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Ditching Big Drugmakers for Biotech Brings Leukemia Boon

Fifty-five, pensionless and assuming he’d have to work until he died, Roger Ulrich had a decision to make. After two decades in the pharmaceutical industry, his position at Merck & Co. (MRK) had been phased out.

Instead of joining another big drug company, where he could expect a steady income and relative job security, Ulrich took a leap. He teamed with two partners, raised seed funding and founded a biotechnology company, making a bet on an industry characterized by risk.

Seven years later, his gamble has paid off. Ulrich, with partners Mike Gallatin and Neill Giese, sold their company, Calistoga Pharmaceuticals, in a deal worth as much as $600 million. A trial of their chronic lymphocytic leukemia drug, idelalisib, was so positive that it was stopped early so that patients taking the control treatment could have the option of switching over. It’s now one of a group of drugs expected to change the face of treating that cancer.

“When I was starting Calistoga, a lot of my colleagues who were with big pharma thought it was a really bad idea,” Ulrich said by phone. “They told me I was nuts.”

Ulrich’s story, and that of idelalisib, are increasingly familiar in the world of drug development, where smaller, more risk-friendly biotechnology companies are supplying more new medicines, said Julian Adams, head of research and development at cancer-drug maker Infinity Pharmaceuticals Inc. (INFI) Idelalisib is a drug that almost wasn’t, after being shelved by another company and targeting a biological pathway nobody was sure would work.

New Drugs

It’s now one of at least five new medicines nearing or on the market that researchers say may change chronic lymphocytic leukemia from a slow march to death to a manageable chronic disease. A cancer of the blood and bone marrow, CLL is the second-most common form of leukemia among adults; about 15,680 people in the U.S. will be diagnosed with it this year, according to estimates from the National Cancer Institute. Life expectancy can range from months to more than 10 years.

The new treatments, from Gilead Sciences Inc. (GILD), Pharmacyclics Inc. (PCYC), Infinity, Roche Holding AG (ROG) and others, will be a focus of the annual American Society of Hematology meeting beginning Dec. 7 in New Orleans. They’re collectively expected to generate as much as $9 billion in annual revenue by 2020, according to analysts’ estimates compiled by Bloomberg.

Treatments Needed

The revenue projections reflect the need for new treatments, as well as their high pricetags. Currently available therapies are able to slow the disease, but they don’t stop it, said John Byrd, director of the hematology division at Ohio State University. Further, they come with the side effects of severe chemotherapies, and many CLL patients -- a predominantly older population, with median age of diagnosis of 70 years -- are unable to tolerate them.

“For about the last six months, I’ve told every new patient I’ve seen that we have agents right now that are close to being approved that really have the potential to change the landscape of CLL,” Byrd said by phone. “We might not cure it, but it could be treated like we treat high blood pressure or cholesterol. If you stay on the medicine, your disease will be controlled and you’re going to die from something else.”

Idelalisib wasn’t always destined to treat cancer. When Ulrich came to it with his partners, a company called Icos Corp. had been considering the compound for asthma. The drug ultimately got shelved as Icos directed resources elsewhere, including to marketing its erectile dysfunction drug, Cialis.

‘Devil’s Number’

It was Gallatin, who was working with venture fund Frazier Healthcare after retiring from leading Icos’s scientific research, who suggested pulling it off the shelf. Frazier provided seed funding and the group licensed the compound, which, at the time, had the unfortunate handle “666” -- “the devil’s number,” Gallatin recalled.

It faced other challenges than a cursed name. The drug’s mechanism of action caused some potential investors to scratch their heads, according to Ulrich. Like other medicines from Infinity, Pharmacyclics and Johnson & Johnson (JNJ), idelalisib is a targeted therapy, going after a pathway important in the signaling of B-cells, part of the immune system. It aims at a target called PI3-kinase delta, unproven at the time to be important in cancer.

Giese, a drug industry veteran with expertise in blood cancers, was convinced the compound would work in B-cell malignancies, Ulrich said. They approached more than 20 venture capitalists, ultimately winning over enough to raise $26 million in their first round of financing, he said.

First Response

A year and a half later, the first cancer patient responded to the drug, at that point called CAL-101. More successes followed. A few weeks before Christmas in 2008, Calistoga was in a team meeting when Albert Yu, the company’s chief medical officer, got a phone call about a patient, Gallatin said.

“This lady had failed multiple courses of the standard care, and she wasn’t going to make it to Christmas,” Gallatin said by phone. In a trial of CAL-101, “she had a remarkable response. He came back with that news and there wasn’t a dry eye in the room.”

Three years later, in April 2011, Calistoga was acquired by Foster City, California-based Gilead, for $375 million, with the potential for $225 million more based on future goals. In October of this year, Gilead stopped a late-stage study of the medicine after patients taking it with another drug, Rituxan, survived longer without their cancer progressing than those taking Rituxan alone. Gilead’s stock jumped the most in 11 months. Further data will be reported at the hematology meeting.

New Hope

The number of potential new treatments for CLL is giving hope to patients with the disease, said Neil Matthews, the administrator of an online patient support group, who was diagnosed with small lymphocytic lymphoma five years ago at age 53 that has progressed to CLL.

Many patients are told to “watch and wait,” instead of treating their cancer with available therapies now, and there is cautious optimism, he said, that those days may be over. Still, the extent the new therapies will benefit all patients, and when the right time is to take them, aren’t necessarily clear yet, he said.

“Many of us right now are grappling with the question of whether to delay treatment in the hope of gaining access to a safer, better treatment, but that brings the risk of an adverse outcome,” Matthews wrote by e-mail. “Treatment too early or too late both put patients at increased risk, which is why access to an experienced specialist is essential.”

Biotech Success

Ulrich, after his gamble in leaving big pharma, joins a group of other drug developers finding success in CLL. Robert W. Duggan, the chief executive officer of Sunnyvale, California-based Pharmacyclics, became a billionaire on the rise of his company’s shares; they’re up 734 percent in the last two years, giving Pharmacyclics a market valuation of more than $9 billion.

Infinity, based in Cambridge, Massachusetts, is in earlier stages of developing its CLL drug; its shares have risen more than 50 percent in the last two years, though the stock has fallen in 2013.

“About five years ago, the combined approvals at the FDA from biotech surpassed combined approvals from pharma,” Infinity’s Adams said, citing data from Annual Reports in Medicinal Chemistry 2009. “That’s stayed steady and I think it’ll never go back.”

Pharmacyclics’s drug, ibrutinib, was cleared Nov. 13 by the U.S. Food and Drug Administration for mantle cell lymphoma, and a decision is expected on the medicine in CLL by the end of February. Analysts estimate it will draw $4.8 billion in annual sales in 2020 for Pharmacyclics, the highest expectation for drugs among the group approaching the market. Pharmacyclics is developing the drug with New Brunswick, New Jersey-based J&J.

Analysts estimate $951.8 million in 2017 sales for Gilead’s idelalisib, and $308 million in revenue for Infinity’s IPI-145 by 2019.

“There’s no question that all these new drugs are going to change the way we treat CLL,” Lee Greenberger, chief scientific officer of the Leukemia & Lymphoma Society, said by phone. “The terrain is changing.”

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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