Henri Termeer on Startups, Drug Prices, Getting Older (Part 1)
Henri Termeer could have easily faded away into obscurity a couple years ago. The biotech pioneer could have relaxed at his oceanside home in Maine, played a little golf. Or, if he wanted, he could have made loads of money at a private equity firm.
Certainly, he didn’t need to mess around with hungry little biotech startups nobody has ever heard of.
At 65, Termeer had more money than anyone could reasonably spend, thanks to the more than $100 million fortune he amassed at Cambridge, MA-based Genzyme. His place as one of the key mover/shakers in biotech history was secure. He will always be known as the guy who figured out how to build a great business by making drugs for rare diseases. Legions of his protégés had moved on to lead other companies, greatly extending his influence. Genzyme grew to 10,000 employees under Termeer’s watch.
While he could have stopped there, Termeer also had reason to write a different closing act to his career. The final days at Genzyme had taken a toll. The company he built and loved was caught flat-footed in a manufacturing crisis in Allston, MA, that erupted in June 2009. That disaster created shortages of Genzyme drugs that people depended on, sparking an angry backlash among patients and shareholders who saw irresponsible, or arrogant, corporate behavior. The crisis prompted the FDA to levy a $175 million fine for the manufacturing deficiencies it saw at Genzyme. Competitors exploited the opening. Genzyme’s sagging stock price made it vulnerable to an unsolicited takeover, which ended in a $20 billion sale to Sanofi in February 2011.
Two years later, Termeer sounds like a man who’s come to terms with the Allston disaster, and is mapping out a second career. He’s landed on a bunch of boards, allowing him to provide advice and insight, without having to shoulder all the day-to-day operating burdens of a CEO. He’s on the boards of MIT, Massachusetts General Hospital, and Harvard Medical School, and gets his biotech fix on the boards of Verastem (NASDAQ: VSTM), Abiomed (NASDAQ: ABMD), and Aveo Oncology (NASDAQ: AVEO). More recently, he joined the board of privately held Moderna Therapeutics, shortly after it inked a $240 million upfront cash partnership with AstraZeneca. He’s advised a few startups, and gave away $10 million to Massachusetts General Hospital to start a personalized medicine initiative.
The guy clearly still has a lot of energy, and isn’t ready to walk away from biotech.
Last week, I spoke with Termeer by phone for a wide-ranging interview about his latest startup pursuits, and thoughts on some of the biggest issues facing the industry. Here’s the first part of the conversation. Look for the second half here tomorrow, as Termeer reflects more specifically on the turmoil at the end of his run at Genzyme.
Xconomy: You joined the board of Cambridge, MA-based Moderna Therapeutics a couple weeks ago, right after it got a huge deal done with AstraZeneca for its messenger RNA drug technology with $240 million in upfront cash. What attracted you to this company?
Henri Termeer: I was familiar with the company because I have worked with Stephane [Bancel, the CEO of Moderna] before. From the beginning, a year and half or two years ago when I got introduced to it, it was a very fascinating possibility. It kept on proving itself. It’s a different way to introduce proteins into the body through synthetic RNA. For me, it was about the people involved, the possibilities, the early-stage nature of it, the significant financial muscle behind it, and the local part. I do a lot of things in Cambridge. I can really be involved without having to sit on planes.
X: I saw you spoke to the Boston Globe a couple months ago, and you said something about how you’re free now and can get a lot more done. What do you mean by that?
HT: When you run a company, and build a company, you have many balls in the air. It’s similar to what I have going on currently. But you have the structure and discipline of a company when you’re responsible for it. It ties you down. You just have to do the work. You have to do the quarterly things. You are very intimately involved with any transactions. It’s an enormous, 24/7 kind of activity. Genzyme was continuously in motion. It was intense for 30 years.
I always had interest in the outside world. I was part of the Federal Reserve, and MGH and MIT and other places. But I did much less. I’d go to board meetings and would run some meetings, but it was different. I didn’t have any time then. Now, I have all the time, and I don’t need to do the work myself. I can work with people, advise them on what would be wise to do, make introductions, make combinations, create things, and move them forward. It’s similar to Genzyme in the sense that I’m doing many things. But there’s much more freedom now.
I absolutely loved Genzyme. I love to think back about the time I was there. I’m in contact with numerous Genzyme people. Some of them now run companies, and some of them are still at Genzyme. I’m very happy to see that Sanofi has done well for them. They are getting paid back on the investment they made.
But I love what I do now. It’s very different. It’s a much more free-flowing kind of environment. I think I can be quite helpful in certain situations.
X: You’re 66, or 67 now, right? What do you want to accomplish in this phase of your career?
HT: I’m 67. But I feel 66 (laughs).
X: OK (laughs), but do you think you’ll be doing this for another 15 years or so? What do you want to accomplish in that time?
HT: My mother is 99. She obviously needs a little more attention, but she’s still very, very wise and still very, very involved and very decisive about what she wants to do in life. She has no plans to go anyplace. I take that as an example. I can do a LOT of things, still. What I hope I’ll be able to help with is executing on investments, and bringing new therapies to the marketplace.
There’s never been a more exciting time than the current time.
We are moving into a time when patients, because of personalized medicine, will start to become involved. Before you had this big black box that they’d look at 20 years ago, of pharma companies, or biotech companies, that hardly knew what they were doing. It’s moved on to a much more consumer-friendly environment.
It creates a new environment. A new environment for funding, and for how you build a company in a much more fragmented world. I think that’s a very exciting thing. We can build many more new companies that bring therapies to the market, rather than broad-based products of the past.
X: How do you decide which projects to get involved with?
HT: At Genzyme, we worked on many things. A few things we worked on worked. Some didn’t work, but we gained some knowledge. It’s often a matter where you can say, “I know about some part of a disease, a specific disease, and I know some things to try,” and then you organize to try them.
I see young people, scientists, from all over the world who observed the Genzyme experience and they want to know, “Is this good enough? Is this the right thing to try?” We have the most interesting conversations. Very often, it seems a hard thing to do. Because the invention or the therapy often isn’t really delivering the kind of power you need. Rare diseases, which are so popular right now, deserve to be popular if we come up with stuff that works. Stuff that’s palliative, or just on the surface—only helps a little bit—isn’t really therapeutic in a real sense. That’s not good enough. That’s not where we should focus our attention and energy. We should go for stuff that really makes a difference for the patient, in which they go from having a rare genetic disease to having a future again, a life again. The Genzyme experience gave us some insights into how that works.
X: You said earlier this is the best time ever to be doing this kind of work. But there are also a lot of challenges out there for entrepreneurs. Venture capital is going through a significant decline. Who will support early-stage innovation? Who will support young entrepreneurs like you were 30 years ago?
HT: Well, 30 years ago, there weren’t many people supporting it, either. We are now in a moment where the same people who voted politicians in who doubled the NIH budget have agreed not to let it grow anymore. That will not grow, because of all the circumstances you and I know about. But the interest of the taxpayer who supported the politician in the past who voted to double the NIH budget—the interest is still there. It has grown. The taxpayer is an individual. And the individual has a family, and has certain conditions. They know their risks around certain conditions, whatever it is—cancer, heart disease, genetic disease. In the next 20 years, we’ll see movement in which the patient will become much more involved.
There are already some good examples today where you can see it happening. The biggest one is cystic fibrosis. The CF Foundation has done a fantastic job of organizing the patient population, raising money, allocating the money in new ways to entrepreneurial activities that are directed to figuring out a better mode of therapy. They’ve made real progress, and they continue to get more resources to make more progress.
That is one example. We’re seeing it now in Duchenne Muscular Dystrophy. It becomes possible now, when we talk about much more specific diseases, and we can communicate with patients, because of technology, because of the Internet. We can find them, they can find each other, and they can get organized. We are not there yet with every disease, not even close.
X: But Henri, the public also has some serious grievances with the pharmaceutical and biotech industry. You know them all. A lot of people are upset about high drug prices, high insurance premiums, costs going up. Not to mention all the various scandals that come out every other week—off-label marketing, hiding of negative clinical trial data, conflicted relationships between pharma companies and clinical research investigators, for a few examples. What do you think the industry can do to repair the public trust, and build stronger relationships like you’re referring to?
HT: You do precisely what I just mentioned. The complaint about healthcare cost is universal. It’s not dependent on the amount of money being spent. The complaint in the U.K.—where they spend a much smaller amount, about 8 percent of GDP as compared to 16-17 percent in the U.S.—is the same. Everywhere, we spend a lot of money, and we still die. People die of terrible diseases. We have diseases where people are 30, 40, 50 years old and in the middle of their careers, and they become immobilized, or have to take care of their Alzheimer’s victim parents. It creates an anger. We say as a society that we make all these investments in technology, and yet we still have all these terrible things. The progress that we can make will allow this industry to be strong.
It’s not a matter of being popular, it’s a matter of being nurtured. There’s a lot of risk involved, and a lot of study involved, and a lot of trial and error involved in the R&D stage. As a society, we need to really help it along. As we see more and more successes, it will allow this industry to say we deserve the kind of support that will allow us to continue.
X: So are you saying the industry needs to earn back the public trust by delivering more good drugs?
HT: Yes. That’s the only way to do it. Europe, of course, has arrived at this point of anger earlier than we have in the U.S. because they have more nationalized, monopolistic buyers. But Genzyme was just as successful, or more successful, in Europe on certain things than we were in the U.S. It was because people accepted that if you have something like the products we have, they will be high-cost. They wanted them, because they had the efficacy.
It doesn’t mean that questions don’t get asked continuously. Any buyer has the right to ask the question, “Are you giving me good value for what I’m paying?” That will never stop. It’s completely OK. The industry will be able to stand up to that challenge, as long as we can say, “Yes, we do provide good value, come and have a look at the data.”
It’s not a popularity contest. This is something where societies are working out their priorities. We just need to deliver.
X: Do you think some companies have overreached a bit on pricing of their drugs? You took a lot of heat for a lot of years over your pricing at Genzyme. But now you see lots of other companies coming out with similarly very high-priced drugs. They may or may not offer the same kind of value. Is the industry running the risk of going too far on price?
HT: If you are not delivering value, you will lose. You cannot win. It’s only a matter of time. At Genzyme, we had records of making sure we delivered value. We were able to sustain it everywhere, in Europe, in Brazil, in Russia. We invited the question. I’d go personally there, and be challenged many times. I thought that was completely OK, completely normal for any society to deal with this question. Any company afraid of that, that feels they can’t quite make the case, ought to be careful. You won’t be able to sustain the product. I can’t generically make a statement that the industry is going this way, but there are cases—which you and I both know—where you say, “Wow, that’s a tough case to make” for a given drug.
X: Drug R&D seems to be stuck in a rut, where there’s too much time, money, and risk involved to be sustainable in many therapeutic categories. Do you see any technology coming along, or any real change in the system, that will make drug R&D more efficient?
HT: Yes, absolutely. You can see it happening. The timelines of some of the highly specific care products are shortened. The FDA is putting in different activities to make these kinds of products go through faster. The Vertex drug went through very fast for cystic fibrosis. The statistics are completely different. There was good evidence, very good evidence, both of a willingness to act, and a willingness to look at a diagnostic component. But we are in the early stages of it.
We are not in a rut. That’s the wrong way to look at it. In my vocabulary, a rut means that you don’t know quite where to go. We are in a transition. It’s moving from many decades of broad-based wellness drugs that have done extremely well. Things like Lipitor, and so on. The cash is now moving to much more specific disease situations.
New companies have a chance there. Large companies don’t have a natural competitive advantage here. They have the money. That’s a big advantage. But they don’t have the organizational advantage. They [Big Pharma] are applying—and I think AstraZeneca is a good example—they are applying many of their resources to the outside and reducing their inside R&D investment.