The Antidote: Inside the World of New Pharma (64 page)

Investors drove VRTX shares up $26.88—a 51 percent gain—to $79.75 in a little over three hours in after-hours trading. Their enthusiasm sprang less from the prospects represented by the molecule itself than from the heady sense that Vertex’s strategy in CF would not fall prey to the same mistakes it had made with hepatitis C, that it had positioned itself aggressively to protect a lucrative franchise against any and all comers. The take-home: Vertex was well on its way to delivering combinations of multiple drugs, experimenting with a range of cocktails to help even the sickest patients, and with no real competitors in sight. Its market capitalization vaulted to more than $16 billion, more than triple what it was eighteen months earlier, landing improbably near the bottom of the S&P 500.

Shortly after the last of the ET left for home, two immigrant brothers from Cambridge murdered an MIT campus policeman about a mile away down Vassar Street, then carjacked a Mercedes SUV and told the driver that they were the Marathon bombers. They led police on a high-speed chase into neighboring Watertown, where one of them was killed in a ferocious gun battle. The younger assailant climbed back in the car, floored it, ran over his brother, and got away. By morning, Boston, Cambridge, Watertown, and several surrounding cities were locked down. Amtrak service from Boston to New York was cut.

VRTX traded up throughout the day, cresting above $86, as sirens wailed throughout the paralyzed region and saturation media coverage enthralled the nation. A nineteen-year-old suspect with still-to-be-known affiliations, capabilities, and plans had forced a major American
city to “shelter in place,” as Governor Patrick said. With Vertex locked down, Smith and Partridge took investors’ calls from home. After the younger brother was captured that night and in the weeks ahead as his double life as a college student and lone-wolf terrorist was revealed, VRTX drifted back into the high 70s, remaining there through the Q1 conference call at the end of the month, when despite a continuing drop-off in Incivek revenues and a decision to write down the non-nuc VX-222, the company beat analysts’ expectations. Hope trumped concern. For now.

The future is repriced every day.

Soon after I returned to Vertex, John Thomson gave me a copy of
Pharmaplasia
, a critical examination of the drug business written by Michael Wokasch, a onetime Merck sales rep and former general manager of a piece of the Aurora acquisition, now a consultant. Wokasch diagnoses the underlying cause of what’s wrong with the drug giants: “rapid uncontrolled growth in a pharmaceutical company that exceeds its capacity to be managed effectively, resulting in a series of unintended consequences.”

Pharmaplasia usually “presents,” as doctors put it, as a symptom of grotesque size, and there’s no doubt that much of what ails Big Pharma is managerial dysfunction and a loss of philosophical grounding brought on by mergers, buyouts, and the ever-escalating arms race to dominate worldwide markets with marginally improved products, primarily to satisfy Wall Street and investors. But it’s the “rapid uncontrolled growth”—the breakneck, hypermetabolic expansion itself—not the resulting giantism that Wokasch has identified as the culprit, and I think he’s right.

In business it’s grow or die. You go through stages. Vertex’s expansion as a commercial company has been a noteworthy success. Its current concentration on specialty diseases positions it to help lead the way as the industry pivots away from mass-market products for widespread chronic illnesses and it saves the company from having to run massive clinical trials and build up and maintain expensive field operations. Since it has no plans in the midterm to grow to more than a few thousand people, its leanness should keep it nimble. But the question now is whether it has retained enough creative DNA from its early days, particularly
in research, to adapt as well during its second quarter-century as it did during its first.

With Boger and his torchbearers lighting the way, Vertex tried to build itself to last, but the future is impossible to predict. What a company becomes depends on its management. It’s too early to know if Leiden, Mueller, and the current leadership will inspire first-in-kind, first-in-class breakthroughs to equal Incivek and Kalydeco, but they will surely be measured on whether they do.

Anticipating a long sales cycle for Kalydeco and the company’s CF franchise, Wall Street has again made VRTX a vogue investment. The anxieties about when Incivek will cliff and the “2015 problem” are dim memories. But at what cost? The question arose again in May when Eric Olson announced he was leaving to join a small development-stage company as its new chief scientific officer. Inside Vertex it was well understood that Olson’s passion and leadership had been invaluable in guiding the CF franchise and its celebrated collaboration with the foundation. How many positive deviants must a company lose before it’s clear that the culture isn’t working as intended and that management has a problem far deeper than a few disappointing quarterly reports?

Vertex has set itself a high standard. For insurance, the company let me in—twice now—to record it all in detail. If Vertex is condemned to repeat the mistakes of the “bigs” as it grows, at least no one can say that it didn’t once know how to do things right. Its struggles to keep to and build on Boger’s corporate vision and sense of possibility have been amply reported for everyone to see. There’s proof-of-concept data.

My access to Vertex, as when I wrote
The Billion-Dollar Molecule
, depended on my allowing two people from the company—Ken Boger and Megan Pace—to review the book for proprietary disclosures. Before publication I gave Pace the manuscript. With her perspective as spokeswoman, I imagined she would have her defenses up, and she did—in a hopeful way, I think, since what she seemed to want to protect was the actual Vertex and its sense of itself as a place with an important obligation to live up to its potential, not business decisions or executive performance or the feelings of individuals about how they’re portrayed. “Well, what’d you think?” I asked.

“I thought, ‘We better not screw this up.’ ”

Boger has considered the impact he thinks the company can have as it matures and expands around the world. Pharmaplasia doesn’t intimidate him, though it wouldn’t be unlike him to expect coming generations of right-thinking, R&D-based scientist-executives, armed with the Vertex values, to invent a cure for it. Either way, his sights are set. He knows what the top of the mountain looks like. Midway through the Vertex Vision Process, during an off-site retreat in 2006, Bink Garrison asked all those on the executive team to develop a vivid description of where they saw the company headed. Boger went off and came back an hour later with an impromptu two-page, single-spaced memo dated 12 April 2039. It was a note to shareholders from the 2038 annual report of Vertex Health Inc., celebrating the accomplishments of the company’s fiftieth year in business.

“Driven, as always, by our passion for innovation,” it began, “we introduced three new therapies to the worldwide health market, in Alzheimer’s disease, in the remaining drug resistant cancers, and against the so called ‘Mars virus’. This marked our tenth straight year of three major product introductions.” He went on:

Most of us cannot remember when cancer was untreatable or, worse, when the treatments rivaled the disease for harm to the patient. Now dealing with cancer is no more trouble than a tune-up of your home fusion reactor; plug in and diagnose the imbalance and then apply the right combination of available treatments. How could we imagine the world without the wisdom and creativity of the emerging “second-lifers,” “generation triple-X,” that increasing demographic of ninety- to one-hundred-twenty-year-olds blessed with their full mental capacities, enhanced by the wisdom and perspective of a century of adult experience. We are only beginning to understand what transformations in art, in science, and in literature they will bring us.

The looming social and economic burdens of coping with the ever-extending health needs and other impacts of tens of millions of
empowered, productive centenarians didn’t faze him. Indeed, he had long believed that by becoming dominant in its markets Vertex would eventually begin to be able to bend the cost curve at the root of the crisis in medicine, at which point active, contributing old people could add more value to society than they consume. He concluded:

The last year marked the fifth successful year of our new global pricing model, now the industry standard. Introduced in 2030 to a skeptical equity market at the time, we pioneered, as you recall, getting paid for our products by a share of the value of the increase in health we brought to each market. We were gratified, and our investors were rewarded, when the model exceeded even our own expectations, allowing more rapid adoption of our newest products on a worldwide basis. Indeed, as our latest earnings indicate, Vertex products are now the single largest driver of economic growth in the shrinking “third world,” contributing almost a third of our annual profits. We are especially pleased to receive, as the first companywide recipient ever, the 2038 Nobel Prize in Economics, adding to the five Nobel Prizes in Medicine received by our scientists over the last decade and the Peace Prize awarded to the company in 2037.

Our new economic model has been widely successful. Based on our “benefit sharing” pricing model, Vertex now controls 16 percent of the world economy (30 percent outside America and the EU), up from 14 percent in 2037. Cash and investments outside our core businesses increased by 15 percent to $12.5 trillion. “With great power comes great responsibility,” as the old saying goes, and we are using our newfound economic power to drive the Vertex values of innovation and public benefit in other industries as well. We believe that is good for those companies as it has been good for Vertex and for the world. We are all stewards of a legacy from our predecessors, and it is our duty to leave the world—perhaps older and healthier than our parents—in a better state than we came into it.

Boger would be eighty-eight when the letter was written, not quite a “second-lifer.” He signed it XXXXXXX, Chief Executive Officer. He wasn’t thinking of himself. But his ease and quickness in writing it suggested that his thoughts were not new. “Until it’s not a possibility, it’s a possibility.” In his mind, he was already there.

N
ORTHAMPTON
, M
ASSACHUSETTS

O
CTOBER
9, 2013

MOLECULES

ABBREVIATIONS and ACRONYMS

AASLD—
American Association for the Study of Liver Diseases

AD COMM—
Food and Drug Administration advisory committee

AZT—
azidothymidine: early AIDS drug

BHAG—
Big Hairy Audacious Goal

BIO—
Biotechnology Industry Organization

BMS—
Bristol-Myers Squibb

CEO—
chief executive officer

CF
—
cystic fibrosis

CFF—
Cystic Fibrosis Foundation

CFO—
chief financial officer

CFTR—
cystic fibrosis transmembrane conductance regulator: mutated protein that causes CF

CMC—
chemistry, manufacturing, and controls

CRO—
contract research organization

DCF—
discounted cash flow