Most every biotech company with some mileage has had at least one near-death experience.
Maybe the key experiment failed, or a dangerous side effect emerged late in the game. Maybe a rich competitor decided to squash the little guy with a frivolous intellectual property lawsuit. Maybe a key partner bailed for whatever reason. Maybe the venture firm couldn’t deliver on the next round of financing. Maybe the FDA trashed the product application.
Biotech companies can be killed any number of ways. The ones that are built to last must have survivalist DNA, a resiliency to get them through the tough times. They have a long-term plan they believe in. They think on their feet, and squeeze their way out when they get in a jam.
Stories of Shackleton-style perseverance have been on my mind lately, as I’m preparing for a big Xconomy event in San Francisco on Dec. 9 about “Building Biotechs to Last.” So I sat down last week in New York with one of biotech’s survivors, Richard Pops, to hear him tell one of his stories about getting through tough times. Pops, the longtime CEO of Alkermes (NASDAQ: [[ticker:ALKS]]) has been on a roll lately, as his company’s market capitalization has steadily climbed to near $5 billion.
But like most veteran CEOs, Pops remembers a harrowing year when it looked like the whole thing could collapse. It’s now a case study he occasionally puts in front of business students at MIT’s Sloan School of Management.
The story of Alkermes’ near-death experience starts in the summer of 2002. After 15 years in business, the company had burned through more than $380 million. One product using Alkermes’ technology—a Genentech growth hormone called Nutropin Depot—was on the market, but not selling well.
Still, it was a start. Alkermes had developed a number of technologies to improve drug delivery. One was a polymer-based technology to make drugs last longer in the bloodstream, and another was used to make inhaled formulations of existing drugs. Excitement on Wall Street was running high that year, because Alkermes was in position to start making big money off an antipsychotic from Johnson & Johnson called risperidone (Risperdal). The J&J drug had been marketed for about 10 years in an oral form, and reached more than $2 billion in annual sales. An injectable, longer-lasting form that used the Alkermes technology had advantages in that it could keep mental health patients on a reasonably even keel without having to worry about whether the patient would stay on his or her daily oral meds.
Alkermes stock was worth more than $16 a share, and it had a team of 500 employees. It had more than $110 million of cash and investments in the bank. The new drug was branded “Risperdal Consta” for its constancy in the bloodstream. (J&J last week agreed to pay a $2.2 billion fine to the federal government for marketing the earlier form of the drug for unapproved uses, one of the largest such legal settlements in history).
At about 5:30 pm on Friday, June 28, 2002, when people were kicking off weekend plans, Pops got the bad news. His vice president of regulatory affairs walked into his office, closed the door, and had an “ashen” look on his face, Pops recalls. The VP had just gotten a phone call from his counterpart at J&J who said the FDA had outright rejected the Risperdal Consta application, through what was called a “non-approvable” letter. Back then, the agency often turned down applications with more bureaucratic niceties, like saying an application was “approvable” if only a few other I’s were dotted. This letter wasn’t that nice.
“We had no idea why that was. We hadn’t had great visibility into the new drug application filing process, which was handled by our partner,” Pops said. “We were completely blindsided.”
Try telling that to Wall Street. This, as readers may recall, was the year when Enron, WorldCom, and ImClone Systems became infamous household names.
“We spent the weekend drafting a press release for Monday morning, knowing we’d be annihilated on Monday. One thing the Street does not like is a surprise,” Pops said.
The Alkermes press release on Monday, July 1, 2002 didn’t attempt to bury the lede, as we say in the news business. The first paragraph said J&J had gotten a “non-approvable” letter. It didn’t say anything more about why
