The pharmaceutical business is not kind to entrepreneurs. It takes more than a decade and hundreds of millions of dollars in venture capital to get from cool idea to marketed drug
A $440,000-a-year treatment for rare diseases turned Alexion Pharmaceuticals into biotech’s biggest entrepreneurial success story and the health care system’s biggest paradox. It also landed them the No. 2 slot on Forbes’ annual list of The World’s Most Innovative Companies
The pharmaceutical business is not kind to entrepreneurs. It takes more than a decade and hundreds of millions of dollars in venture capital to get from cool idea to marketed drug, which is why the founders of Amgen, Genentech and Gilead were gone by the time those companies became big successes. But nestled near a pastoral local farm 40 minutes outside of New Haven, Connecticut, is the exception to that rule. There, an unassuming, self-deprecating doctor named Leonard Bell still serves as chief executive of Alexion Pharmaceuticals, the company he founded after he quit his medical professorship at Yale 20 years ago.
His salvation: Soliris, launched in 2007 to treat a rare cause of anaemia. In 2012, that drug will do more than $1.1 billion in revenue, with Wall Street expecting that figure to double over the next three years. Its current net margin: 22 percent. Alexion shares are up 600 percent since the drug’s approval—outperforming tech darlings such as Apple and Salesforce.com over the same period. The company sports a market capitalisation of $20 billion, and Bell’s stake is worth $179 million. These kinds of statistics underscore why little-known Alexion hit No. 2 in Forbes’ annual ranking of the most innovative companies.
They also point to a paradox in the health care system. Alexion, with 1,100 employees, is a multinational pharmaceutical company with offices in more than 30 countries—but only a few thousand patients the whole world over. Soliris is a blockbuster—and Alexion a juggernaut—because of the drug’s astronomical price: $440,000 per patient per year. Yet, the drug is so effective that private insurers and national health agencies, even sticklers like the United Kingdom and Australia, are willing to pay.
“We focus on patients with absolutely devastating disorders that are also either lethal or life-threatening,” says Bell. “They’re also very, very rare, so they get no attention from anybody. They’re left with no hope, and we only go forward not with treatments that will make it a little bit better but with treatments that will transform their lives.”
In the US, the Affordable Care Act makes ultra-niche drugs “commercially possible by increasing the number of people covered by insurance”, says Biotechnology Stock Research’s David Miller. “Current and future developers of orphan drugs will strongly benefit from the law.”
Hillmen and Rother tried to convince Bell. No dice. The stumbling block was whether such a rare disease could ever be profitable. Hillmen also says there were doubts that he could even deliver enough patients for a clinical trial. Bell says his primary consideration was safety: He was afraid that if the drug worked and the regimen was then stopped, the red blood cells would start instantly being destroyed more catastrophically than normal. Bell says Hillmen is “a physician I would trust my life with” but that he was “so invested in the care of his patients” that he may have wanted to move too fast.
(This story appears in the 26 October, 2012 issue of Forbes India. To visit our Archives, click here.)