The Antidote: Inside the World of New Pharma (41 page)

With the room staged to resemble an AdComm, the consultants sharpened their questions. Weet delivered the introduction. Mueller, asked by a reporter around this time what role, if any, he expected to play, said he thought that as the company’s chief scientist and its chief medical figure, he and Kauffman should represent Vertex, but he met resistance within the room. “ProEd has done probably a hundred of these,” Weet recalls. “They were very clear in their view as to who should be the spokesperson. You don’t necessarily want to have the top person in the company, because if all of a sudden that person gets vaporized by the advisory committee, that’s not good for public image. So they have very clear feelings: it should be someone senior, but not too senior.

“Their view was that the head of regulatory should give the introduction,” he says. “So in the first mock, I gave the introduction, and Bob gave the clinical overview. I don’t know exactly what happened, but I know Megan had said in her experience it was not the head of regulatory
but always a clinical person, usually the CMO. We agreed to disagree with that.”

The daylong session was by all accounts stressful, disconcerting, tense. In Weet’s view, this was not because Vertex was far from ready to stage telaprevir’s case but because it allowed people across the company to see how much work still remained to prepare for being interrogated by two dozen experts who had the time and inclination to advise the government on whether to approve a new drug. The FDA had scheduled a two-day AdComm for April 27–28, with Merck presenting its case first by virtue of submitting its application first. Vertex had ten weeks to prepare. Weet thought that this was more than enough time and that the mock did its job pointing out what needed fixing, but there was collateral damage in added tension and anxiety.

“It’s one of the reasons you want to keep as many people away from these as possible; the first rehearsal is gonna show a lot of holes,” he explains. “Well, but this was a spectacle. Everybody wanted to be there. Paul Daruwala was there. [VP of Marketing] Pam Stephenson was there. Peter was there, and people were saying, ‘This is a disaster. We’re not ready.’ Of course we’re not ready! My last advisory committee, we actually had our mocks in Cleveland. We were located in Rochester, New York. We had our mocks in Cleveland, just to keep people away. I mean, when we went off-site, we really went off-site. It was great. It was a disaster, but that’s what it was for, and we improved it and got it right.”

One notable effect of doing everything for the first time with the idea that it can and should be done better than anyone has done it before is to put a premium on the ability of veterans joining from industry leaders such as Merck, Gilead, and Genentech to push and prod selectively. Pace prevailed, in part with received wisdom, in part because she had the faith not just of Emmens but also of Boger and Ken, both of whom believed that, having been at Genentech, she “got it”: the larger challenge of building a pharmaceutical vision into a beacon. Kauffman became telaprevir’s undisputed spokesman and, by extension, its main external champion.

New Merck CEO Ken Frazier didn’t follow the usual trajectory to get to the top in Big Pharma. His mother died when he was twelve, leaving him
in the care of his father, a janitor. Working hard in school and inspired by Thurgood Marshall, he went into the law, excelling as a student at Harvard and practicing in Philadelphia, where he gained a reputation as an aggressive litigator. He won a new trial for an Alabama man who’d spent nearly twenty years on death row for murder; the prisoner was later acquitted. Defending Merck against liability suits, he came to the company’s attention, joining in 1992 and becoming general counsel in 1999.

Faced with thousands of plaintiffs’ suits alleging that Merck knew about the health risks with Vioxx years before it pulled the drug from the market, Frazier devised a daring strategy. Rather than make the cases, as lawyers say, “go away” by settling quickly and quietly, Merck decided to fight each case to a verdict. The company won eleven of sixteen lawsuits at trial before agreeing to a $4.85 billion settlement fund. The final legal bill was under $8 billion, compared with $18 billion estimated by analysts at Merrill Lynch.

Value, in drug-making terms, has many metrics, and it didn’t go unnoticed on Wall Street that Frazier’s hard-nosed legal maneuvering created more shareholder value for Merck than its vaunted labs as the company sped toward a patent cliff with its biggest seller, Singulair, for asthma. Frazier rose rapidly to head Merck’s human health business and then became president. On January 1 he took over as CEO, the first African-American to lead a major drug firm. Merck was the world’s second-largest drugmaker measured by sales.

Less than two weeks later, Frazier got word that a safety panel had shut down a thirteen-thousand-patient late-stage study of an experimental blood thinner, vorapaxar. Analysts considered the drug, acquired as part of the Schering takeout, a jewel of the pipeline, with some annual sales estimates reaching $5 billion by 2015. Frazier and Merck’s board faced a reckoning. Like Pfizer, Merck had hoped to buy its way out of going over the cliff along with its expired lead product by taking out another major drugmaker, imagining that the other company’s R&D would fill the holes in its pipeline. The crash of vorapaxar and Schering’s two other main hopes left only boceprevir to justify the acquisition.

Meantime, Pfizer, in its year-end-earnings conference with analysts—one day before Merck’s and, coincidentally, Vertex’s—touted a one-third
cut in R&D spending and a big stock buyback. Its market value had sunk below what it had paid to take out several competitors over the past decade as it tried to build a broad portfolio of new products that never materialized and that Pfizer’s new CEO, Ian Read, now said was no longer its goal. Read announced a plan to overhaul the company’s research operations to focus on the most profitable programs. In addition, he said the company would increasingly outsource business and disclosed that it would shut its research hub in Sandwich, England, where Pfizer had developed five of its top twenty drugs, including Viagra. Read told the analysts, “At some point, your shareholders and stakeholders demand you have a return on investment in research.”

Frazier and Merck were under stiff pressure from Wall Street to follow suit: shrink R&D, sell off divisions, goose the stock price by taking cash and giving it to investors instead of risking it on trying to discover new breakthroughs. Frazier doubled down. Torn between Wall Street’s demand for profits and the long-term funding needs of drug innovation, Merck returned to first principles: if not “Drugs for people, not for profit,” the idea that value in drug making ultimately results from dramatic new medical advances. Frazier told the analysts that the company planned to spend as much as $8.5 billion on research in 2011—putting it on a par with Microsoft and Pfizer, the country’s long-term leaders—and he withdrew Merck’s long-term profit forecast. Predictably, investors responded to Pfizer’s plan by driving up the stock the most in six months, while Merck shares fell almost 4 percent. “I am not blind to what investors want us to do,” Frazier told the conference call. “They want us to invest in prudent ways, in ways that actually drive return on investment and productivity. But as a company, we believe that the only sustainable strategy in the health care environment we’re in is real innovation that makes a difference to patients and payers.”

Here was the grand contradiction that the pharmaceutical industry—and society—had spawned during the golden age before 9/11. Millions of Americans had come to rely on the steady high dividends of drug stocks in their portfolios, making them complicit in Wall Street’s relentless demand for escalating, year-after-year profit; the corresponding proliferation of marketing-driven me-too drugs; and the resulting precipitous
decline in productivity. In the Great Recession, dividend-paying stocks were vanishing, while important new drugs were harder and harder to find. The point was: drug discovery, the least certain and longest term of enterprises, had helped prop up two decades of unparalleled prosperity at the cost of its own future. It was to Frazier’s considerable credit that he would defy Wall Street and risk Merck’s stock performance during his own tenure by hewing to George Merck’s original vision.

Which, of course, inspired Boger’s vision too, and Emmens’s. In
his
remarks to analysts, Emmens made no apologies for Vertex’s accelerating burn rate and galloping losses. With its research and development costs up 25 percent in the last year alone, the company had lost $180 million, or 90 cents per share, in the last three months of 2010. Revenue had nearly doubled: from an anemic $34 million to $66 million. Shares of Vertex fell 17 cents to close at $38.80, and the company, with a global workforce nearing two thousand as it added hundreds of jobs in less than a year, had a market capitalization of nearly $8 billion. Wall Street forgave Vertex’s ballooning R&D budget, which more and more analysts were coming to regard in their forecasts as less of an enhancement of a company’s worth and more of a “value destroyer,” based on its rosy calculations about telaprevir and the consensus that Vertex remained a choice takeover target. Goldman Sachs biotech analyst Terrence Flynn initiated a “buy” rating, anticipating that telaprevir—TVR, he called it in his note—would capture 80 percent of sales and would so dominate the market that its revenue curve would extend several more years. “We expect the TVR launch to exceed high expectations, as the Street is underestimating the warehoused treatment-failure population awaiting new treatments and [the] pricing power of TVR,” Flynn wrote, adding: “We believe we are more bullish than the Street on the sustainability of the TVR revenue stream beyond 2014, following the entry of next-generation competitors.”

Smith likened Vertex’s disclosure meetings to “opening the envelope,” a helpful analogy evoking a simpler time when life-altering news arrived—telegrams, say, containing the fate of loved ones—under a protective seal that you had to slice open in a rush of anticipation; or else the Oscars,
a glossy ritual of suspense ending in crushing disappointment for most, elation for the fortunate few. In fact, what is distributed around the table is a printed booklet of a PowerPoint, a facsimile of a slide deck narrated dispassionately by a clinician as the others flip through it, absorbing the data.

The Vertex swoosh, “twelve of twelve,” the Phase II findings showing improvement in CF patients taking VX-770—each had been a key internal milestone, a turning point inducing a heady blend of gratification and terror. In mid-February, heading into the long President’s Day weekend, the results of a pivotal Phase III study of 161 patients with cystic fibrosis who were randomly assigned to get a VX-770 pill or a placebo—STRIVE, it was called—outdid them all. With Ken presiding as always, Kauffman presented the findings. The patients in both groups all had at least one copy of the G551D gating mutation.

The study found that those taking the drug had a 17 percent relative improvement in their FEV1—the amount of air they could blow out in one second—compared with those on placebo. The effect lasted the entire forty-eight weeks of the study. Side effects included headache, respiratory infections, nasal congestion, rash, and dizziness, but they were well tolerated. Smith recalls doing a double take when Kauffman presented the safety data. Remarkably, more patients from the placebo group dropped out of the trial than those on the drug.

The effect for patients exceeded anyone’s imagining. Before starting on Vertex’s drug, many couldn’t climb a flight of stairs without erupting into a coughing fit; within days of starting treatment, some reported, they were able to breathe better than they had in years. It was as if a light switch had been flipped on, a radical upsurge in energy supercharged by a jolt of hope that they hadn’t imagined was possible and for which they were totally unprepared. Because CFTR is also broken up in the digestive tract, CF patients generally struggle to maintain their weight, but patients on VX-770 put on weight readily and kept it on. Weight gain wasn’t a primary end point of the study, but it was a hugely promising signal nonetheless that the pill worked throughout the body and could further transform the lives of patients by improving absorption, lessening
the need for supplemental pancreatic enzymes, and making breakfast less of a painful battle of trying to choke down a few more calories.