While the patient community and Investors greeted the news with excitement, Mullen new that to fulfill the promise of Anteater, he would need to make a number of crucial decisions and the company would need to bring the drug to market In record time. Boogie Ides would be submitting its Biologic License Application (BLAB) for Anteater based on interim one-year results from the ongoing Phase Ill trials, and the company aimed to submit the application within 90 days.
If approved?and if granted priority review, as the company planned to request, which would reduce the review turnaround from ten months to six months?Anteater could be on the market as early as November 2004, over a year earlier than Initially anticipated. The FDA, which granted licenses for prescription medication, typically reviewed new MS drugs after two years of Phase Ill data were collected and analyzed. The research protocol established for Anteater, like that for most drugs, had called for an Interim review of the data after one year of Phase Ill trials.
Therefore, In December 2003, a small team of Boogie Ides neurologists and statisticians began examining the one-year data.
In keeping with the research protocol and standard procedure for drug trials, the team vomited Its completed analysis to the FDA In mild-January 2004. In early February, the research team also shared the one-year results with the top executives at Boogie Ides and Elan. After discussions of the Interim results with the FDA, the decision was made to submit an application for approval.
Submitting the application early would enable more multiple sclerosis patients to get “on therapy,” not Just those participating In the clinical trials. Because multiple sclerosis Is a progressive disease and no medication Is able to reverse the trend, merely delay the rate of progression, this was clearly crucial.
Getting a license for Anteater would also allow Boogie Ides and Elan to start realizing a return on the large Investment they had both made Just to get this far In the development process. In additional Anteater sales for 2005 alone.
Analysts estimated profit margins anywhere from 16% to 25%. 1 Professors Joshua Marigolds and Thomas Delano and Research Associate Terry He-man prepared this case. HOBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright 2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www. Hobs. Harvard. Du.
No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means?electronic, mechanical, photocopying, recording, or otherwise?without the permission of Harvard Business School. 408-025 However, an early application also introduced considerable challenges for Boogie Ides. Manufacturing capacity would have to be ramped up quicker than expected, both because of the earlier centralization date and because Anteater was so efficacious that more patients than anticipated would likely be put on therapy.
Boogie Ides would also have to work with insurers and managed care providers, including the government-funded Medicare and Medicaid programs, to persuade them of the benefits of the drug and ensure that they would reimburse its cost. This process could take months and typically required extensive lead time to schedule meetings and review data with insurers?data that had to be convincing.
Early FDA approval would mean short-circuiting that whole methodical process, and it was unclear if this could be finalized before the drug was approved.
Although all the signals from the FDA were positive, there was also the risk that the FDA, which itself had been going through a period of upheaval, would not approve Anteater. If this happened, the reputation risk to Anteater could be irreversible, even if it was approved at a later date after further trials. Mullen knew his responsibility was nothing short of transforming the promise of Anteater into reality. He had to determine how to get the drug made and accessible o patients, and he had to lead the company to execute?in record time?on those plans.
Mullen knew Boogie Ides could fulfill the high hopes of patients and investors, and now his task was to lead the company to do so. Boogie Ides History Cambridge, Massachusetts-based Boogie was founded in 1978, in the early days of the biotechnology industry. The company’s underpinnings rested on a tradition of great lab science. The company was one of the first to develop recombinant proteins using genetic technology. Two of its co-founders, Phillip Sharp and Walter Gilbert, won Nobel Prizes.
The overall ethos was to find superstars and build labs around But great science does not automatically imply great business. Boogie circa 1985 resembled a big post-doc lab. There was a lot of interesting work on protein and molecule development. This work was subsequently published, but there was little focus or follow up on developing commercially attractive products. For example, although Boogie filed a U.
S. Patent application for Recombinant DNA molecules and their use in producing human interferon-like peptides in 1980, the patent was not issued until July 23, 1985.
Even then, profits seemed a distant promise. Beta Interferon was initially launched as a cancer drug and failed. It was then pursued as a treatment for hepatitis with limited success, and only later was tried successfully against multiple sclerosis.
To benefit financially from its initial research emphasis, the company adopted a marketing strategy of licensing out those discoveries and technologies for which it held strong patent rights. For several years, the company’s primary revenue source had been royalties from such pharmaceutical powerhouses as Merck, Abbott, and Sheering-Plough.
After gambling big on developing “blockbusters” that did not work out, however, Boogie, by 1986, faced financial meltdown. Money had been invested into dozens of research projects without sufficient emphasis on products with clear commercial market possibilities.
In addition, because several founding members taught at European universities, the company had maintained dual headquarters in Geneva and Cambridge, leading some to consider the company a university-type research organization rather than a profit-motivated enterprise. 2 Wall Street became restless.
Growing R&D expenditures on a broad range of projects led investors to question Bogie’s commitment to turning a profit. In a bid to transform a research organization into a vertically integrated development, manufacturing, and marketing organization, the board recruited Jim Vincent to serve as CEO in 1985. Vincent sold off Bogie’s European operations, built up the management team, and renegotiated important royalties for the interferon products. He also refocused research on four areas: inflammation, thrombosis, virology, and selected cancers.
A number of products already in development were slashed and headcount reduced from 500 to 225 employees. Over time, Vincent focused the company’s product placement efforts on two drug candidates, Horology (a blood thinning device) and Avenue (then targeted at Hepatitis). Boogie became profitable in 1989. By 1993, Boogie was one of few biotechnology companies with a track record of profits and positive operating cash flow. As Horology and Avenue progressed to Phase Ill clinical trials, Vincent recruited James Dobbin as COO in 1994.
At that time, Horology was the favored project, but efficacy trials Boogie competitor, Chicory Corporation, was bringing a similar beta interferon to market for treating multiple sclerosis. Bogie’s scientists recognized that their variant f beta interferon would outperform Chicory’s. Management suspended trials of Avenue in hepatitis, brought forward their trials of Avenue in multiple sclerosis, and cut the Horology project in order to take Avenue to market quickly. The gamble paid off. The product was a success and provided a rapidly rising stream of product revenues, enabling Boogie to remain profitable and grow.
Bogie’s management had effectively bet the company on bringing one product to market: Avenue, an Interferon beta-la to treat relapsing forms of multiple sclerosis.
Through innovative partnerships, Dobbin was able to outsource drug formulation, snacking, warehousing and distribution, while retaining the critical bulk manufacturing operation in-house. This helped ensure a large supply and rapid distribution of Avenue. Then in 1997, one year after the successful centralization of the company’s sole proprietary drug, Dobbin was named CEO and focused on increasing Bogie’s drug pipeline.
During this period, Boogie initiated numerous partnerships to pursue new disease indications and tried to acquire early stage products. However, in December 1998, Jim Dobbin abruptly resigned citing personal reasons.
Vincent once again stepped in as CEO and promoted Jim Mullen, the head of international operations, to President. Mullen had Joined Boogie in 1989 after nine years at Smithies-Became Corporation, and had come up through Bogie’s operations organization. An engineer by training, Mullen had succeeded by focusing on operations and getting things done.
In May 2000, Mullen became CEO, while Vincent remained Chairman of the Board of Directors. A Continued Quest to Diversify Despite its financial success, Boogie was in a delicate position. It continued to live primarily off Avenue.
In FYI 2000, the drug accounted for $761 million or 82% of Bogie’s revenues (see Exhibit 1). The company’s other income derived primarily from royalties on worldwide sales of products it had licensed out in its early days, including alpha interferon and hepatitis B vaccines as well as diagnostic products.
In January 2001, CEO Jim Mullen told the financial community: “Bogie’s next great challenge is to transition from being a one-product company into a multi-product company. ” 3 Nevertheless, the company believed its marketing relationships with physicians specializing in multiple sclerosis was one of its key competitive advantages and it sought to extend its coverage of this market. As of early 2002, nine of the 14 products undergoing clinical trials at Boogie were Avenue-related product extensions. Relied on an opportunistic research culture, as well as partnerships, to bring drug candidates into the pipeline.
Lab biologists and the medical division were the key drivers in deciding where Boogie should dedicate its research efforts. This culture centered on strong individual scientists with small independent laboratories. Success was determined by finding good target genes using crack scientists, “wet” lab space, creativity, and a great deal of luck. Biology is a set of incredibly complex systems. Interactions between living creatures and drug molecules are often unpredictable and hard to fully understand.
As Victor Stateliness, Bogie’s Director of Biological Research put it, “In biology it is a rule of the game that on Monday your experiment is working and the same experiment on Friday gives you a partially different outcome! ” Boogie Ides Merger In June 2003, Boogie announced that it was to merge with Ides Corporation, a leading biotechnology company based in San Diego. The move, valued at $6. 4 billion, was viewed as a merger of equals, seen as a way of creating a company with significant enough scale to keep pace with their larger competitors.
The transaction transformed the new Boogie Ides into the third largest biotechnology company in the world. 4 Jim Mullen was appointed CEO of the new combined company, while Ides CEO William Raster was appointed Executive Chairman.
The company headquarters were to be located in Cambridge, Massachusetts (see Exhibit 2 for the company’s core values). The deal brought together Bogie’s immunology franchise with Idea’s strong position in oncology. Raritan, Idea’s most successful drug, was the leading treatment for non-
Hodgkin lymphoma, and like Avenue was, in pharmaceutical terminology, a blockbuster drug, generating annual sales over $1 billion. Although profitable and considered among the stronger players within the biotechnology sector, both companies had struggled to find new drugs in recent years and believed that their combined strength offered the best strategy to keep pace with the leading biotechnology companies, Image and Genetic. The merger allowed for a scaling-up of the research and development facilities with a promised budget of over $550 million and a staff of more than 1,000.
Cost cutting was also a prime driver. It was projected that the efficiencies of the merger would save more than $300 million in operating expenses and $175 million in capital expenditures through 2007. 6 According to Raster, the merger would be the impetus the company needed to be a major player: “This isn’t about any given product or pair of products. It’s about the powerhouse we can create over the next five to 10 years. This is a way to grow in a single leap and avoid the growing pains, the fits and starts of organic growth, which is an arduous process.
7 Their combined size also increased Boogie Idea’s attractiveness to smaller companies cooking to find partners to bring their drugs to market. The merger was perceived as setting Boogie Ides up as a preferred partner for smaller biotech looking for a larger company with sufficient scale and reach to help gain FDA approval and, subsequently, manufacture and market drugs. Licensing and other types of partnerships were increasingly common as the number of small R focused companies grew, an upshot of recent scientific advances in molecular biology.
In approved by the FDA were the result of a partnership; by 2002, the percentage had risen to almost 50%. 8 We must be the best in our sector in the therapeutic areas we have chosen, oncology and immunology,” said Raster.
“We are inherently collaborative and will become the partner of choice for others seeking to develop in commercialese biologic for oncology and immunology. “9 Analysts viewed the merger more cautiously: “l don’t think we are convinced that the merger of two companies with somewhat mediocre fundamentals, when put together, equates to one company with solid fundamentals,” said Patrick Flanagan of Adams, Harness and Hill. The issues facing each are Just brought into the fold. “10 Despite a class-action lawsuit filed by shareholders claiming that the Boogie board had breached its fiduciary duty by not attempting to obtain the highest price, and rumors that Genetic would step in as a white knight with a higher bid for Ides, the merger was approved by both sets of shareholders on November 12, 2003. However, there was some initial local criticism that the company’s focus on cutting costs did not extend to the executives, particularly with regard to relocation expenses.
It was reported that despite Boogie Idea’s pledge to find $475 million in savings by 2007, the new company spent $5. Million on three Boston luxury condos for executives relocating from San Diego. 11 Multiple Sclerosis Multiple sclerosis (MS) is a chronic autoimmune disease that affects the brain and spinal cord. MS can cause a variety of symptoms, including changes in sensation, visual problems, weakness, depression, and difficulties with coordination and speech. Although many patients lead full and rewarding lives, MS can cause impaired mobility and disability in the more severe cases.
The National Multiple Sclerosis Society estimates that approximately 400,000 people in the United States have MS, approximately 1 in 750. Multiple sclerosis affects neurons, the cells of the brain and spinal cord that carry information, create thought and perception and allow the brain to control the body. Surrounding and protecting these neurons is a fatty layer known as the myelin sheath, which helps neurons carry electrical signals. MS causes gradual destruction of myelin (denomination) in patches throughout the brain and spinal cord causing a myriad of symptoms, depending upon which signals are interrupted.
The name multiple sclerosis refers to the multiple scars (or scleroses) on the myelin sheaths.
It s thought that MS results from attacks by an individual’s immune system on the nervous system and is therefore categorized as an autoimmune disease. Multiple sclerosis may take several different forms, with new symptoms occurring in discrete attacks or slowly accruing over time. Between attacks, symptoms may resolve known about how MS causes damage, its exact cause remains unknown.
MS primarily affects adults, with an age of onset between twenty and fifty years, and is more common in women than in men. MS is a debilitating disease and patients’ symptoms will worsen over time. At present, it is not understood what causes MS, although it is now that both environmental and genetic factors are involved.
There is no known cure. However, several types of therapy have proven to be helpful in restoring function after an attack, preventing new attacks, and slowing the progression of disability. Progression of the disease is not constant, and will often come in episodic attacks.
There are several different subtypes, or patterns, of progression (see Exhibit 3 for graphical interpretation): 5 Relapsing-Remitting 2 Relapsing-remitting (ARMS) describes the initial course of 85% to 90% of individuals with MS. This subtype is characterized by unpredictable attacks (relapses) followed y periods of months to years of relative quiet (remission) with no new signs of disease activity. Deficits suffered during the attacks may either resolve or may be permanent.
When deficits always resolve between attacks, this is referred to as “benign” MS.
Secondary Progressive Secondary progressive describes around 80% of those with initial relapsing-remitting MS, who then begin to have neurological decline between their acute attacks without any definite periods of remission. This decline may include new neurological symptoms, worsening cognitive function, or other deficits. Secondary progressive is he most common type of MS and causes the greatest amount of disability. Primary Progressive Primary progressive describes the approximately 10% of individuals who never have remission after their initial MS symptoms.
Decline occurs continuously without clear attacks.
The primary progressive subtype tends to affect people who are older at disease onset. Avenue and Rebel Since its introduction in 1996, Avenue had been the leading therapy for treating patients with relapsing-remitting multiple sclerosis (ARMS). It had also consistently been responsible for at least 90% of Bogie’s revenues (see Exhibit 1). Under the Orphan Drug Act, Avenue was given exclusive rights to the ARMS market until May 2003. This legislation, enacted by the US Congress in 1983, rewarded drug-makers for developing products for rare diseases, otherwise “orphaned” by the industry.
Rare” typically meant affecting fewer than 200,000 Americans?approximately the number estimate was subsequently revised upwards, but the orphan drug act continued to apply. Drugs would ordinarily get 20-year patents; orphan drugs however were granted a seven-year monopoly for the treatment of that disease, as well as 50% tax credits for clinical trials. This monopoly made it hard for similar drugs to compete unless they could demonstrate compelling better efficacy. The original orphan drug protection for ARMS had gone to Betrayers, a similar underestimating drug, developed by Burble industries.
However, three years later, in 1996, in spite of Beefeater’s orphan-drug protection, the FDA approved Avenue for the same indication.
While the efficacy of the two drugs was similar, Avenue caused fewer complications at the injection site. 13 Indeed, two patients on Betrayers had to have their arms amputated. 14 The FDA deemed this sufficiently important to override Beefeater’s monopoly. The active ingredient in Avenue is interferon beta-la, a modified human protein produced in mammalian cells.
Beta interferon are nondiscriminatory agents which slow down and regulate?or modulate?the abnormal inflammation of the brain and spinal cord caused by MS, thereby altering the natural course of the disease. The specific interferon-induced proteins and mechanisms by which Avenue exerts its effects in multiple sclerosis are still not fully understood.
6 In 1999, Sermon Pharmaceuticals, a biotechnology company based in Geneva, Switzerland applied for FDA approval for Rebel, another interferon beta-la drug signed to prevent disease progression in relapsing-remitting patients.
Rebel had already been approved and was widely used in Europe and Latin America. 1 5 However, the FDA rejected the application on the grounds that Avenue was protected under the Orphan Drug Act. Sermon continued to press for FDA approval, conducting a number of clinical trials, intended to demonstrate that Rebel was more efficacious than Avenue. Although essentially the same drug, the dosage and delivery routines were significantly different: Rebel was injected at a dose of 44 meg three times a week subcutaneously directly under the skin); Avenue was injected at a dose of 30 meg once a week, directly into muscle.
6 Sermon was confident that its drug was superior: “From every trial we have performed and all our studies, it is obvious there is a better effect in MS patients,” said CEO Ernest Preferable. 17 However, results of ongoing clinical trials were unclear and open to interpretation. By early 2002, Sermon produced data showing that in a 24-week regimen, patients on Rebel had significantly fewer flare-ups of the disease and developed fewer brain lesions. 8 Boogie argued that there was no proof that Riff’s worth-term superiority conferred any long-term advantages and maintained that In March 2002, 15 months ahead of the end of the orphan drug protection, the FDA approved Rebel for use on relapsing-remitting MS patients. Sermon started marketing the product within days. 19 Boogie fought back hard, insisting that Sermon’s claims were exaggerated and going to court over the specific wording Sermon used to publicize the trial outcomes.
Boogie also published results of its own study, suggesting that Avenue was clinically superior.
Sermon, determined to use Rebel as a gateway product into the lucrative U. S. Arrest, kept up its marketing campaign, targeting existing patients as well as newly diagnosed patients. In July, Sermon announced that it had formed a partnership with Pfizer, the world’s largest drug maker, to market Rebel in the United States.
Boogie increased the size of its sales force in response. 20 Their increased sales and marketing efforts resulted in second- quarter profits dropping by 40% relative to the previous year. 21 Physicians clearly noticed the increased attention.
Dry. Daniel D.
Micro, director of the multiple sclerosis center at the University of Michigan, observed: “The marketing is rice. I hear one thing from one drug rep and a totally different thing from another. The average neurologist sees many different kinds of patients. They don’t have the time to delve into the data. So whichever rep is more aggressive, whichever one is around more, sending them to more meetings, that’s the one who’ll have the most influence. “22 Not everybody thought that the fierce competition was beneficial.
According to Timothy Variation, an assistant professor of neurology and neuroscience at Harvard Medical School: “The dollars spent on arguing those percentage points represent a age disservice to patients. I’m appalled at the amount of money spent on marketing because these drugs are only moderately effective. The money would be better spent on new therapies. “23 The Development of Anteater Given its experience and expertise working with the MS community in developing and marketing drugs, Boogie focused on finding additional drugs for this disease.
In 2000, Elan Corporation of Ireland approached Boogie to partner in the development of a new MS drug, named Anteater. 24 At 7 the time, Anteater was in early stage clinical trials for both multiple sclerosis and Crown’s disease, a chronic inflammatory disease of the gastrointestinal tract.
Elan was looking to rationalize its product portfolio and was placing Anteater at the center of the company’s strategy, simultaneously divesting many other projects and laying-off two-thirds of the company’s workforce. 5 Elan itself had Just used some of the funds from the recent divestment to buy back the rights for Anteater from Anteater was the first of a new class of drugs, called selective adhesion molecule inhibitors, designed to inhibit immune cells from leaving the bloodstream and attacking inflamed tissue. 6 It promised to be the first chemically-different treatment available for multiple sclerosis in nearly a decade (see Exhibit 4 for drugs previously approved by the FDA for multiple sclerosis).
Although focused primarily on MS, the drug also had potential to treat other inflammatory diseases. In a clinical trial of 72 patients conducted Just prior to the partnership agreement, those given only two doses of Anteater had only half as many new lesions, areas of damage to the brain from the disease, as those given a placebo.
27 At the time the partnership was announced, Anteater was in the process of being tested in a longer-range study to determine whether it slowed progression of the disease over time. Taking on Anteater was a calculated risk for Boogie.
It had not yet been approved by the FDA, and if it were to be approved, there was also the risk that it might cannibalize sales of Avenue. Jim Mullen downplayed the threat, stating that Anteater would either be used for different groups of patients or in combination with Avenue. 28 Under the terms of the deal, Boogie and Elan would evenly split development costs and profits.
Boogie, which would manufacture the drug, also made undisclosed upfront and milestone payments to Elan. 9 Hopes for Anteater were high. Boogie forecast annual sales of at least $1 billion within the MS market alone.
Mullen observed: “We clearly see it as a drug in the blockbuster range. [Additionally] if Anteater proves effective in treating Crown’s disease, it could find an even larger market. “30 By September 2001, Anteater had shown promising results in its Phase II trial.
In these trials, involving 213 patients at 26 sites in the United States, Canada and the United Kingdom, patients injected with Anteater once a month for half a year showed “virtually no new lesions being armed, better results than were found with a control group of patients who weren’t given the drug. The side effects of the drug were minor. 31 The drug was quickly moved into Phase Ill trials (see Appendix for details of clinical trial process), which were again promising. By early 2004, it seemed that Anteater was well in line to pass its “primary end-points,” demonstrating both efficacy and safety. Early Application The small team of neurologists and statisticians reviewing the interim Phase Ill data presented it to Mullen and other Boogie Ides and Elan executives in early February 004, shortly after the team had submitted its briefing on the results to the FDA.
Even though the clinical trials were only one year through their proposed two year duration, the team analyzing the data and the companies’ executives were all excited by the impressive results.
In two separate, double-blind, randomized, studies conducted at multiple centers, covering a total of 2,100 patients, Anteater was shown to reduce the rate of relapse by 66% during the first year of treatment compared with a placebo. Alternative MS drugs reduced the relapse rate by approximately 30% compared with a placebo.