay $300,000 for a drug; convincing austerity-hit foreign governments was another. With health care systems around the world under increasing financial stress, it wasn’t too early to think that the super-orphan commercial strategy might become unsustainable, sooner rather than later.
The company also announced that the FDA had placed a black box warning label on Incivek, cautioning prescribers that the drug had caused fatal skin rashes in at least two patients. More than fifty thousand patients had started on the medicine, but despite the company’s extensive rash management protocols, two patients in Japan had developed a potentially fatal skin condition, Lyell’s syndrome, one dying of multi-organ failure, the other surviving after she discontinued treatment. Another woman died after being hospitalized. Vertex redoubled its instructions to doctors to halt therapy as soon as a serious skin reaction was identified, as the fatal cases resulted when patients stayed on therapy even after severe rash was diagnosed.
A black box warning at launch, or for a mass-market pharmaceutical, could break a product, but in specialty diseases where you’re dealing with very sick patients, such advisories are both common and expected—“a hiccup,” Cumbo called it. Every drug he’d ever launched had eventually earned one. As anxieties flared among the field force, Cumbo and Vertex’s marketing leaders fanned out to steady the organization. “That was torture,” he says. “I did all the conference calls. Area directors. Regional marketing managers. Reps. Treatment educators.” Where a year earlier some voices inside the company might have been apoplectic, now there was no crisis. Wall Street shrugged off the news, preferring instead to celebrate the Kalydeco ruling. VRTX finished the day up 1.5 percent, closing at $45.85.
The area under the Incivek curve no longer ruled the Street’s calculus in pricing the company. Selling nearly $2.5 billion of the drug in the twenty months since launch, Vertex turned a corner. Of seventeen firms providing ratings, according to a year-end summary, thirteen were positive, four neutral, and—notably—none negative. The analysts all now loved the company’s CF franchise, viewing it as a major growth driver. The bulls were especially optimistic about its agreements with Glaxo and J&J to develop cocktails around the Alios nucs. No short players appeared on the horizon.
Vertex showed Cumbo its appreciation by not walking him out the door the day he said he was leaving and by letting him keep his computer through the holidays. Gearing to move up to business development at Sarepta, a stratum leap that would raise him into the realm of M&A trades and global licensing deals, he prepared for his debut: the Morgan conference. Sarepta had already arranged his San Francisco meeting schedule. Vertex was his first appointment of the week.
Within thirty-six hours of announcing his departure on January 2, 2013, Cumbo answered 130 texts and 200 people had visited his Linked-in page. What his leaving signaled for Vertex wasn’t yet fully clear, but it traumatized an already disheartened sales force. “They’re shocked and they’re scared,” he said. Cumbo was a long way from hiring at Serepta, just entering late-stage trials with its lead drug and with early-stage and midstage development programs in hemmorhagic viruses and flu, but he relished the chance to help build a company from scratch, and he could imagine working with the best of them again in the future. By the end of the week three of them turned in their notice. Whether an exodus would follow depended on other considerations, but Vertex now had to face that grim prospect too.
Of all the costs of yielding its lead in hepatitis C, holding on to an anxious, dispirited field force was among the most pressing but far from the most crucial. In the longer term, the company’s years of delay in bringing Incivek to market and the shrunken window of opportunity brought on by the looming arrival of nuc-based, all-oral regimens had forced a reckoning. Incivek may have been a booster rocket, as Emmens said, but what if it hadn’t boosted the business high enough, fast enough to reach escape velocity, to soar? Vertex was an operating company at long last. Now what?
Could it continue to innovate and forge ahead when it failed to keep people who “bled purple,” not just Cumbo and Murcko, who had landed on his feet—consulting, teaching at MIT and Northeastern, and mentoring young scientists pro bono—but also fellow positive deviants Ann Kwong, who left to start a drug-innovation consultancy, and medical affairs director Cami Graham, who returned full-time to clinical practice? What had senior management learned that would keep it from losing its lead in CF and other disease areas? Big Pharma may not know how to innovate but it remains effective at copying and incorporating ideas that work. It’s not good enough to be “first and worst,” as one Boston fund manager liked to describe Vertex’s dilemma as a pacesetter. Mueller’s mystique aside, it had been five years since the company had brought a breakthrough molecule out of its own labs and into development. A leader leads. Had Vertex become, in the end, as Vertexian operationally as it was scientifically? Was it truly the twenty-first-century New Pharma prototype it claimed to be?
At the Morgan confab, the perennially dismal pharmaceutical world bristled with new excitement, buoyed by the surge in FDA approvals. “Rational exuberance,” someone called it. Leiden used his twenty-minute slide show to refocus the company’s strategy and prioritize key business goals for the year. Here was a clear statement of bittersweet success. Vertex, he said, was redirecting development toward specialty diseases—hepatitis C, CF, Huntington’s disease, multiple sclerosis, and cancer—and it would seek partners and outside funding to advance its JAK3 inhibitor and flu drug. He announced that the FDA had granted Kalydeco and 809 its first two “breakthrough drug” status labels, as part of a larger effort to speed important new medicines to patients. “Innovation is our lifeblood,” Leiden told his audience, “our special sauce.”
Leiden told Bloomberg News in an interview that the company would consider collaborations enabling it to get VX-509 to patients with RA and other autoimmunities without having to fund large-scale trials and a big commercial team, a deal that “would maintain value long term.” He also said Vertex wouldn’t fund trials of the flu molecule VX-787 with its own money, setting back the program indefinitely and demoralizing those who thought it represented the best chance of becoming a lifesaving medicine from among those in Vertex’s current pipeline. “There are some things we are not going to do,” he said. “That’s new for Vertex.”
Elsewhere, in another suite, Cumbo sat down for his first meeting as a strategist and deal maker. Across the table was Christiana Stamoulis, Vertex’s senior vice president for business development. Stamoulis had the usual pedigree: two degrees from MIT, a consulting stint, leadership positions at Goldman Sachs and Citigroup, a veteran of some of the biggest deals in industy history. Cumbo was reassured to discover that he was treated well, respected.
Vertex was something else to hi
m now, something like what Merck had been to Boger: an education, a crucible, a competitor, a potential partner; maybe, in some future, a takeover threat, or in some alternative one a target. “Strange world this bd thing . . .” he texted later in the morning, “but I think I like it!!! It will be challenging again . . . It will be fun to watch and see how they (bd pll) discount me because I don’t have an MBA from Harvard and come from ’bama . . . made a living off people underestimating me.”
In February 2013 Vertex announced that it would start a pair of late-stage studies—1,000 patients at 200 sites—to test its first combination therapy in CF. Pressed on by the FDA’s determination to show that it could speed up approvals, the company decided to evaluate two doses of VX-809 in combination with Kalydeco for twenty-four weeks. With patients in urgent need of new treatments, Olson and the CF franchise steering group spurred on the timetable for FDA review. “If the Phase III is ultimately successful (late 2013/early 2014), upside for this stock could exceed anything in our coverage universe,” ISI’s Schoenebaum speculated. “But with that upside risk comes downside risk as well. We remain ‘Buy’ rated on Vertex, but admit it’s quite binary and not for everyone.”
A few weeks later, Keith Johnson went on intravenous antibiotics for the first time in three and a half years—since December 2009, a few months before he started on VX-770. He hoped to qualify for the combination trial but his FEV1 percentages were declining and, after his experience in the last trial with VX-661, he wasn’t sure that enrolling in clinical studies was his most effective route. He had concluded that his best hope of getting access to Kalydeco was to wait until the combo was approved for people with his genotype. “I’d rather get what I know works,” he said, “and leave the science to somebody else at this point.”
