The search for the magic bulletFebruary 11, 2014: 2:53 PM ET
Fortune.com selects the most compelling short essays, anecdotes, and author interviews from "250 Words," a site developed by Simon & Schuster to explore the best new business books -- wherever they may be published.
FORTUNE -- 250 Words' Sam McNerney sat down with Barry Werth, author of the new book The Antidote: Inside the World of New Pharma, a deeply reported tale from within an upstart drug company, Vertex Pharmaceuticals (VRTX), and the ferociously competitive, if indispensable realm of drug development that it inhabits. Werth's previous book on Vertex, The Billion-Dollar Molecule, was selected as one of Fortune's "Smartest Books We Know." Werth talks to Sam about [former Vertex CEO] Joshua Boger, The Innovator's Dilemma, and the "Hep-C-apalooza."
McNerney: Tell us a little bit about one of the main characters, the founder and former CEO and chairman of Vertex, Joshua Boger. You write he had a "rich talent for convincing himself and other people through a mix of bravado, hyperbole, charisma, marketing, and tenacity that almost anything can be done." Sounds like Steve Jobs.
Werth: I first walked into Vertex's original converted garage in August 1989 and within five minutes I knew I wanted to write about Josh Boger. I was a magazine writer at the time and Josh told me how he would change the world, with such sincere confidence and conviction that I said to myself, "Either this guy's the real thing, or a charlatan." Then I met the founding scientists and the business people and I encountered the same, what I'll call, skeptical optimism–they believed what he said was possible, but they worried he was getting carried away with his grandiosity. To me, Josh embodied hubris. He also was a great quote, never profane, always smart and funny. A couple of weeks later I followed him down to an investor conference on Wall Street where desperate CEOs paraded before bored-looking investors. "A meat market," he told me. "We're talking fishnet stockings. I mean it just doesn't get any lower than this."
Now that I've watched him and interviewed him over nearly 25 years, and now that Vertex is thriving, I've thought a lot about what it takes to build an important company. Former president of Vertek Vicki Sato put it best about Boger: "He has an outrageous sense of possibility coupled with a very deep sense of self-confidence about one's ability to translate that into something that is actually working." The key is to impart that to everyone else. That's the way I compare Boger to Jobs. Josh skillfully deploys what people at Apple called a "reality distortion field"–a magnetic optimism powerful enough to raise a group's aspirations and hike the stakes. "Insanely great," and all that. Jobs used his reality distortion field to stare coldly through others until they succumbed. Boger favors more irony and humor but with the same result: for 20 years under his leadership, the organization kept aiming higher and higher. In a tough, slow, high-risk slog, that's the only way to get there. That and never quitting. That's Josh.
In The Innovator's Dilemma, Clayton Christensen describes how in order to make a profit a company must fulfill a customer's needs in the present, but to survive in the long run, it must develop products that meet a customer's unstated needs in the future. Could you comment on the innovator's dilemma in the biotech industry? How much luck is involved?
Imagine you have 300 ideas for new products, yet you know from the get-go that the industry odds are that only one of them will make it to market. Now further imagine that at end of the most critical testing stage, up to a decade or so when the cost of finding out whether your product is effective and safe will run, say, to a half billion dollars, only one in 30 projects get to the finish line. Three percent. Now if that wasn't tough enough, consider that you have no product revenues during this period, and all your capital comes either from Wall Street, which demands a quick return, or big companies that are interested in buying your most promising ideas. What do you do?
That's the innovators dilemma in biotech. To make it through, Vertex knew it had to do several things well: generate a lot of really good ideas, cut the weak ones early, build a wide portfolio, come up with better and better ways of proving concepts earlier, balance the type of risks it took so it didn't get blindsided later on, improve its hit rate, and chase after money constantly. Luck, good and bad, has a major role in any enterprise, and I would say over the quarter century Vertex has been in business, it's had roughly equal shares of each. I'll add that either way, it helps to have the best data possible, so that you can make informed moves. "Fortune," as Pasteur said, "favors the prepared mind."
You detail the "Hep-C-apalooza," which involved the FDA approving two drugs for hepatitis C: telaprevir (Vertex) and boceprevir (Merck). Some employees at Vertek believed that "Merck… got away with murder." You note that one panelist for the FDA had received research funding from Merck (MRK). How would you evaluate the FDA drug approval process?
The back-to-back FDA advisory committee hearings for the two drugs really opened my eyes–and not just mine. The comparison couldn't have been starker. Merck went first with boceprevir and its presentation was largely smoke and mirrors. The big issue with its drug was that it made a lot of patients so anemic that they also had to be prescribed EPO, which the FDA considers dangerous. How can you approve a new drug that requires people to take a second drug with a well-known dark side? Merck glossed over the issue and wasn't challenged. They brought in an expert on anemia who never spoke a word. The company hadn't done any studies to show drug-drug interactions with other commonly used medicines. It invented study criteria out of whole cloth. Despite all this, the advisory committee unanimously recommended boceprevir for approval.
The next day Vertex came in and addressed every concern the FDA had with studies and data and science. It, too, got a unanimous recommendation for Telaprevir. The lesson, I hope, is not that transparency and honesty don't matter, but that regulators have to be much tougher in the face of a rising tendency throughout science to present lousy, skewed, manipulated data, knowing no-one will bother to try to replicate it so you'll probably be able to skate by. This is a huge problem that permeates the world of research and goes way beyond the FDA.
The tech startup culture in Silicon Valley is much different from the pharmaceutical industry. It took Vertex nearly two decades to launch a big product and make a profit. Can you imagine if Google or Amazon were in business for twenty years without a product? Why would anyone want to start a pharmaceutical company?
Two reasons: opportunity and reward. Boger used to say to recruits: "If I'm right I'm gonna save a million lives a year. What else are you doing that's so important?" People who start pharmaceutical companies have this preposterous notion that a) it can be done, b) they're the ones to do it, and c) the value created, both social and financial, makes it worth doing. Value of course can include personal riches, but there are a lot easier ways to get rich, so I don't think that's the main driver.
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You ask the following question in the introduction: "Could true believers in the idea that the purpose of pharmaceutical research is to put patients first and transform the lives of sick people compete in an industry where it was far preferable to develop, say, a marginally better fifth statin compound for high cholesterol and market the hell out of it, as Pfizer (PFE) had done with the bestselling drug of all time, Lipitor?" After writing two books on Vertex, what's your answer?
Well, the company has delivered two important breakthroughs over the past couple of years and a lot of people think it's on its way to curing cystic fibrosis, so I guess you'd have to say the answer is yes. For now. With two qualifications: we don't know what Vertex will deliver next, or whether it's actually a sustainable model. Also, this is not to say that the same thing is possible today. Could another Vertex arise today and make it all the way to sustainability given the pressures on health care spending and the accelerating revolution in personalized medicine, where increasingly companies will be bringing out more and more highly effective, eye-wateringly high-priced drugs for smaller and smaller groups of patients? I doubt it. But then everyone but Boger and his torchbearers doubted Vertex would ever make it. So you never know.