The Antidote: Inside the World of New Pharma (58 page)

Sunday, early afternoon, Smith and Mueller stood talking at the edge of the action. Mueller was animated. The Pharmasset buzz had grown deafening in anticipation of a three o’clock presentation of new data from a small midstage trial with PS-7977, its lead nuc. Mueller believed Vertex had an effective, competitive all-oral regimen for hepatitis C with Incivek, VX-222, and ribavirin, but the source of his confidence, especially with Smith, remained purposefully obscured, a matter of body language. He tried to convey that Vertex had what it needed, especially after the addition of the Alios nucs, to remain competitive in the disease without disclosing specifically any new data or compromising Smith in his handling of Wall Street. Mueller dismissed “this nuc hype bullshit.”

Smith countered that if Mueller was right, it was “all the more reason” to buy a late-stage nuc to ensure that the perception of Vertex’s 2015 drop-off was exterminated for good. As he saw it, the company faced a reckoning: buy a nuc for $1 billion and solve the problem, or save the money at the cost of continuing uncertainty.

Cumbo, nearby, palmed his cell phone, scanning the other booths: Merck, Gilead, Roche. The consistent message from the field force was that Incivek, its historic launch aside, had like all other medicines problems that hadn’t shown up in the trials. Doctors reported less rash but more anemia and painful anal-rectal itching, forcing the company into action, working overtime to provide advisories and assurances to doctors and to the FDA that the side effects were being rigorously monitored and remained manageable. Cumbo had heard from his team that Merck’s reps were spreading rumors of a spike in adverse events, including deaths, with Incivek, and though many doctors were reporting that the Vertex salespeople were the most customer focused they had ever seen, the war
over the drug’s reputation among the lower-prescribing physicians on whom it was relying for the next wave of patients had not yet been won. Sales were flattening.

More than four hundred people, including Mueller and Smith, packed the overflow room to hear Dr. Edward Gane of the New Zealand Liver Transplant Unit in Auckland report the results of Pharmasset’s ELECTRON study on giant video monitors bookending an empty stage. A total of forty patients infected with HCV received a dual regimen of PSI-7977 plus ribavirin for twelve weeks. They also were randomly assigned to take Roche’s Pegasys for either four, eight, or twelve weeks, or not at all. According to Gane, all participants achieved viral response by the end of the study, no viral breakthroughs were noted, and the only serious adverse events were in the Pegasys arms, none in the dual arm. Gane put up a slide that caused many observers to gape: a comparative analysis of the various arms, 100 percent SVR rates in all of them. What Pharmasset was claiming conjured the ultimate hope in hepatitis C: not a quad or a three-drug combo, but a pan-genotypic two-drug cocktail, a one-size-fits-all superdrug. The blockbuster takeway: Pharmasset’s compound plus riba could cure hepatitis C in twelve weeks
without
interferon.

On closer inspection, the combination was no panacea. As hivandhepatitis.com, which evaluates experimental antivirals, reported, nearly alone among the media: “Because the researchers were uncertain whether the two oral drugs alone would work, they chose a population of relatively easy-to-treat patients who could be most easily ‘rescued’ if the experimental regimen failed: treatment-naïve people with HCV genotypes 2 (about one-third) or 3 (about two-thirds), and no cirrhosis; about 40 percent also had the favorable IL28B CC genotype. A majority were men, most were white, and the average age was about 48 years.”

In other words: no nulls, no treatment failures, no harder-to-treat genotype 1 patients, few higher-resistance black people, no seriously ill cirrhotics, no elderly—the very populations Vertex went to pains in its pivotal trial to show it could cure. And, so far, no relapses.

After Gane finished his report, the moderator invited responses. A respectful silence descended for twenty seconds over the main hall and
the overflow room. “You’ve stunned the audience,” the moderator told Gane. The lead question from the floor spoke to a shared hesitation. Prior nucs designed to inhibit the HCV polymerase had gotten knocked out in large studies due to toxicity. Wouldn’t PSI-7977 suffer the same fate? Gane could make no guarantees, but he optimistically reported that during the twelve weeks of the study he and his colleagues had seen no safety signals.

Enthusiastic applause ripped through both rooms. Smith, seated a dozen rows from the back, clapped appreciatively while Mueller, standing at the rear, kept his hands in his pockets. Most stunning was the instantly telescoping timetable. Pharmasset would doubtless move full-bore into Phase III. It was chasing the megamarket for direct-acting antivirals against hepatitis C much sooner, and with a much more potentially credible candidate, than Vertex and Merck thought possible even six months ago, on the eve of the first real breakthroughs against the disease in a decade. The pace of change had suddenly lurched by an order of magnitude: a breathtaking speedup and a boon for patients no matter which drugmaker prevailed.

Giddy Pharmasset senior executives cruised the sea of fund managers and analysts, ten-deep at the bar, during the company’s investor relations event that night in a contemporary art gallery a dozen blocks from the Moscone. They showed a short movie,
The Nucinator
, starring CEO Schaefer Price as a Schwartzeneggeresque avenger. Price played the leader of of the Nucleotide Resistance Movement, a heavily armed, emotionless, and efficient killing machine who leads the way to an interferon-free world for patients with hepatitis C by exterminating all types of HCV. The film had amusing, low-budget dialogue to go along with the cartoonlike
WowPowBam!
fight scenes: “
Competition crusher!
” and “
Now that’s what I call viral suppression!
” The crowd cheered lustily.

Price owned 3 percent of the company. Later, in his remarks, he predicted an interferon-free world by 2014. Under the heading “Who cannot take interferon?” Price put up a slide of an iceberg, the vast submerged area representing a huge phantom patient population that, lest anyone still need convincing, he believed more than justified
Pharmasset’s overweight valuation. He talked passionately about “everyone treated with the same regimen . . . our drug being an all to everyone,” and unveiled, Steve Jobs–like, the product: a lavender oval-shaped pill embossed with the company’s logo and a
1
. “One pill, once a day,” he said. “And it’s pretty, too.”

By the next morning, VRTX plummeted. Partridge saw there was nothing Vertex could do to stem the damage. He was worried, but not deeply so, even as it scraped 17 percent lower over the next twenty-four hours, to $30. Partridge was already getting calls from contacts attracted by the daily downward repricing of the stock, and they were the kind of desirable, long-term “value” investors who buy into companies selling at less than their intrinsic worth and whom he and Smith had been chasing for years. He was grim about disappointing shareholders and employees, but as he enjoyed noting, danger was also opportunity.

Smith, pacing the lobby, spoke by phone with Emmens, then grabbed a bag of potato chips and roamed the aisles of scientific posters at the far end of the exhibition space from the Vertex booth. He liked to get off alone and think in a crisis. He and Emmens agreed on the issue: “Do we chase hepatitis C?” Two schools of thought competed within the company: those who wanted to race ahead and those who thought the game was over. Smith worried about disgruntled investors and the hundreds of people inside Vertex trying to build the hepatitis C franchise, but the good news was: “CF is awesome. It’s going to carry us through.”

No one at Vertex was immune to the reality that, for patients, the twenty-year chase in hepatitis C was at last producing new cures with astounding speed and chances of success, especially relative to other diseases, and in the larger sphere this could only be considered a triumph for all involved. But all had their roles to play, and after the Liver Meeting they faced the certainty that the revenue arc for the next couple of years would be significantly lower and shorter than projected, ratcheting up the pressure on all of them. Patients were still lining up for treatment and so Vertex redoubled its program to sell Incivek hard now while targeting those groups—cirrhotics, nulls, people coinfected with HIV—who couldn’t wait for the next wave of treatments. “Making hay while the sun shines,” Sachdev said.

Vertex threw a formal IR event that night in a posh suite at the Four Seasons. A more staid affair than Pharmasset’s, it was an opportunity to present new quad data that showed higher-than-anticipated SVR rates in some of the hardest-to-treat patients. The improvement went all but unregarded by the analysts, who had spent the day conferring with KOLs and had come to the conclusion that Pharmasset’s story would surely result in wholesale warehousing of patients, especially if, as it appeared, the five-year campaign for testing baby boomers soon succeeded and diagnosis rates spiked. Patients were the coin of the realm. The analysts were taking them away from Vertex and giving them to Pharmasset. Koppel and Porges, investor and analyst, sat in the back checking the score of the Eagles-Bears game on Koppel’s iPad.

“I hope this is the nadir,” Wysenski murmured. Stepping off the elevator, she had bumped into Pharmasset’s chief commercial officer buttonholing one of her salespeople. The final night of the conference, they were all beat, bored by the eternal road show
Sturm and Drang
and the peculiar savagery of the Liver Meeting, where it seemed you were either way up or way down. It could be worse: they could be Merck. Everyone was eager to get to the airport. Each night Sachdev had sat through several dinners lasting until one thirty. He tried to reschedule on an earlier flight so he could crash in his own bed, sleep for an hour, and have the next day to work and see his kids.

Kauffman, happy with the quad results and not disappointed to be flying out the next morning to join Smith and Partridge for a few days at a Credit Suisse investor conference in Phoenix, was the least downbeat. After the CF meeting, he too agreed that cystic fibrosis would bring more value to the company than hepatitis C. VRTX might be in crisis but Vertex was exceeding his ambitions. As for Pharmasset, he preferred to wait to see the data.

Koppel sat spread-legged late the next morning on a couch in a solitary corner of the Four Seasons lobby, hunched over a coffee table, typing on his iPad, bristling with mixed emotions. Vertex had preoccupied him for more than a week. It was rare, and probably unhealthy, to become so personally invested in the gyrations of one bet, but the long/short
thesis had swept everyone investing in either company deeply inside the fortunes of both. He was disgusted with Emmens and Wysenski. He didn’t believe they had a midterm play and thought what they should do was quickly buy one of the two remaining companies with a late-stage nuc, Idenix, 13 percent of which Brookside owned. “Not only did they not put fear in the minds of the shorts, they supported the shorts. I’ve never seen a management team support the shorts in the way that they did,” he said.

Porges arrived, crossing the room from the elevators with a seasoned look: funereal, but gleeful to be getting out of town. “There’s blood in the water,” he mocked ghoulishly, doubling down on his Australian accent for effect. “The piranhas are circling. But there’s life in the corpse. Stock at thirty—fifty is the number we came up with.” He sat down, chortling, “These guys fucking suck.”

“This is what I did yesterday,” Koppel said. He proffered the iPad. It showed a chart combining and comparing thirty possible scenarios based on three columns of data—probabilities of a host of likely contingencies. “I said there are essentially three different major questions with the company right now. What’s the degree of the warehousing? Do they get a nuc or not, which essentially is a proxy for can they maintain their 2015 hep C franchise? And what are the scenarios for CF?”

“Time out,” Porges interrupted. “I’d be interested in this, but the only part of this that really matters is this.” He pointed to the last column.