The State of Biotechnology, According to Biogen Idec CEO Jim Mullen

8/16/07Follow @bbuderi

It was a sunny, steamy morning last week when I elevatored upstairs at Biogen Idec’s Kendall Square headquarters to interview CEO James Mullen—and I sat right down in the hot seat.

Literally. Mullen awaited in a big-windowed conference room; I perched with my back to the sun and instantly started baking. Mullen smiled. Did the CEO enjoying seeing a reporter sweat? Nah, couldn’t be. He quickly lowered the shades, and we got down to business.

Biogen is on a nice little roll. It just reported a big jump in second-quarter income and profits. An FDA advisory panel recently recommended that its multiple sclerosis drug Tysabri, co-developed with Elan, be approved for treating Crohn’s disease. This news, coupled with Biogen’s buyback of about $3 billion worth of its shares in early July, has the company’s stock (NASDAQ: BIIB) trading at right around $59 a share, flirting with a two-year high.

That’s the good news. The not-so-good news is that Biogen, like every major biotech firm (and big Pharma as well) these days, has pipeline concerns. Also like other firms, Biogen has some serious policy headaches to deal with right now—patent reform and generic biotech drugs chief among them (more on these later).

All of which means that Mullen had a lot to say. Because we covered so much ground, I’m going to break this into two parts. Today I’ll explore Mullen’s take on the biotech industry, its evolution, and its future. Tomorrow’s story will examine Biogen’s multi-tiered strategy for managing innovation. Here’s a hint: “Luck,” he quips, “is not part of the strategic plan.”

But that’s for tomorrow. Today, let’s start with Mullen’s version of Biotech 101.

The 1960s saw “a huge explosion of innovation in Pharma,” Mullen says, and that expansion lasted close to 30 years. Beginning in the late 70s and early 80s, as he puts it, “biotech pokes its nose up out of the ground.” The upstart field gets traction in the early to mid-80s, and the first important products (think Genentech’s recombinant human growth hormone, Protropin, or Amgen’s antianemia treatment Epogen) arrive soon thereafter.

The 90s brought the genome sequencing wars. Many people miss the true importance of that, Mullen says. “Probably the more important thing, more important than the human genome, was all the technology developed around it—which allowed the inquisition of biology in a way that had never been done before,” he says.

“So, for biotechnology, we’re in this interesting place,” says Mullen. “If you look for 30 years cumulatively, we’ve not made money as an industry. There are some spectacular successes, and there’s a huge amount of value that’s been created with the technology.” But true, sustained, profit-making? Not there.

That, says Mullen, is about to change. “We are catching up to where the Pharmas were maybe 20 years ago,” he says, adding, “The discoveries and developments over the next 20 years will be stunning.” He then rattles off a litany of fields such as human drugs, animal pharmaceuticals, agricultural products, and energy (such as corn to ethanol), where biotech will be making ever-greater contributions.

Mullen’s predictions echo those made at the birth of the industry—including in Biogen’s original business plan back in 1978, he points out. The company housed its research headquarters in a two-story brick building that also served as a manufacturing plant. There, Biogen kept bins full of corn stover (the leaves and stalks left over after corn is harvested), from which it sought to make ethanol—an idea that proved a bit ahead of its time. “Not sure anybody did the math too carefully on that back then,” Mullen says.

If Biogen was in the dark about the true costs of making fuel from corn, it was equally short on knowledge about regulatory procedures, management of manufacturing processes, and other critical issues needed to run a world-class business. When Mullen arrived in 1989, he says, there was so much to do to bring Biogen up to the standards practiced by big Pharma “that you almost didn’t know where to start.”

Those days are, of course, long gone. Biotech firms now have to be incredibly sophisticated, particularly in Washington, where debates are raging over patent reform, the pricing of drugs, user fees, generics, and more. Government and legislation are always issues, says Mullen. “What’s unusual is that a number of these issues have all come to a boiling point all at the same time.”

Here’s Mullen’s take on the big two, patent reform and biogenerics.

Patent reform
At the heart of the issue is a patent-reform bill, currently making its way through Congressional committees and well-described in the Boston Globe, that many see as favoring the interests of the software industry over those of biotech, in part by limiting damages in patent-infringement cases. “Given the short product cycles in the software industry, it’s understandable that they’d want those changes. But the changes would have unintended and negative consequences for discovering and developing new cures and treatments for patients,” Mullen says. “If patent reform lowers the bar—by weakening the penalties—for competitors to infringe upon a valid patent, investors will not finance the lengthy and expensive development of biotech products.”

That, of course, is the biotech line, and there’s plenty of room for disagreement. To his credit, Mullen doesn’t see the issue as cut-and-dried. “I’m more of a pragmatist on that,” he says. “I think that they’ve got some legitimate issues that have to be sorted through. Personally I think we missed the really central point, which is having a highly functioning Patent and Trade Office.” He favors giving the office more resources to do its job.

Biogenerics
To what degree should generic drugmakers be allowed to put out versions of biotech drugs—and what regulatory hoops should they have to jump through to do so? Here’s a piece Mullen wrote last April for the Wall Street Journal that partly deals with this complicated issue.

With bills aimed at creating a pathway for biogenerics currently wending their way through the House and Senate, Mullen wants the government to think this issue through very carefully before acting. “We have long supported the creation of a pathway for follow-on biologics,” he says, using a term for biogenerics preferred by many industry insiders. However, he believes that such a pathway must recognize “that biologics are vastly more complex” than the small molecule drugs typically made by big Pharma.

Mullen is particularly concerned about data exclusivity. This term refers to the period of time would-be generics makers are prevented from using the original firm’s safety and effectiveness data as evidence supporting approval of a knockoff drug. Like BIO (the Biotechnology Industry Organization), Mullen wants 14 years of data exclusivity, instead of the five years enjoyed by makers of small-molecule drugs. You can dive deeper into this issue here. BIO’s core argument is that such an added safeguard is necessary because patent protection is inherently weaker for biotech drugs than for small-molecule drugs, and that a longer period of data exclusivity will help level the playing field. “If we think we’re the knowledge economy and the innovation economy, that only works if there’s a way to protect the innovation,” Mullen says.

While the patent reform and generics debates play out in Washington, there’s one more big issue facing biotech companies that we barely touched on in our interview—the convergence of biotech and Big Pharma. In the past, large drugmakers have made small-molecule drugs, whereas biotech firms have produced protein-based drugs. Now, in the hunt to keep pipelines full, the two are converging.

“So there are all these questions,” Mullen says. “What’s the consolidation? Should Pharma be buying biotech? Or are they the dinosaurs?”

More tomorrow on Mullen’s plans to make sure Biogen itself doesn’t become a dinosaur.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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  • Doug Wilson

    I take great pride in telling people that I worked for Jim Mullen when he was 28. It wasn’t the easiest 2 years of my career, but it has propelled my career. Thanks, Jim. I wish you every success.

  • Paula Looker

    Mr. Mullen
    I have MS and take Avonex. I am very troubled by the ever-increasing cost of this drug. IT is now $1800 per month. There will come a time when I cannot afford the product once I am off private insurance. I am 61 years old. How do you defend the cost? Biogen records huge profits and yet Avonex is so expensive to those who really can benefit from the therapy.