The Antidote: Inside the World of New Pharma (32 page)

“Did I think it was time to put somebody else in? Yeah,” he recalls. “I said, ‘If we don’t do that now, leave Josh in. I know what it’s supposed to sound like. You can have the greatest sense of urgency in the world, but unless that team works together, you’re not gonna make it.’ ”

In July, Charlie Sanders was named to head a special committee of Genentech’s board of directors to assess a surprise takeover bid from Roche, thrusting him into strenuous high-stakes negotiations. In 1990 Roche had bought 55 percent of Genentech, which went on independently to become the most productive R&D organization in pharmaceuticals. With some shares still trading publicly, the company had been able to attract entrepreneurial-minded researchers with stock options and promises of autonomy. Now Roche wanted to own everything, and there was deep unease at Genentech that losing its independence would destroy the science-focused culture that had led, over a five-year period, to the rollout of Roche’s three biggest-selling drugs: the cancer breakthroughs Rituxan, Herceptin, and Avastin.

Hiring Goldman Sachs as advisor, Sanders and the special committee evaluated the bid. They rejected it, saying it “substantially undervalues the company.” As spokesman, Sanders said the board would consider a higher offer, and he tried to dispel the notion that Roche’s takeout proposal was unwelcome. “We look forward,” he told the
Times
, “to the company maintaining its successful relationship with Roche, regardless of the ownership structure.”

A case-hardened truth in industry is that the only sure way to avoid being taken over by a bigger company, or “taken out,” is to become too costly. Vertex, with a market cap of $5 billion, a harrowing burn rate, and no immediate prospect of profits, seemed safe for the moment. Ken and
his team had negotiated a “standstill” agreement with J&J: a contract barring one partner from making an unsolicited offer for the other. The company’s antitakeover provisions, including a poison pill, had been in place since the public offering in 1991. Taking another look to see that they hadn’t forgotten anything, the brothers agreed they were as well defended as possible. “Like trying to eat a blowfish,” Josh Boger said.

In mid-September, two days before Vertex planned to announce another stock offering, Wall Street shuddered again. This time the disruption engulfed the global economy. The prominent securities firm Lehman Brothers hurtled toward liquidation after it failed to find a buyer because Washington, unlike with Bear Stearns, refused to step in. Merrill Lynch agreed to sell itself to Bank of America to skirt the same abyss. Less than a week after the government took control over the troubled, government-sponsored mortgage finance companies Fannie Mae and Freddie Mac, the insurance giant American International Group (AIG) sought a $40 billion federal lifeline, without which it said it might have only days to survive.

On Monday Smith told Boger, “We need a constant supply of capital. If the system goes down we’ve got a real issue.” With Vertex heading into the completion of pivotal trials of telaprevir, expected losses for the year of around $400 million, and less than $500 million in surplus cash, Smith “needed to top off the tank.” Vertex decided to go ahead with the offering, announcing the sale of more than eight million new shares as Wall Street teetered. Goldman Sachs, one of the two remaining investment banks, acted as the sole book runner for the sale.

Since the last time Smith had raised money, in February, Vertex’s share price had ridden a whirlwind, driven down more than 50 percent by a few prominent analysts touting fears over telaprevir-related rash and concerns over competition from Schering, before regaining everything and more in the wake of the company’s scientific publicity blitz after the PROVE and VX-770 results. Doubling down on telaprevir, Smith had sold the rights to Vertex’s royalty stream for Agenerase and Lexiva for $160 million in cash—the company was no longer in the business of treating AIDS. Heading into the teeth of the worst capital market in seventy-five years, Smith, with his usual brio, approached the fund managers he hoped to shepherd together to complete the offering.

The following week, Paulson and the White House submitted a $700 billion bank bailout to Congress, which was now considering it. McCain, declaring it was time to “put politics aside,” said he would temporarily stop campaigning so that he could return to Washington to help forge a deal. In the maneuvering, he suggested postponing the upcoming presidential debate. Obama rejected the delay, saying, “It is my belief that this is exactly the time when the American people need to hear from the person who, in approximately forty days, will be responsible for dealing with this mess. It is going to be part of the president’s job to deal with more than one thing at once.”

Smith’s urgency reflected the nation’s financial instability and Vertex’s make-or-break race to market with telaprevir. He compared the company’s situation to a road trip into barren, unknown country. He thought, “This might be the last gas stop before our destination.” When one fund manager from LA protested the price of the offering in the face of the larger crash, Smith cut him off. “I’ve got to call a few other investors,” he snapped. On the same day that Vertex completed the sale, netting $225 million at a share price of $28, the Dow plummeted 650 points.

Defying gravity had long been Vertex’s unofficial scientific credo. Now it became its financial signature as well. Starting the third week after Black Monday, the Dow shed 2,400 points—22.1 percent—in eight harrowing trading days. Trillions of dollars of wealth were wiped out as volatility raged. Despite Washington’s apocalyptic rhetoric and roiling discomfort, Wall Street got its bailout. By Election Day, VRTX shares were up almost 30 percent on the year, making it the top-performing stock in the NASDAQ 100.

Boger realized that Emmens wouldn’t stay retired long. After thirty-five years in pharma, Emmens was receiving approaches from headhunters and venture capitalists alike, and he was entertaining them all. If he returned to business, Vertex would surely lose him as a director. He had recently written and published a business primer in the form of a fabled quest, coauthored with an illustrator, an old friend. Titled
Zenobia
, after novelist Italo Calvino’s mythical city on stilts, it tells the story of a young heroine who gets a job at a former industry giant bedeviled by paralyzing
hierarchies and who triumphs over “yes-men, cynics, hedgers, and other corporate killjoys.” He believed passionately in the power of individuals to rescue organizations by inspiring them, and having just proven his thesis again at Shire, he wasn’t through. “Anyone who hasn’t read Matt’s book doesn’t understand Matt,” Boger says.

Sanders was preoccupied by the Genentech takeout, which had “taken a big toll on him,” and he was “fading in strength,” Boger believed. No longer intimate with the pulse of the board or the directors’ thinking, Boger sensed a growing vacuum, a free-floating anxiety: “background noise,” he recalls, especially about Graves’s ability to pull together and manage a commercial team. “The board fell in love with Kurt and then fell out of love with Kurt and blamed me for it.” Despite Vertex’s all-around positive results, there grew a sense of crisis. Members, taking seriously the succession issue, worried that Vertex needed more commercial leadership—now. Sanders was unable or unwilling to rein in their apprehensions.

“Remember, there’s lots happening in Charlie’s life,” Boger recalls. “A company where he had spent a lot of time on the board was getting engulfed, and their mission was going to get derailed. . . . A lot of Genentech people were very upset with Charlie for not taking a harder line. I don’t blame Charlie at all, but it did go on for a long time. There was a lot of back-and-forth. It took a lot of Charlie’s energy and time. He was worn out.”

In late fall, Sanders invited Boger to breakfast at the Harvard Club of Boston in the Back Bay. “We’re thinking of making the transition now to Matt because Matt’s available,” he said.

“Is he interested?” Boger asked.

“Yeah, he’s interested.”

Boger weighed the news as he did any new data point. He was discerning and dispassionate. “So at first I was thinking to myself, that’s a pretty good idea,” he says. “I wasn’t happy with the way that Charlie presented it. I wasn’t happy that there had apparently been—by the way, illegal—board meetings without me. They had called all the directors, except me, together to have a discussion about this, so by the time Charlie told me, it had already been decided. I’m a director, so how can they
exclude me from those discussions? Would I have opposed it? I don’t think so, because I think it was a pretty good idea.”

Boger thought of Vertex as
his
company. He had imagined it, realized it. Had he named it Boger Pharmaceuticals—had he given it the family name as, pre-biotech, generations of founders had done when they entered what was then called the “ethical drug” business—his stamp on it could not have been more personal. In seconds he knew it had been completely taken over by others without his even being asked what he thought. “Too many roads had been crossed before I even had a chance to have an opinion,” Boger says. “Charlie was not playing a strong role there, and I was cut out of the discussions. It was so obvious that Matt had effectively managed the whole process so that he was completely in the driver’s seat, and so that anything he was asking for they were saying yes to, even things that they had told me—like being chairman—were off the table. I just didn’t understand this.”

Emmens recognized the depth of Boger’s attachment—and his continued irreplaceable value—to Vertex. He appreciated Boger’s position, as well as his own. “When I sat down with Josh,” he recalls, “I said, ‘If you don’t want me to do this, I won’t do it. I’m not a scientist, and I know that’s lacking, but I think I can come in and do what needs to be done to get commercial in place.’ Plus, we had to finish out development. ‘I think I can get a team of people to make this work. I have the kind of skills to get just what we need. I’m not gonna make the science any better, but the rest of the stuff I’ve done.’ If he said, ‘No, go away,’ I would’ve.”

Boger had a choice: to lead Vertex at least through the launch of telaprevir and maybe beyond, or leave the company. Many on the board thought there was no place for a charismatic founder except forced retirement. Emmens needed Boger involved and insisted, over their protests, that he be kept on as a director. For Boger, it was a no-brainer. As always, he was thinking leagues ahead to what the company could become. There was no question that Emmens was the better candidate to do what Vertex needed to do in its next phase of transition in becoming a profitable, global drugmaker, and that now was the right time to make the switch. Boger reflects:

This is where people don’t believe me when I say this: it’s
never
been about me. But I had studied various examples of succession. I did know that there are fifty examples of people staying too long for every one who left too soon. So the mistake that people make is staying too long.

I also knew from talking with people who had made these transitions, one side or the other, that an absolutely terrible time to make a transition is just after you’ve had a big success. Because then the guy coming in has got nothing to build his loyalty on. What’s he gonna do? It’s another four to five years until the next big success, and meanwhile he’s just a caretaker of your success legacy. So you can’t really ask a new leader to come in and just take the trophy. It’s not fair. And people who’ve done that have not had a good track record.

Boger opposed Emmens’s becoming chairman. He thought Emmens could run Vertex and talk to Wall Street as CEO, and that he—Boger—could serve as non–executive chairman, managing the board and representing the company to the rest of the world. He thought he could continue, basically, to do what he had been doing for the past three years, using his public persona and worldwide connections to prepare the company to step into a larger footprint, without having to deal with executive reports or raise money or manage anything.

“I thought they had a beautiful opportunity,” he says. “It was going to be terribly delicate for the rest of the company to have me suddenly vanish—needlessly, since we had the culture thing up, and it was the most important thing in the company. That was putting all that at risk. For what? . . . I was worried that whatever Matt did was going to alienate a significant fraction of the torchbearers in the company, enough so that they were either going to leave or put their torches out. And that he was never gonna recover from that; that he was gonna lose the sustainability momentum that I had built up over the past five years. That’s what I was worried about.”

Emmens prevailed. He knew he had to have complete control. Indeed, he’d seen up close what happened to Boger when
he
yielded the chair.
Boger agreed to stay on through a three-month transition period beginning in February, when the announcement of his retirement would be timed to celebrate Boger’s twenty years at the helm. As Vertex closed for two weeks at Christmas, he had his resentments, but he held them in check. That he’d made the right decision was affirmed by Emmens’s doing just what he’d have done if the roles had been reversed. “I thought he was asking too much, and I didn’t see why he was being given everything that he was asking for,” Boger says. “After me saying for two years I was being paid like we were a start-up but we were going to be a big company, suddenly they buy it, and his salary is triple. Why did he get the argument? I was making the argument before. There were things like that that annoyed me. But leaving too soon was by far the better choice than leaving too late.”