How a Side Effect Might Turn Into Success
By WILLIAM J. HOLSTEIN
ARRYTOWN, N.Y. -- LEONARD S. SCHLEIFER, the son of a sweater manufacturer who grew up in the Rego Park section of Queens, was on his way to becoming a distinguished scientist. But after he earned an M.D. and a Ph.D. and started a research career in 1984 at Cornell University, he became fascinated with the biotechnology revolution. Though he had never held what he jokingly calls a "real job," he decided to build a company that delivered better drugs to people.
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So in 1988, he assembled a group of Nobel Prize winners and other researchers and created Regeneron Pharmaceuticals in a former Union Carbide laboratory here.
Dr. Schleifer, 49, is now on the brink of one of the biggest victories in the biotechnology race — or one of the most humiliating defeats. His company has consumed hundreds of millions of dollars in investors' capital and has never had a profitable quarter. It developed a protein in the early 1990's to treat amyotrophic lateral sclerosis, known as Lou Gehrig's disease, but patients lost too much weight as a side effect. The company halted trials in 1993.
But it turned out that a genetically re-engineered version of the failed protein, known as ciliary neurotrophic factor, is very effective in helping people lose unwanted weight. That has led to an anti-obesity drug called Axokine, which is in the third and most important stage of clinical trials. Just as Pfizer came upon Viagra by accident, Regeneron discovered Axokine with more than a little serendipity.
In terms of the number of people affected, obesity "could be the largest market in the pharmaceutical industry," Dr. Schleifer said in an interview, displaying the optimism that has sustained an unprofitable company for 14 years.
Last year Dr. David Satcher, then the surgeon general, said the problem of overweight and obese Americans had reached "epidemic proportions," killing 300,000 people a year. His report said 40 million Americans were just plain obese, meaning at least 20 to 30 percent over their ideal weight.
Dr. Schleifer, who walks regularly to keep the middle-age pounds off, traces this "obesification of America" to the increased availability of high-fat, high-calorie food and a decline in physical activity. "This is a disease, not a cosmetic problem," he said.
Scientists have made strides recently in understanding the complex communications between the brain and the digestive system. A study in the New England Journal of Medicine recently described how a hormone called ghrelin makes people hungry.
AXOKINE, injected just under the skin, sends a message to the brain's appetite control center in the hypothalamus, making people feel full sooner than they would otherwise. It also prevents the brain from sending alarm signals in the form of hormones when less food is consumed. At the recommended dosages, Dr. Schleifer said, there are no side effects like nausea; people simply stop eating as much.
An important research topic in the current stage of clinical trials, which runs for two years and involves 2,000 patients in 65 locations, is whether people keep the weight off after they stop taking Axokine. So far, Dr. Schleifer said, his researchers have followed patients for as long as nine months after treatment and have found that they have not regained lost weight.
The trials are scheduled to be completed around year-end, which means Axokine would enter the Food and Drug Administration approval process next year. To anticipate F.D.A. questions, Regeneron is conducting other studies to see how Axokine reduces obesity in various types of patients.
The only other anti-obesity drug in late stages of testing is made by Sanofi-Synthélabo of France. Amgen's work on the compound leptin has proved disappointing.
The F.D.A. has been wary of genetically modified medicines lately. ImClone Systems, for instance, tried for quick approval of its cancer drug but was rejected.
Small wonder, then, that Dr. Schleifer's outlook brightened when an aide walked in during an interview to inform him that Biogen had just won an F.D.A. panel's approval for its psoriasis drug, Amevive, a genetically engineered medicine. "Wow," he said. "This really gives the sector a psychological boost."
Some critics say Dr. Schleifer is aggressive and brash. Other people say he has yet to prove himself.
"His reputation suffers from the problem many C.E.O.'s face when they have a product failure," said Michael G. King Jr., managing director at Robertson Stephens, who still maintains a buy rating on the stock.
Dr. Schleifer acknowledges that he has always been known for his persistence. When he was dating his future wife, Harriet, her father remarked, "If you throw him out the door, you'd better lock the windows because he'll come back in that way."
He may have received some of that persistence from his father, who was born to poor immigrants in the Williamsburg section of Brooklyn and went to Cornell in 1929 on scholarships with just $5 in his pocket. Leonard Schleifer had a solid middle-class upbringing in Queens, where he had jobs shoveling show, delivering prescription drugs, bagging groceries and parking cars for a clothing store. "I am cursed and blessed with eternal optimism," he said.
His tenacity has helped sustain the confidence of big investors like Julian Baker, a managing partner of Baker Brothers Investments, which has invested more than $100 million in Regeneron since 1998. "Len is incredibly honest and very driven," Mr. Baker said. "He really tells you what he thinks in a business world where people are reluctant to do that."
Regeneron, which went public in 1991, had its darkest time after it pulled its Lou Gehrig's disease drug. The stock fell, and by late 1994, some people in the company thought Regeneron would collapse. The stock is now at $16.52.
The setback helps explain why the biotechnology revolution has taken so long: the first waves of people who tried to develop genetic medicines were too research-oriented. They did not know how to identify a need in the marketplace and then build a company. "That was a huge part of the learning curve," Dr. Schleifer acknowledged. "We didn't realize that the science part, while difficult, is only the first step."
To fix the problem, Dr. Schleifer wanted to recruit Dr. P. Roy Vagelos, the legendary Merck chairman, who was stepping down in November 1994. Dr. Vagelos was one of Dr. Schleifer's heroes, although they had never met. "I just called him up," Dr. Schleifer recalls. The Nobel laureates on his board who knew Dr. Vagelos — Alfred G. Gilman, Michael S. Brown and Joseph L. Goldstein — also called him.
Dr. Vagelos was skeptical about becoming involved in a tiny company he had never heard of. But after spending half a day at Regeneron, exploring its research, Dr. Vagelos agreed to become chairman in January 1995. "Len is the C.E.O. — there's no question about that," Dr. Vagelos said from his office in Bedminister, N.J. "But we discuss almost everything. He has never made a decision I've disagreed with."
After Dr. Vagelos joined the company, the most important task was focusing it on realistic targets. Treating progressive neurological diseases is one of the most difficult challenges in medicine because it is so hard to measure how different treatments work. "It was an uphill battle," Dr. Vagelos said.
Under his prodding, Regeneron scientists refocused their efforts on developing Axokine into an anti-obesity treatment.
In the case of Axokine, Regeneron created a protein that enters a cell through its "receptor" to shape its behavior. But company researchers also know how to create molecules that hunt proteins in the bloodstream that cause rheumatoid arthritis, allergies, asthma and solid cancerous tumors. The molecules then trap the malevolent proteins, and together are eliminated from the body. By year-end, Regeneron will be in clinical trials with other drugs that attack these four disorders. "We're not a one-trick show," Dr. Schleifer said.
With that potentially rich product pipeline, Dr. Schleifer wants to build a company bigger than Genentech or Amgen and to do it without major allies — an ambition of staggering proportions. He has already bought a factory in Rensselaer, N.Y., near Albany, to prepare for manufacturing and hired a marketing executive from Bristol-Myers Squibb, with some recruiting help from Dr. Vagelos.
Dr. Schleifer intends to build a sales force and says he is confident that the $400 million in cash he has will be enough to get his first product to market.
Is he suffering delusions of grandeur? "Certainly, some people will say that the chance of building another giant rarely happens," he said. Out of thousands of budding biotechnology companies, only a relative handful have clearly succeeded. "We expect to be bigger" than them, he said. "I absolutely, fervently believe that."
Dr. Vagelos said he is also convinced that Regeneron is headed for greatness. With its wealth of scientific talent, he said, "This company cannot ultimately fail." |
