Team Actelion
In the 1980s, hundreds of biotechnology firms were established with the express intent of becoming fully integrated pharmaceutical companies. Few achieved the goal, and today only a handful retain their own ticker symbols: AMGN, BIIB, CELG, GILD, REGN, and VRTX, for example. The rest were absorbed, sold off in pieces, or dissolved.
By the late 1990s, the realities of the business had forced prospective bioentrepreneurs to abandon outsized dreams and develop alternative business models and strategies. New companies were formed to supply drug makers and biomedical scientists with research tools, information on therapeutic targets, or promising molecules carried through preclinical or early stage clinical development. Startups came to understand that their customers were not healthcare providers or patients, but rather pharmaceutical corporations and other research organizations.
There were exceptions. This is the story of one of them: Actelion, Europe’s largest dedicated biopharmaceutical company, headquartered in Allschwil, Switzerland, a municipality just outside of Basel. Actelion uses the tools of “structure-based drug design” to engineer small molecule therapeutics. The firm got underway in December 1997, with a plan to invent, develop, and market its own products — in a business that routinely punishes such ambitions.
By the end of 2003, Actelion had made an initial public offering of stock, introduced a first-in-class blockbuster therapeutic product, and set up a global marketing organization. In 2004, the company turned a profit. It sounds like instant success — by pharmaceutical timekeeping, at least — but the foundations for Actelion’s impressive ascent were laid in the 1980s, with the formation of the company’s founding team at the Swiss drug-making colossus, F. Hoffman-LaRoche.
There were four in the group: cardiologist Jean-Paul Clozel, his wife, pediatrician and pharmacologist Martine Clozel, Swiss biochemist Walter Fischli, and German cardiovascular physician and computer scientist Thomas Widmann. When Roche restructured its R&D operations and implemented a system they found restrictive, the four decided to strike out on their own.
On December 10, 2010, Actelion inaugurated a new headquarters on its property in Allschwil, a striking five-story structure of cantilevered steel designed by Basel architects Herzog & de Meuron. Jacques Herzog called the “stacked” modular design “one of the most complex we’ve ever done.”
The size of the building (350 offices, an auditorium, and numerous communal spaces in 294,000 square feet) indicated Actelion’s vitality and the scale of its expansion. The unique design symbolized the company’s commitment to experimentation and innovation. Hundreds attended the opening, including prominent leaders in Swiss science, business, and government. Doris Leuthard, president of the Swiss Confederation, was on hand.
The event was upbeat. It was a day for revelry and congratulations, but the company’s future was uncertain. Rumors of a sale or takeover had swirled for months. Amgen, AstraZeneca, Bayer, Bristol-Myers Squibb, Eli Lilly, GlaxoSmithKline, Novartis, and Roche had all been mentioned as interested parties.
Analysts and shareholders wondered whether the time had come for Actelion to surrender its independence. The organization had made extraordinary progress since its inception thirteen years earlier. It was highly profitable and valued at nearly US$7 billion, but some questioned whether it could continue to grow.
Actelion introduced its best-selling product, Tracleer, in 2001. Tracleer is an endothelin receptor antagonist used to treat pulmonary arterial hypertension (PAH), a rare, progressive, and usually fatal disease. Endothelin is a vasoconstricting peptide involved in the regulation of blood pressure. When it is overproduced, the result is chronic hypertension. Tracleer blocks its action. The drug became a blockbuster product with annual revenues in excess of US$1 billion.
In 2010, Actelion had three additional products on the market. Ventavis and Veletri were alternative therapies for PAH. Zavesca was an enzyme inhibitor used to treat Gaucher’s disease, a rare lysosomal storage disorder.
The company had licensed or purchased each of these drugs to mind the gap between the introduction of Tracleer and the maturation of the firm’s development pipeline, but the three together generated less than $200 million in annual sales. Actelion derived more than 85 percent of its product revenues from Tracleer, which would lose patent protection in less than five years.
The company needed a strong replacement in order to sustain its forward momentum, but it had recently endured a series of late stage clinical failures. Eighteen months earlier, the company’s lead compound in an R&D project undertaken with Merck, an effort to discover and develop “next generation” non-peptide renin inhibitors for the treatment of high blood pressure, had stalled in Phase 2 trials.
Then, in September 2010, Actelion announced that it was suspending the development of clazosentan (like Tracleer, an endothelin receptor antagonist) after a Phase 3 study in which the drug failed to show clinical benefit following hemorrhagic strokes.
In the aftermath, critical analysts suggested that Actelion might be a one-trick pony. At the opening of the new headquarters, reporters posed questions to CEO Jean-Paul Clozel about the company’s pipeline and the possibility of a sale. Clozel vigorously defended the firm’s research and insisted that Actelion was not on the auction block. “We had a couple of setbacks,” he said, “but we have a very strong pipeline. This is why we want to stay independent.”
“Actelion needs to be fixed”
The pressure intensified in January 2011 when Actelion discontinued Phase 3 testing of an insomnia treatment, a potential breakthrough medication developed in collaboration with GlaxoSmithKline. The drug’s effect was achieved via a novel mechanism of action. It interfered with orexin, a neurotransmitter that stimulates wakefulness, but also produced unspecified side effects.
After the retreat, it appeared that Merck was positioned to take the first-in-class ribbon with a rival orexin inhibitor, suvorexant. Success in the insomnia competition could have meant billions for Actelion. The missed opportunity roused disaffected shareholders to action.
Elliott Advisors, Ltd., the British arm of Elliott Management Company, Paul Singer’s US$18 billion New York hedge fund, had become Actelion’s largest investor, with a 5.12 percent stake in the company. The group had established a reputation for aggressively pursuing control of companies and implementing strategies to boost the near term value of its holdings.
On February 3, Elliott sent an open letter to Actelion’s board of directors. It called for chairman Robert Cawthorn to resign, and for Clozel to step down as a director (but not as CEO). Elliott argued that the possibility of a sale should be entertained, and that the company’s efforts to discourage offers were not in the interest of all shareholders.
The hedge fund nominated six new candidates, including several experienced pharmaceutical executives, for election to the board of directors at the annual shareholders’ meeting to be held in May. The nominees embarked on a media campaign to make Elliott’s case and win support from Actelion’s institutional investors.
On March 25, a headline in the Wall Street Journal quoted former Novartis executive James Shannon, Elliott’s candidate to succeed Cawthorn as chairman of the board: “Actelion needs to be fixed.” In the article, Shannon announced that, if elected, he would press for cuts in R&D spending. He allowed that a sale might be a preferred endpoint, but emphasized that “the company needs first to be run as a business.”
The two sides prepared for a showdown. As they traded arguments for and against various strategic options and changes in the composition of the board, it became apparent that the trouble stemmed from differing assessments of Actelion’s innovative capacities, and from conflicting philosophies of risk.
The hedge fund operated on the assumption that the company had peaked. Actelion countered that it was still building value and that to sell was to risk discounting investments made by current shareholders and delivering windfall returns to a late arriving buyer, or disrupting the firm’s R&D operation and preventing it from realizing its full potential.
Cawthorn and Clozel pointed out that the company had two new compounds for the treatment of PAH advancing smoothly through clinical testing — macitentan, discovered by Actelion, and selexipag, originally synthesized by Nippon Shinyaku. If successful as drugs, they would secure and extend Actelion’s PAH franchise, and catapult the company to new commercial heights.
Elliott dismissed this kind of talk as wishful thinking and reiterated its warning to shareholders: a change in leadership was necessary to avert calamity when Tracleer came off patent and was exposed to competition from generics. The lines were clearly drawn. Elliott sought risk reduction. Actelion sought to stay the course it had followed for thirteen years with notable success.
For Clozel, everything was at stake in the proxy battle. The shared vision of the founding group — to which he belonged — was the creation of an independent research organization committed to discovery and innovation. Elliott Management Company had no particular interest in discovery or innovation. It was concerned with protecting its investment and maximizing returns.
Clozel had faith in his organization. The hedge fund’s pharma proxies did not. Clozel understood that learning about biological systems, processes of disease, and the properties and actions of medicinal compounds takes time, and he believed, in the spring of 2011, that the company’s development pipeline was just coming to fruition.
The belief was based on long experience in the drug hunting business, experience that began to accrue in the mid-1980s when a small group of biomedical scientists came together in Roche’s cardiovascular research unit with common interests and outlooks, and diverse but complementary skill sets.
The biochemist
Walter Fischli joined Roche in 1982. He held a PhD in biochemistry from the Eidgenössische Technische Hochschule (ETH), the Swiss Federal Institute of Technology in Zurich, and he had recently completed a postdoctoral fellowship in the laboratory of Avram Goldstein, the discoverer of endorphins, at the Addiction Research Foundation at Stanford University.
The visit to California was productive. Fischli made a name for himself by isolating and characterizing two dynorphins, the first representatives of a new class of opioid peptides. He went on to explore their interactions with cellular receptors. It was, in essence, a project in pharmacology.
After the fellowship, Fischli received a number of employment offers in the United States, including an invitation to join the DNAX Research Institute of Molecular and Cellular Biology. DNAX was a commercial venture started by California entrepreneur Alex Zaffaroni and famed Stanford biochemist Arthur Kornberg, with help from Kornberg’s university colleagues, Paul Berg and Charles Yanofsky, and ample infusions of cash from the Schering-Plough Corporation.
Fischli decided otherwise. He and his wife had a young son and a second on the way. They returned to Switzerland to be close to their families, and Fischli went to Basel to interview at F. Hoffman-LaRoche. He came away impressed with the company’s scientific capabilities. Roche was making substantial investments in new technologies and new approaches to drug discovery and development.
The company offered a job, and Fischli accepted. “I was in heaven,” he says. “I was the first biochemist in the cardiovascular department. There was a big push to get into 3-D molecular modeling. This was very exciting for people interested in rational drug design.”
Rational drug design refers to medicinal chemistry and drug development informed by knowledge of biological targets (molecules known or hypothesized to be involved in processes of disease) and interactions of targets with ligands (synthetic compounds or biological molecules that bind targets selectively).
Pharmacologists had previously relied on iterative trial-and-error procedures to discover compounds with disease-modifying properties. They randomly screened compounds for biological activity in cells or animals, selected drug candidates on the basis of observed effects, and passed them on to chemists who synthesized libraries of analogues for further screening. The work was often carried out in complete ignorance of underlying mechanisms of action.
When Fischli arrived at Roche, the company was adopting X-ray crystallography, nuclear magnetic resonance (NMR) spectroscopy, and computational software tools in an effort to turn rational drug design into a structure-based discipline. The goal was to guide medicinal chemistry with better understandings of relationships between molecular conformations and biological functions, and physical interactions between disease-related biological targets and potentially therapeutic compounds. Fischli began using the new tools to develop drugs for heart disease.
Two years into the job, Fischli was asked to review the file of a cardiologist, Jean-Paul Clozel, who was being considered for a position in the research group. Fischli saw that Clozel possessed expertise that the department desperately needed: “He worked in physiology, animal pharmacology. I thought it would be fantastic if he could join.”
The pharmacologist and the physiologist
Jean-Paul Clozel met his wife, Martine, in 1975, when both were medical students at Nancy University (now incorporated into the University of Lorraine) in northeastern France. Martine was the top student in a class of 50. Jean-Paul was in the top ten.
Jean-Paul specialized in cardiology. “I studied medicine,” he says, “because I wanted to understand disease. I wanted to discover drugs.” Martine worked in pediatric oncology and pharmacology, and then took specialized training in neonatology. “I loved it,” she says. “The field was underdeveloped. There was so much to be discovered. And I was thrilled to do medical work that helped very small children, some of whom were seriously ill.”
In 1980, Jean-Paul was called to compulsory military duty, but he was able to avoid conscription thanks to a special agreement between the French and Canadian governments to support the exchange of scientific and medical knowledge. Instead of carrying a rifle, he was permitted to spend two years conducting medical research in Canada.
By this time, Jean-Paul and Martine were married, with a young child. The family moved together to Montreal. Jean-Paul carried on with his work in cardiovascular physiology at the Montreal Heart Institute. Martine took a position in neonatology at Montreal Children’s Hospital, an affiliate of McGill University.
In 1982, the couple returned to Nancy to finish medical training as specialists, Jean-Paul in cardiology, Martine in pediatrics. Martine became a resident physician and then an assistant professor of medicine at the University Hospital. During this period she helped to establish a neonatology research department at INSERM, the French National Institute of Health and Medical Research.
Jean-Paul began looking for opportunities to conduct pure research. He made contact with Roche, and was recruited by the cardiovascular research group. He liked the idea of working in industry — he wanted to develop drugs for heart disease. He had considered a career as an academic pharmacologist, but concluded that he was a poor fit for the highly formalized French university system.
“Professor of medicine doesn’t have the same meaning in France as it does in the US or Canada,” Clozel explains. “My working style was very informal and open. If I agreed or disagreed with something, I would simply say so. I was a bit difficult in that way. It gave me very little chance for an academic career in France.”
He told Roche that he wanted to join, but hoped that he could first spend a year in the United States studying the latest developments in cardiovascular physiology, and specifically how the heart adapts to lung disease. Roche approved the plan and provided a modest stipend.
Clozel arranged a position at the Cardiovascular Research Institute at the University of California, San Francisco (UCSF), a world-class research center, and one for Martine in the neonatology department of the UCSF Medical Center. Martine studied the physiology of pulmonary hypertension, a normal phenomenon in fetuses until birth. The department had developed new technologies for research in the area. She used them to generate a series of important papers. “It was,” Jean-Paul says, ”a fantastic year for both of us. There were so many very good people there.”
When it was over, the Clozels moved to Basel. Jean-Paul went to Roche as planned and began experimenting with drugs for hypertension. Martine had resigned her university and INSERM positions before leaving for San Francisco, and was out of work. She tried to persuade Swiss hospitals and research institutions to establish a pediatric research laboratory in Basel, but she wasn’t able to generate a critical mass of support for the idea. She then tried to land a research position at one of Basel’s pharmaceutical giants — Ciba-Geigy, Sandoz, or Roche.
Ciba and Sandoz both informed her that she couldn’t be hired because her husband worked at Roche. They feared leaks of confidential information. She then went to Roche, and was told that she couldn’t be hired there, either, because her husband worked at Roche. The company had a policy that prohibited husbands and wives from working together.
Finally, Jean-Paul went to the head of research at Roche to say, “If you can’t accept the both of us, I will have to leave. I can’t have my wife, who has done all of this wonderful research, not working because of me.” The company found a place for her in a different cardiovascular research group.
Martine’s first assignment was to investigate platelet aggregation and blood clotting. She was pleased with the position. “It was the best gift I could have been given,” she says. “From day one, I loved working in the pharmaceutical industry.”
It wasn’t long before Martine was asked to study the ways in which the endothelium, the thin layer of cells that lines the inner walls of blood vessels, is implicated in clot formation and inflammation. The project soon took an unexpected turn that brought her back into routine daily contact with Jean-Paul’s research group. No one objected.
“It was the best gift I could have been given. From day one, I loved working in the pharmaceutical industry.”
The clinician
Shortly after Martine joined Roche, the company made a new senior level hire in cardiovascular clinical research. Thomas Widmann was a German cardiologist who, like Fischli and the Clozels, had international experience in biomedical science.
Widmann began his medical training at the University of Heidelberg, but after the first year of coursework, the self-described “technology freak” received a special scholarship from the French government to study medicine and computer science simultaneously. He spent two years in Paris before returning to Heidelberg to take his final medical exam in 1975.
Widmann then began working on a specialty in internal medicine. His ultimate goal was to become a heart surgeon, but that plan was disrupted when he received an unexpected call from the cardiology center at the University Hospital of Geneva. The group wanted to take a leading position in an emerging medical subfield — “quantitative cardiology.” Widmann was invited to lend his special expertise in computing. He accepted.
In the 1970s, computer makers were moving from mainframes to minicomputers. Widmann programmed desktop-sized DEC PDP-11 machines to analyze large data sets generated by scanning and volumetric instruments. The work produced novel insights into cardiac functioning. He stayed in Geneva for three-and-a-half years, combining patient care with technology development and biomedical research.
In 1980, he received an offer to move to the University of California, San Diego, to install a sophisticated computer infrastructure at the university hospital’s Special Center of Research (SCOR) on Ischemic Heart Disease, one of eight such centers funded by the US National Heart, Lung, and Blood Institute (NHBLI).
Widmann served as the center’s first systems engineer and became involved for the first time in the clinical testing of experimental drugs — trials of ACE inhibitors for the treatment of congestive heart failure. He also participated in a series of external technology development projects.
He traveled frequently to Milwaukee, where he helped product developers at General Electrical Medical Systems program user interfaces for cardiovascular CT and MRI scanners. He spent time with NASA engineers at the Johnson Space Center in Houston and the Jet Propulsion Laboratory at Caltech in Pasadena, and worked to adapt motion-tracking technologies (accelerometers, gyroscopes, compasses, and barometers, for example) for applications in cardiovascular research.
He also became involved in an entrepreneurial venture, Triton Technologies, a firm started by a friend that licensed software for digitizing and analyzing signals from analog medical instruments. It seemed an almost obligatory extension of his academic work: “In California,” says Widmann, “you’re nobody unless you have your own company. I’m exaggerating, but you can appreciate what I’m saying.” All in all, his time in California was a broadening experience.
Widmann worked on soft money in San Diego until 1987. By that time, he had offers of permanent employment from US universities on both coasts, but decided, he says, “to follow my intuition and get out of academia.” He wanted to do something else. He began to explore opportunities in the pharmaceutical industry in Europe.
He interviewed with Roche and Ciba-Geigy in Basel. Both asked him to join. Widmann chose Roche because he was deeply impressed by Dr. Jan Koch-Weser, a former Harvard pharmacologist, a world famous heart specialist, and head of the corporation’s global clinical research organization. The two got on well from their first meeting, and Koch-Weser became a mentor. Widmann was hired to direct clinical trials of the company’s cardiovascular drug candidates.
“There was preclinical research, then a black hole, and then came clinical research. Basically, people didn’t talk to each other.”
Ten years at Roche
From the mid-1980s through the mid-1990s, cardiovascular research was a productive area for Roche, thanks in no small measure to contributions from the group that later teamed up at Actelion — Walter Fischli, Jean-Paul and Martine Clozel, and Tom Widmann. They worked together in the same building for ten years. They made numerous discoveries, produced hundreds of scientific papers, and created several novel medicinal compounds.
Soon after joining the company, Jean-Paul was assigned to lead about twenty people in one of five research groups within the cardiovascular department. He was responsible for research on hypertension, angina pectoris, and heart failure. Ultimately, he decided which compounds would be advanced to clinical trials.
He worked closely with Walter Fischli, who belonged to the biochemistry group. Martine soon joined them. Fischli screened and characterized compounds, and handed off the best to the Clozels, who investigated their pharmacological properties. The work yielded new insights into the physiology of cardiovascular disease and better understandings of pharmacological interventions.
When Jean-Paul settled on promising drug candidates, he took them to Tom Widmann, who managed clinical trials for the entire department. On joining Roche, Widmann had discovered organizational barriers to communication. “There was preclinical research,” he says, “then a black hole, and then came clinical research. Basically, people didn’t talk to each other.” That changed when Widmann struck up a friendship with Jean-Paul. “We really clicked,” he says, “and suddenly this black hole was filled.”
They were physicians with extensive clinical experience. They discussed discovery and development projects in a common vernacular, and agreed on the importance of drawing widely from the organization’s accumulated physiological, pharmacological, and medical wisdom to formulate hypotheses, establish protocols, and determine endpoints in clinical trial designs. “It is very important,” says Widmann, “that clinical development people are connected as early as possible to the preclinical researchers, in order to know what they are cooking up.”
This was the template for the group’s collaborations — regular interaction and communication. For ten years, the four researchers had offices within fifty meters of each other. They saw each other daily, and made an especially effective team because, as Martine Clozel explains, “We had complementary specializations and our knowledge covered many different aspects of discovery and development.”
Endothelin
Of the group’s many achievements, the most important, as it later turned out, came from Martine Clozel’s studies of the endothelium. In the summer of 1987, she was working with endothelial cells in culture. When she placed an isolated blood vessel in contact with the medium, she observed a powerful constricting effect.
The strength of the reaction made Clozel wonder whether she had discovered an unknown cause of hypertension. Previously, there was no suspicion that the endothelium was actively involved in regulating blood pressure, but Clozel conducted a literature search and found that a group at the University of Cincinnati had made the same observation two years before. She consulted Walter Fischli. They hatched a plan to track down the causal agent.
“We knew it was a peptide,” she says, “but it was clearly different from anything that we knew about.” The pair attempted over the next several months to isolate and purify the molecule. Assuming that researchers elsewhere would be on the same trail, they worked with a sense of urgency.
They made good progress until March 30, 1988. On that day, Martine returned from a brief ski holiday, went into her office and found a paper on her desk, an article published in Nature by Japanese scientists from the University of Tsukuba. “Walter had put a note on a corner of the paper,” she recalls. “‘Here it is.’” The paper described endothelin, a vasoconstrictor of unmatched potency isolated from porcine endothelial cells.
It was a peptide of twenty-one amino acids. The Japanese group reported that it was unrelated to any known peptide family, but researchers at Tel Aviv University soon discovered that endothelin is homologous to cardiotoxic peptides found in the venom of the Israeli mole viper. Evolutionary studies later determined that the mammalian and reptilian molecules are derived from a common ancestral gene.
Clozel and Fischli had been scooped, but they weren’t discouraged. Fischli explains: “If we had been at a university, it would have been a disaster to work on the structure for a year and then have somebody else publish it. But we were working in a pharmaceutical environment. We said, ‘OK, fine. What we really want is an antagonist.’”
They carried on. In December 1988, they traveled to London for a scientific meeting on endothelin. They were able to report that human endothelin is identical in chemical composition and physical structure to the porcine molecule discovered by the Japanese. They had also identified cellular receptors for the peptide, first in human placental tissues, and then in smooth muscle tissues in the vasculature.
An endothelin inhibitor
They began screening. They looked for compounds that would prevent endothelin from binding to receptors. The discovery of an antagonist would enable them to determine whether and how the peptide was involved in processes of disease, and perhaps serve as a starting point for a drug development effort.
In short order, they found a simple compound with low affinity for the target receptors. They worked to modify and improve its pharmacological properties by chemical means. According to Clozel, Roche was supportive: “We were given a lot of freedom to do our research, and when we showed the potential of the compound, we were given more chemistry, biology, and pharmacology manpower to start a full discovery project.” Jean-Paul joined the effort, and he and Martine performed animal studies to elucidate the functioning of the endothelin system and analyze the effects of chemical interventions.
After three years, the group had an optimized antagonist. They called it bosentan. Based on what they had learned about the endothelin system, the Clozels proposed that bosentan could be used as a medication for several different cardiovascular problems, including congestive heart failure, subarachnoid hemorrhage (usually caused by the rupture of a cerebral aneurysm), essential hypertension, and pulmonary hypertension.
Roche elected to develop it as a therapy for heart failure. Researchers at the Mayo Clinic had flagged increased concentrations of endothelin in the blood of heart failure patients, so there was a compelling rationale for treating the condition with an inhibitor. The increase was not as pronounced in cases of hypertension and subarachnoid hemorrhage.
The drug was ushered directly into clinical trials. The size of the market, the correlation between levels of endothelin and degrees of heart failure, which strongly suggested a causal role for the peptide, and the efficacy shown by the inhibitor in preclinical studies combined to generate great expectations for a blockbuster product. But as happens often in the drug development process, bosentan’s forward progress came to an abrupt halt in Phase 3 testing.
Roche was testing two other promising therapies for congestive heart failure. Late stage clinical trials are enormously expensive; the company was reluctant to move forward with three drug candidates for the same indication. Upper management resolved to identify a lead compound and sideline the others. When Widmann’s clinicians recorded elevated liver enzymes in patients receiving bosentan, a sign of potentially serious side effects, one piece of the puzzle became, as Fischli says, “a no brainer.”
The project was cancelled. The research group argued that the trial doses were too high, that the liver issue wasn’t adequately understood, and that there were other indications to try, but to no avail. Although they still believed in the compound, they accepted the decision with equanimity. As Martine Clozel says, “It’s a big pharma company and they decided to go after heart failure. That’s how it is.”
But this isn’t where the bosentan story ends. The group had learned a lot about the endothelin system and the role that endothelin plays in a number of cardiovascular ailments, and a lot about the inhibitor designed to block the peptide and relax blood vessels. Bosentan was shelved, but its inventors knew it could be resurrected. Its career as a medicinal compound wasn’t over.
“It was not an adversarial relationship. He called me his most critical friend.”
“You don’t speak our language here”
The bosentan chapter was a disappointment, but by and large, Fischli, Widmann, and the Clozels were satisfied with their circumstances at Roche. They were drug hunters. Their colleagues were smart, skilled, experienced, and cooperative, and Roche provided resources that were more than sufficient to get the job done. They had established a productive research and development program, which they were eager to sustain and improve.
The environment became less congenial in the 1990s when Roche began to change. Widmann was the first to experience frustrations. As chairman of the company’s clinical R&D strategy committee, he had “internationalized” the department’s research units in Europe and the United States. Previously, Roche had worked with three different sets of guidelines for clinical research, one in German, another in French, and a third in English. It was awkward and difficult to manage. Widmann set out to harmonize and standardize operating procedures.
He designated English as the lingua franca for international clinical research. “The company’s headquarters were in Basel,” he explains, “but the money was made in the United States.” He spent a lot of time traveling to help regional managers implement new practices. The exercise was enlightening. He studied the rise of the contract research sector, and saw that Roche could take advantage of structural changes in the industry.
Widmann arranged to make a presentation to the top management at Roche: “I proposed what was, at the time, a novel way of managing international clinical research, one that would focus Roche on the core values of its business. Since the Quintiles of the world were doing great things in process-oriented clinical development, I thought that large pharmaceutical companies should concentrate on value-drivers — R&D and Phase 1 and 2 clinical studies.” He recommended letting contract research organizations manage large, unwieldy Phase 3 trials.
The idea was new and Widmann learned that Roche wasn’t ready for it: “I was told, ‘This is great, Tom. Thank you for your presentation, but you don’t speak our language here.’” Widmann had been excited by the possibilities, and was discouraged by the summary dismissal — although Henri Meier, the company’s CFO, requested the financial data he had presented, and years later acknowledged his foresight: “He told me, ‘Tom, that was a great presentation. I still use your slides.’”
Widmann’s discomfort increased when his mentor, Koch-Weser retired in 1992. The company recruited a Swiss professor, an eminent cardiologist, as a replacement. Widmann disagreed with his new boss on many operational issues — according to Widmann, the professor had as much interest in publishing scientific papers as he did in registering new drugs — and they had many heated exchanges. But the conversations were always respectful: “It was not an adversarial relationship. He called me his most critical friend.”
The professor left after two years. Widmann describes the next person in the position as an opposite personality, a rigid, process-oriented autocrat: “He basically said, ‘You work for me, so if I tell you the white wall is red, you must say it’s red, too.’” For Widmann, the relationship was extremely unpleasant and eventually intolerable. “I could absolutely no longer work with that person,” he says.
The company was afraid of losing Widmann to a competitor, so they pulled him out of the department, made him a consultant, and gave him an office in a different building. But by that point, in 1996, he says, “It was my wish either to join another pharmaceutical company or establish my own business. I decided to start a contract research organization.”
The company was called Hesperion. Widmann started it with his own capital and never needed to raise additional funds. “It took off like a rocket,” he says. “It immediately made lots of money.” As a principal of the company, Widmann served as a consultant to Roche, and managed research projects for Novartis.
“The frustrating consequence was it seemed that Roche no longer believed in medicinal chemistry.”
Restructuring
Walter Fischli and Jean-Paul and Martine Clozel wished their friend well without a thought of leaving the company themselves, but that soon changed. When Jürgen Drews retired as the company’s president of global R&D in 1997, his replacement, Jonathan Knowles, formerly director of research at Glaxo Wellcome Europe, introduced a new philosophy and undertook a thoroughgoing reorganization that impacted drug discovery and development at a fundamental level. The leaders of the cardiovascular research group had trouble accepting it.
They hadn’t been entirely in accord with the old regime. Drews had publicly proclaimed his belief that the future of drug discovery and development was in genomics, protein engineering, and the manufacture of biological macromolecules. Many of the company’s chemists were offended. “The frustrating consequence,” says Fischli, “was it seemed that Roche no longer believed in medicinal chemistry.” The effect on morale was deflationary.
The chemists worried that their programs would be neglected, their resources diminished, and their contributions devalued. But in the end, the practical effect was slight — medicinal chemistry was indispensable. And while Drews believed the new technologies would spur productivity and innovation, he didn’t expect them to displace scientific judgment and creativity.
In a book he published after leaving Roche, Drews lamented industry-wide attempts to systematize pharmaceutical R&D. He wrote, “Well-educated physicians are moved into the background in favor of project managers who, while they oversee the complex process of development, often know little about the medical and scientific aspects of the substances being developed under their supervision.” Fischli and the Clozels were afraid that Knowles’ proposed reorganization would inadvertently make the same kind of mistake.
Knowles intended to install a genomics-based drug development program to be carried out by autonomous “centers of excellence.” Each center would be dedicated to discovering and developing drugs in a designated therapeutic area — cardiology, oncology, neurology, and so on. All tasks, from the identification of genomic targets to the delivery of products to specialized marketing groups, would be contained within cross-functional, disease-focused development teams.
In every instance, the process would be tightly bound to a specific objective: meeting a predetermined medical need. Fischli and the Clozels considered the strategy wrong-headed. From their point of view, Knowles’ embrace of genomics was overenthusiastic. They believed that knowledge of genes would be useful, but that the vision of immediate returns was an illusion, a mirage. “Between studying the genome and making a drug,” says Jean-Paul, “there are enormous barriers.”
The cardiovascular team favored a different approach, one in which research would be focused, not on specific diseases, but rather on biological systems. Jean-Paul explains: “I thought we should have groups specialized in specific targets — enzymes or receptors. When you discover a drug that blocks an enzyme or stimulates a receptor, then you can test to find out where it is best used. It might be in treating cardiovascular disease, it might be in the central nervous system. You don’t know.”
Discretion and control
Fischli and the Clozels didn’t want preclinical and clinical pharmacology to be constrained by administratively fixed therapeutic objectives. Drug hunters, they insisted, needed freedom to travel wherever their experiments led them. They needed to be able to identify, assess, and exploit opportunities as they emerged in the course of inquiry.
The endothelin project was an instructive example. Roche’s cardiovascular group had learned that the molecular components of the endothelin system (the peptide, its biochemical precursors, processing enzymes, and cellular receptors) are produced in many different kinds of tissue and play important roles in not only chronic and acute cardiovascular conditions, but also pulmonary, renal, and connective tissue diseases (pulmonary fibrosis, diabetic nephropathy, and scleroderma, for example). Endothelin is also overexpressed in various cancers (including melanoma, breast cancer, and prostate cancer) and may contribute to tumor progression. It is involved in wound healing and neurotransmission, as well.
Jean-Paul Clozel sums up the lesson: “When you’re developing a compound, you can’t know what the ultimate benefit will be.” His negative reaction to Knowles’ new scheme was based on his long experience in physiological and pharmacological research. He says, “My first thought was, ‘We will miss too many things.’ I was afraid we would work for years and never discover anything.”
The core issue was control. Fischli and the Clozels wanted to retain it. It was their belief that productivity in drug discovery and development is built on cumulative advances in knowledge of biological systems, and that scientists, not managers, should have discretionary powers concerning the direction of their work.
Knowles, in contrast, wanted to direct research agendas from above. He wanted to make sure that the company’s scientists “understood what medicines they were trying to make and for whom.” In the 1990s, big pharma corporations began responding to spiraling costs and flagging productivity in research and development by exerting greater managerial control. Roche after Jürgen Drews was no exception.
The company’s cardiovascular research group hadn’t applauded all of Drews’ directives, but they appreciated his willingness to give scientists freedom to develop technological platforms and discover drugs. Knowles made it clear that he wanted to restrict that freedom. “There is this idea,” said Knowles, “that innovative science somehow leads to medicine. We feel strongly that innovation is very important, but it has to be in the context of what patients need.”
In his book, Drews attributed this orientation, with a hint of derision, to “businesspeople.” “For them,” he wrote, “a new medicine is ‘good’ only if it is directed toward an economically profitable indication. They do not readily get involved in search strategies with uncertain outcomes.” Drews conceded that firms cannot afford to follow every interesting lead, but said: “The secret of success does not require that the researcher always have his way.” The real danger, in his view, was that project managers “would assert their authority over too broad a front.”
On this point, Fischli and the Clozels sided with Drews. They felt that Knowles’ approach was contrary to what they had learned about making innovations. They tried to negotiate. They presented an alternative plan, but it was curtly rejected. Fischli comments: “Knowles’ problem was that he was coming from a much smaller place and had to take over a very complex research organization. He was probably overwhelmed, and not able to take the time to look over our proposal.”
Frustrated, the group appealed the decision to CEO Franz Humer. The cardiovascular group was highly regarded inside Roche. Fischli and the Clozels were among the company’s top researchers. They hoped that they had enough influence to win modifications to the new structure. According to Fischli, Humer was in favor of their counter-proposal, but refused to intervene: “He said, ‘I would like to help you, but the research director must make this decision.’ Finally, he said, ‘Look, Jonathan Knowles has decided.’”
“We created Actelion because we had knowledge and experience spanning from drug discovery to clinical development to product registration. We felt we were a powerful team.”
Actelion
According to Martine Clozel, the idea to set up an independent company “probably came from Jean-Paul.” Jean-Paul spoke about it with Tom Widmann, who expressed interest. “We began,” Widmann says, “by meeting in Jean-Paul and Martine’s kitchen or at my house in Basel. I was having great success with my clinical research organization, making good money, and learning precisely what needed to be done to establish a scalable infrastructure in Switzerland.”
Jean-Paul then invited Walter Fischli to join. Martine recalls, “We were surprised but very happy that Walter was enthusiastic about the idea.” All four believed that in a smaller, less structured environment they would have greater freedom to pursue opportunities in drug discovery, and that together, they possessed the expertise needed for success. “We created Actelion,” says Martine, “because we had knowledge and experience spanning from drug discovery to clinical development to product registration. We felt we were a powerful team.”
Jean-Paul made an appointment to meet with Humer, to discuss the possibility of Roche funding a spinout venture that would develop compounds already under investigation in the cardiovascular department. Humer was sympathetic, but declined to lend assistance. According to Clozel, he said, “‘If you want to be independent, you must take responsibility.’” He did, however, agree to waive non-competition clauses in the defectors’ contracts.
Fischli breathed easier. “They could have blocked us,” he says. “The four of us leaving meant that Roche would lose the strength of its cardiovascular program, but Humer’s blessing meant they would not proceed against us. That was very beneficial. The negative side was that we didn’t receive financial support.”
The entrepreneurs created the company (named Actelion from the beginning, for “acting on the endothelium”) in December 1997, and went off in search of startup capital. Tom Widmann led the financing effort and became Actelion’s de facto CEO. “Thomas understood how venture capital worked,” says Jean-Paul Clozel. ”He knew people.” Widmann drew up budgets for offices, labs, and operations. “We met together often as a founding group,” he says, “and formulated a plan to show to potential investors.” Jean-Paul accompanied Widmann to meetings, to help explain the opportunity.
At this stage, the entrepreneurs covered all business expenses out-of-pocket. They moved from Roche’s corporate headquarters in Basel to a 400 square-foot office in Allschwil. “We had some old furniture,” says Widmann, “something from my grandmother, something from Martine’s grandmother, a sofa, an old chair, and an old coffee machine from my kitchen. We had one large table. That’s where the general management committee sat, and the finance committee, and the clinical development committee. It was very exciting to put it all together.”
“People asked, ‘Are you crazy? You want to be a little Roche, or a little Ciba?’ It just wasn’t considered possible at that time.”
“A very anxious period”
The founders had many friends, acquaintances, and contacts in the pharmaceutical industry in Basel, but few understood the project. Fischli says, “At that time, people in Basel did not move from company to company. They just stayed at Roche, Ciba, or Sandoz until retirement. Going out to build a new company wasn’t yet on the horizon for most people. And we were going to make small molecules. People asked, ‘Are you crazy? You want to be a little Roche, or a little Ciba?’ It just wasn’t considered possible at that time.”
The entrepreneurs were undeterred. “We had neither a product nor an investor,” says Fischli, “yet we believed we could set up a small but powerful research-driven organization. We were experienced drug hunters with a clear vision of a new company that would rapidly discover and develop new products.”
But months passed without success in fundraising. The group had trouble convincing investors that Actelion could compete with the likes of Roche and Novartis. Says Jean-Paul Clozel, “When I look back at the business plan, it looks a little bit naïve. I’m not sure today that I would invest in Actelion.”
He began to have doubts: “It was a very anxious period. It was frightening. We had given up well-paid jobs at Roche. We went from receiving good salaries every month to having absolutely zero income. We were spending our personal savings, and we were still without investors.” The Clozels had purchased a home in France. They sold it, and put all of their money into Actelion. “I remember very long sleepless nights,” says Jean-Paul. “I began to think that maybe I had made the biggest mistake of my life.
During this dry spell, the group sought advice from André Mueller, then a consultant at Deloitte & Touche. Mueller began his career in corporate development and finance in Basel, first at Ciba-Geigy, then at Sandoz. He took a leap into biotechnology when he joined the Biogen startup in Geneva in the late 1970s, and served as the firm’s first CFO. Four years later, he became a founding partner of Genevest, the first Swiss venture capital organization.
As Jean-Paul Clozel remembers it, Mueller immediately recognized Actelion’s potential: “He said ‘Look, it’s a fantastic project. I want to be part of it.’” He joined as CFO and took part in the capital search. Mueller also proposed inviting Rob Cawthorn to chair Actelion’s board of directors.
Cawthorn had spent seventeen years as an executive in Pfizer’s international division before joining Biogen as president in late 1979. In 1982, Cawthorn took over Rorer, a Philadelphia specialty pharmaceutical maker, as CEO. He upgraded the company’s R&D capabilities, negotiated a merger with Rhône-Poulenc in 1990, and served as chairman of the consolidated multinational until 1996.
Mueller and Cawthorn brought experience in finance and general management that the founders lacked. The executive luster rounded out the proposition. In May of 1998, the company received its first funds — 18 million Swiss francs (US$12 million) — from some of Europe’s top investment firms, including Atlas Ventures, Sofinnova, TechnoVenture Management, 3i, and Genevest. In April, Actelion hired its first scientists and began building out laboratories.
Walter Fischli took on the job of designing and equipping the facilities, because, he says, “I was the one who was most bound to the bench.” As soon as the labs were operational, he and Martine Clozel initiated drug discovery and development projects. All of their work at Roche had been left behind, including a large collection of endothelin inhibitors, but, as Jean-Paul Clozel says, “There were other drugs to discover.”
“We wanted to sell our products everywhere in the world. We were global almost from day one.”
Tracleer
The startup received a huge boost in November when Roche decided to shut down its cardiovascular research program. A suite of endothelin receptor antagonists invented by Walter Fischli and Martine Clozel became available for licensing.
Actelion acquired tezosentan, an intravenous therapy poised to enter clinical trials as a treatment for acute heart failure. A year later, the entrepreneurs retrieved bosentan. Roche had suspended Phase 3 testing of the compound as a therapy for congestive heart failure. Actelion intended to resume that investigation, while recruiting patients suffering from pulmonary arterial hypertension for a Phase 2 trial.
Pulmonary arterial hypertension (PAH) is a debilitating disease. Vascular resistance in the lungs wears out the heart muscle. Patients experience chest pain, shortness of breath, dizziness, and fatigue. The condition leads eventually to complete failure of the right ventricle. In 1998, the three-year survival rate was below 50 percent.
The condition is rare and the market small (around 80,000 patients worldwide), but the opportunity was large. The medical need was wholly unmet. Says Fischli, “Everybody dreams of finding an effective drug for heart failure, but there was little out there that could help PAH patients.” Unexplained and potentially damaging effects on liver function had sidelined bosentan at Roche, but Actelion’s leadership group believed they were benign, and they expected that regulators would deem the risks acceptable if the compound could help PAH patients.
The company fast-tracked the project. Martine Clozel recalls, “We came back from Roche after signing the deal to our tiny office in Allschwil. Within minutes I was on the phone with one of the world’s leading specialists in pulmonary hypertension.”
The founders went back to investors for funds to conduct clinical trials. In March 1999, a second financing round closed. This time, the company raised 48 million francs (US$34 million). The company hired a chief of clinical development, took a controlling interest in Widmann’s CRO, Hesperion, which served thereafter as the company’s clinical arm, and began to enroll patients in trials.
Early in 2000, Mueller suggested that the company should go public. “When he said that,’” Jean-Paul Clozel remembers, “I had to ask: ‘I‘m sorry, Andre, but what is an IPO?’ I hadn’t gone to business school. I really didn’t know.” Nevertheless, Clozel was selected by the leadership group to succeed Widmann as CEO and become the public face of the company in the run-up to the offering. Widmann became head of corporate operations.
Clozel credits Cawthorn with helping him through the role transition, and thereafter: “Rob was a fantastic chairman. He always pushed for innovation. He really helped me, and played a key role in building this business.” On April 6, 2000, Actelion made its debut on the Swiss stock exchange. The sale raised 246.4 million Swiss francs (US$136.25 million) to pay for drug discovery and development, clinical research, and planned manufacturing and marketing operations.
Later in the year, the US Food and Drug Administration (FDA) designated bosentan as an orphan drug. The ruling provided tax credits for clinical testing expenditures, an accelerated regulatory review, and seven years of market exclusivity. Early in 2001, the compound received the same designation from the European Medicines Agency (EMA).
In anticipation of regulatory approval, Actelion set up U.S. and European subsidiaries to market the drug, and in subsequent years, went into Japan, Canada, and Australia. “We wanted to sell our products everywhere in the world,” says Jean-Paul Clozel, “and we wanted to realize their full value within Actelion, so we created our own marketing apparatus. We were global almost from day one.”
The company absorbed a shock in April 2001 when tezosentan failed in a pivotal Phase 3 trial for acute heart failure. The value of the company’s shares dropped more than 60 percent in a single day, but the bosentan project was nearing the finish line. The FDA approved sales of the drug in November 2001. Six months later, it was endorsed by the EMA.
The compound went to market with the brand name Tracleer. Physicians were grateful to have a medicine to give to patients with PAH. Sales quickly gained momentum, and revenues exceeded forecasts. In February 2002, bosentan’s Phase 3 heart failure trial concluded with a negative result, but the company had already achieved its sustaining success. Less than five years from its founding, Actelion was an independent, fully integrated biopharmaceutical company.
Showdown
Actelion had been propelled by research the founding group had initiated at Roche in the 1980s. Much of the company’s value derived from its deep knowledge of the endothelin system and countless experiments with chemical inhibitors. In the end, Actelion was able to make a novel therapeutic intervention.
To foster continued innovation, the founders sought to minimize organizational impediments — silos, information bottlenecks, and layers of bureaucracy. Interdisciplinary communication and collaboration were key elements. Martine Clozel says, “We made the system very light, very open, transparent, and natural. This is the beauty of Actelion. I think we have been very efficient.”
Of course, as the operation expanded and grew more complex, coordination became more difficult and the company was obliged to impose new ordering mechanisms — hierarchies, chains of command, reporting procedures, governing committees, and so on. Walter Fischli comments: “You have to integrate certain structures while trying to remain as entrepreneurial as possible. It’s these two extremes that you have to balance, and just like any company in such a situation, we are constantly thinking of new ways to do that.”
The company remained committed to exploration. It sought to ensure that as the organization evolved, preclinical research agendas would not become subject to demands from the company’s sales and marketing groups. As physiologist/CEO Jean-Paul Clozel told the press in 2000, Actelion intended to focus its research on molecular targets “in which we have significant biological insight.” The underlying assumption was that the company’s chances for success in drug discovery would improve as its scientific teams gained better understandings of the ways in which ligands and receptors are implicated in biological processes.
And so Actelion carried on. Biopharmaceutical innovation is an expensive, risky business, and as the company escorted drug candidates on long, arduous journeys from discovery to final, decisive clinical trials, it endured costly failures.
The members of Team Actelion had long considered such outcomes inevitable facts of life in discovery-dependent science and industry. Says Jean-Paul Clozel, “If you want to be innovative, you have to fail.” Shareholders were patient until January 2011, when clinical evidence of side effects forced Actelion to abandon its highly anticipated sleep drug. Elliott Advisors then embarked on its campaign to remove Cawthorn and Clozel from the board of directors and pave the way for a sale.
In effect, Elliott called for a referendum on Actelion’s culture, its research strategy, and its philosophy of risk. The hedge fund’s nominees for board membership argued that Actelion had spent far too much money on unfocused basic research. Clozel insisted that the company was learning how to make wise choices in drug development, and improving its chances to create innovative first-in-class therapeutic products for unmet medical needs.
Clozel pointed out that the company had two promising therapies for PAH making their final approach to regulatory approval — a compound called macitentan, an endothelin inhibitor with an improved safety and efficacy profile, and selexipag, a prostacyclin receptor agonist that, in his view, had the makings of a breakthrough blockbuster drug.
Clozel and Cawthorn also recruited former GlaxoSmithKline CEO and chairman J.P. Garnier and former Schering-Plough CFO Robert Bertolini as candidates for board membership, to lend their expertise and to counter Elliott’s attempt to stack the deck. The company announced a plan to make Garnier chairman of the board when Cawthorn retired the following year at age seventy-five.
On May 5, 2011, Actelion’s annual general meeting was held in Allschwil. Sixty percent of the company’s shareholders were on hand. The proceedings were reportedly loud and raucous. When the ballots on board composition were counted, the activist faction was defeated. Garnier and Bertolini joined; none of Elliott’s candidates were approved. It was a resounding vote of confidence in Team Actelion’s approach to biopharmaceutical innovation.
Clozel reiterated the company’s philosophy: “What’s on the balance sheet is not as important as a culture of innovation and being able to bring something to patients which then creates value for everyone. The market and shareholders don’t always understand this, but it’s the only way for our company.”
Elliott Advisors began selling its stake in Actelion at the end of September 2011. A little over two years later, the FDA authorized sales of a new drug from the company — macitentan, under the brand name Opsumit — for the treatment of PAH. The approval virtually guaranteed the near term stability of Actelion’s PAH franchise.
“I consider drug discovery and innovation an art not a science. What we try to do at Actelion is choose the best people. We want to work with the Picassos of drug discovery.”
Innovation Picassos
According to Jean-Paul Clozel, there is no secret formula for biopharmaceutical innovation. He insists that innovation cannot be planned or managed — the best one can do is to encourage it. “I consider drug discovery and innovation an art,” he says, “not a science. Nobody could manage Picasso, nobody could tell him how to paint. What you can do for artists, and for scientists, is to give them the tools and the environments they need. You can give Picasso a nice house in the sun on the French Riviera and let him create.”
“What we try to do at Actelion is choose the best people. We want to work with the Picassos of drug discovery. We give them the canvas, the palette, the colors. We provide the best tools and we hope for a masterpiece. Of course, not every painting will be a masterpiece, not even for Picasso. It is the same in innovation. I think we have a great chance of success, but it’s never certain, of course. But that’s the beauty of this industry.”
Actelion’s independence depends crucially on sustained innovation in drug discovery and development. Repeat performances are difficult, but Clozel has faith in his organization. “I am not a serial entrepreneur,” he says, “I am a long-term entrepreneur. I act as if Actelion will be here for two hundred years.”
In June 2014, Actelion announced unequivocally positive results in a Phase 3 trial of Selexipag, a drug with the potential to become another blockbuster. Reuters reported on the buzz in the pharmaceutical industry: Actelion was once again the subject of widespread speculation, once again rumored to be an acquisition target. In the Swiss business newspaper Finanz und Wirtschaft, Jean-Paul Clozel sounded his usual refrain: “Our aim is to make progress with the company independently. This means we are not for sale.”
— Mark Jones
Illustration by Grégoire Vion
Photos courtesy of Actelion
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