Millennium: A Pharma Star Is Born?
Every year, on Oct. 31, Mark J. Levin lets down his hair. The 50-year-old chief executive of Millennium Pharmaceuticals Inc. in Cambridge, Mass., throws a howling Halloween bash--and usually shows up in drag. One year, he wore turquoise silk pasha pants from I Dream of Jeannie. Another year, he came as a French maid in a tight black dress and white apron. Levin is creating an environment where "people feel they can be outrageous," he says. "When senior people in a company let loose and do strange things, it allows other people to be themselves."
At Millennium, letting loose has become a necessity. The scientists and doctors who make up most of its staff of 1,300 are putting in long days, sometimes 14 hours at a stretch, trying to spin insights about genes into useful drugs. This feverish intensity seems to infect everyone on the payroll, from Levin down to the white-coated research assistants in Millennium's gene-sequencing facility. And everyone at Millennium seems to accept--almost as a religious creed--that the medical profession is at a historic turning point: the dawn of gene-based medicine.
KNOWLEDGE SPRINGBOARD. Their faith got a lift this summer, when scientists around the world completed the first, rough draft of the human genome--the operating system for all of human biology. According to its fans and detractors alike, Millennium is one of a handful of companies that have a firm grasp on this new body of information. With luck, Millennium may be the first company to use its knowledge as a springboard to vault into the ranks of the world's top pharmaceutical companies.
But the company also faces enormous challenges. Despite a $12 billion market cap and a stock price nearing $128 as of Sept. 11, Millennium has yet to show sales or profits from any actual drugs. Its first marketable products will come from a company Millennium acquired last year. Drugs from its own pipeline won't hit the shelves until 2003, at the earliest.
What's more, when it comes to the new field of gene-based medicines, "there are still a lot of questions that haven't been answered," says Matthew Geller, analyst at CIBC World Markets. A gene may play a well-established role in a disease. But a drug based on that gene may still fail because it has side-effects, or doesn't address other causes of the disease. Millennium must also keep an eye on fast-moving competitors. Human Genome Sciences Inc. of Rockville, Md., for one, has filed patents on thousands of genes and is developing innovative laboratory techniques of its own. Another Rockville company, Celera Genomics Corp., has signed up some powerful pharmaceutical partners.
Despite these caveats, Millennium has already executed some extraordinary maneuvers. Barely seven years old, Millennium has six drugs in clinical trials but no actual products on the market. Nonetheless, it has managed to sock away about $800 million in the bank--the bulk of it from equity investments and technology licensing deals it has cut with Pfizer, Bristol-Myers Squibb, Bayer, and nearly every other major drugmaker. In exchange for Millennium's cutting-edge research, these behemoths have agreed to pay obscene amounts of money. The total, over seven years, comes to about $1.8 billion--a sum that is unmatched in the history of biotech.
More than the license revenue, however, it's the structure of the deals that has analysts buzzing. In late June, Millennium brokered a landmark agreement with Aventis, which was formed from the merger of Hoechst Marion Roussel and Rhone Poulenc Rohr. The German giant consented to merge its pipeline of inflammation drugs with Millennium's and split the profits 50-50. "That kind of deal is unprecedented in the drug industry," says Douglas Lind, vice-president and analyst with Morgan Stanley Dean Witter. "Usually pharmaceutical companies cherry-pick the best candidate drugs from biotechs. In this case, Aventis partnered one of its top disease areas."
What is it about Millennium that has top-name drug companies such as Aventis clamoring for a piece of its future? Analysts say the crux is an unusual--and unproven--drug development program. Millennium is known for its expertise in genomics, the science of identifying genes and how they function in humans and other organisms. But the company has also integrated a basket of drug-discovery technologies--ranging from bioengineered lab animals to high-speed robotic testing to software for mining giant gene databases.
PASSING IT ON. Using these tools, approximately 300-plus M.D.s and PhD biologists--many of them lured from nearby Massachusetts Institute of Technology and Harvard University--seek to identify the most relevant disease-causing genes and proteins, so that they can develop drugs that interact with them. Because this process hinges on the knowledge and hunches of smart scientists, Millennium's information systems are designed to tag interesting developments in each lab and broadcast them to the broader community of researchers. Last year, for example, Millennium's neurobiologists found an intriguing gene in the brain. While the team continued its research, the system alerted the metabolic group, which found that the gene was also involved in weight management. This group is now using the information to screen for obesity drugs.
"What Millennium has done is to industrialize the process," says Errol B. de Souza, senior vice-president in charge of U.S. research and development at Aventis. Adds Kurt Von Emster, manager of the Franklin Biotechnology fund: "Millennium has set itself up to cover all the bases--it has an arm in therapeutics, an arm in genomics, and an arm in predictive medicine. Any one of those could be successful, and it would bring success to the company."
It's about time somebody came up with a better way to create new medicines. It currently takes 12 to 15 years and half a billion dollars to get a drug from the laboratory bench to the clinic. About 75% of these costs arise because so many of today's medicines prove toxic or ineffective during human testing. Scientists at Millennium believe they can improve those numbers using their genomics technology. Currently, modern medicines are designed against only about 400 known targets, meaning genes or proteins that appear to be implicated in disease. But with the completion of the Human Genome Project, scientists suddenly have thousands more at their disposal.
Only a limited number of these will ever be turned into drugs. And Millennium scientists have spent the past seven years refining techniques to sift for the best prospects. They do this by thoroughly analyzing the biological underpinnings of conditions such as obesity or inflammation, and then using that information to identify where the critical intervention points might be. Dr. Robert Tepper, Millennium's chief science officer, says the company will soon begin moving dozens of drug candidates into animal and human trials. Obesity and cancer drugs are bound to be on the front burner. Ultimately, Chief Technology Officer Michael R. Pavia says, the company should be able to develop novel--and safer--drugs for about $250 million in six to seven years. That would be a 100% increase in productivity over today's methods. Millennium is striving to achieve this goal in just four years.
Two years ago, the company was able to sell its target-finding abilities to the king of aspirin, Germany's Bayer. For $465 million, Bayer got a 14% equity stake and 225 targets over a five-year period. So far, Millennium has delivered on its promise, shunting dozens of candidate molecules to its partner. And Bayer is not the only company to boast "Millennium Inside." Indianapolis-based Eli Lilly & Co. has collaborated with Millennium since 1995 in the arena of heart disease. This year alone, Millennium and Lilly scientists have published data on three novel targets, including a molecule called ACE2 that plays a critical role in regulating blood pressure in mice. Impressed by the quality of Millennium's research, Lilly extended the five-year collaboration this past June.
READY TO GO. Last November, Bristol-Myers Squibb Co. (BMS) also signed up, for a payment of $32 million. In this case, the goal is to generate genomic data that can be used to predict whether or not individual patients will respond to new cancer drugs that are in development at BMS--a strategy called pharmacogenomics. Nicholas Dracopoli, executive director of pharmacogenomics at BMS, notes that the typical cancer drug only works in 30% to 40% of the population, and scientists have yet to understand the molecular differences that determine why one person responds and another doesn't. Working with Millennium's predictive medicine group, Dracopoli hopes to identify the genetic markers that will predict a drug's success or failure. He says BMS chose Millennium for this venture "because it was the only company ready to go now. All the others overhyped their genomics technology."
But to meet Levin's goals and become "the biopharmaceutical company of the future," Millennium must evolve beyond genomics. It must learn how to design and synthesize the chemical compounds that facilitate or block gene activity. Toward that end, in 1997 the company purchased another Cambridge (Mass.) company, ChemGenics Pharmaceuticals Inc. This past summer, Millennium also scooped up Cambridge Discovery Chemistry, a biotech in Cambridge, England. Together, the two acquisitions give Millennium more than 200 trained chemists capable of designing drugs that bind specifically to the biological targets being discovered in-house.
Levin knows that he needs marketable products now. So last year, the company shelled out $750 million to acquire LeukoSite, a deal that gave them an experienced clinical research team and six molecules in human tests for diseases such as stroke and colon cancer. Before the end of this year, Millennium hopes to have two products on the market: a treatment called Campath for leukemia and a diagnostic test, developed in-house, for aggressive skin cancers. Just last month, the company filed a $1 billion shelf registration with the Securities & Exchange Commission. Levin won't say what the money is for, but given the company's aggressive growth strategy, it seems likely that another major acquisition is in the works.
BIOTECH BELIEFS. Right from the start, Millennium was able to attract medical and business people with a sense of mission. Chief Business Officer Steven H. Holtzman, for example, sought a job that might transcend the known limits of medicine. "I watched my father and grandfather die of congestive heart failure," he says. "Now, I look at my eight-year-old son, Bryan, and think if we pull this off, my little guy won't ever have to get this disease. That's a good reason to get up in the morning." Levin himself incessantly preaches the company's mantra: "We believe that nothing is impossible." Lest someone forget, those words are also printed on every employee's mouse pad.
In fact, his own sense of mission long preceded the founding of Millennium. The son of a St. Louis shoe-store owner, Levin earned a master's in biochemical engineering at hometown Washington University and was quickly on the move. In 1976, he took an engineering job at Eli Lilly in Indianapolis. Next, he moved to Eden, N.C., to head up process control for Miller Brewing Co. For a while, he sold computers for Foxborough Co. in the same state, and in 1981, he jumped ship to join one of his customers--a tiny startup called Genentech Inc. Here, says Levin, "I saw how important it was to hire the best people and create a culture where those people could do great things."
Six years later, Levin switched jobs again to become a venture capitalist for the Mayfield fund. During his seven-year stint, he helped found 10 biotechnology companies, but Millennium was his magnum opus. The idea of gene-based medicines was in the air, and Levin sensed that it would be huge.
Given Levin's engineering background, it's little wonder so much emphasis is placed on improving the productivity of the drug discovery process at Millennium. At one factory, 32 gene-sequencing machines whir 24 hours a day, seven days a week, spewing out millions of DNA sequences. Meanwhile, every month a robot named Zeus manufactures 5,000 microarrays--sheets of nylon spotted with minuscule amounts of 10,000 different pieces of DNA--which company scientists will later probe for disease-causing genes.
Will this process take Millennium to the top? Alex Hittle, a biotech analyst for A.G. Edwards & Sons Inc. isn't entirely convinced. "Let's face it," he says. "To get a drug on the market you still have to do a clinical trial, and that takes a certain amount of time."
But Levin is trying to squeeze time out of that area of drug development, too. In 1997, he hired Kenneth J. Conway to direct Millennium's predictive medicine unit, MPMx. This is the diagnostics and pharmacogenomics arm of Millennium, which focuses on developing biological markers that can be used to forecast the severity of a person's disease and whether the patient will respond to a given drug. "It's about finding the right drug for the right patient," says Levin. Do that, he says, and you can design smaller clinical trials with better patient outcomes. And ultimately, that should save valuable time and money.
It's still the early days for this biotech venture. For Levin, the main challenge will be to manage an organization that has ballooned from 30 to 1,300 in such a short period of time. Before becoming a full-fledged pharmaceutical company, Millennium will have to show that it has the science and the market knowhow to bring one of its own products to market. That's no easy task, but then again, it's a new millennium, and Millennium Pharmaceuticals is a new kind of company.
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