On The Hot Seat At Biogen

How CEO Jim Mullen managed a drug crisis after alarming news broke

James C. Mullen, the 46-year-old chief executive of Biogen Idec Inc. (BIIB ), has a degree in chemical engineering -- and the demeanor to match. He's an unruffled, just-the-facts-ma'am kind of guy. So when he first learned that Tysabri, his company's breakthrough drug for multiple sclerosis (MS), might be responsible for a deadly brain infection, he moved quickly but calmly to find out what happened and to make sure it didn't happen again. And he did all this while sticking to a long-scheduled commitment to his four children: a family vacation in Florida.

Mullen received the first reports about the two sick patients on Feb. 18, in the company's small conference room in Cambridge, Mass. He had no reason to expect such dire news. Just one day earlier, Biogen and Elan Corp. (ELN ), the co-developer of Tysabri, had released results from a two-year clinical trial showing that the drug was safe and highly effective. Tysabri had received an expedited approval by the Food & Drug Administration last November, and analysts were predicting that the drug would hit $2 billion in annual sales in short order.


The turn in fortunes was extreme and rapid. Dr. Burt A. Adelman, Biogen's executive vice-president for research and development, told Mullen within an hour of learning the news that at least one and possibly two patients in the ongoing clinical trial of Tysabri had developed an extremely rare brain disease -- progressive multifocal leukoencephalopathy (PML). "The mere fact that this bounced immediately to my office showed how serious the situation was," says Mullen. He quickly issued orders: Alert the FDA at once, marshal all known facts, and inform every doctor involved in the trial. With a methodical investigation in place and responsibilities delegated, Mullen took off for Florida.

None of Biogen's executives was surprised that Mullen left the premises, given his dedication to his family. But colleagues also noted that it wasn't much of a vacation, since he was constantly in touch by phone. "He was very calm, as always," says Craig E. Schneier, executive vice-president for human resources. "He instituted the appropriate procedures. We never felt any sense of panic." Still, Schneier acknowledges that "I instantly felt better once the boss was back," on Feb. 25. By then, the first patient diagnosed with PML had died; three days later, Biogen, in consultation with the FDA, decided to suspend sales of Tysabri.

The drug's removal left doctors, employees, and patients in shock. PML is extremely rare and, although Biogen had been monitoring trial patients for infections, Mullen says they never anticipated this disease. The disappointment within Biogen was enormous. "I've seen people weeping in the halls," says Schneier. Even so, once the diagnosis was confirmed, Mullen felt there was only one responsible action. "Here was a risk that we didn't understand, and patients had other options. Stopping the drug was the right thing to do."

Some investors, however, criticized the company for pulling the drug too precipitously, and Biogen's shares plunged 42.6%, to $38.65, the day the drug was withdrawn. A few days later a shareholder lawsuit was filed, charging that Biogen had withheld information about the risks associated with Tysabri. Mullen says he never considered the legal ramifications -- "the first time I got aggravated was when I was talking to too many lawyers" -- and is at peace with his decision. "We knew we would get criticized any way we [decided to] go." Investors expect dramatic shifts in stock prices, he says; the important thing is "no more patients were harmed."


Amid these concerns, Mullen is also preparing for an expected Securities & Exchange Commission investigation into several large stock sales by Biogen executives shortly before the company learned of the sick patients.

Despite all this, Mullen thinks investors have overreacted. "People paint this setback like the company is going out of business. But in 2004 we were profitable without Tysabri," earning $45 million on revenues of $2.2 billion. In his 16 years at Biogen, costly development programs for drugs to treat AIDS, rheumatoid arthritis, and hepatitis B have all flopped, and that was before the company had any profits to report. "Those setbacks were more threatening to the core of the business," says Mullen.

He didn't initially choose to work in such a risky industry. After graduating from Rensselaer Polytechnic Institute in 1980, he took a job at the former Smithkline. "I figured it would be a challenge," he says. Nine years on, he decided it wasn't so challenging and joined Biogen, then a tiny startup. Mullen distinguished himself by taking on an assignment far afield of engineering: In 1996 he moved to Paris to build Biogen's European sales operation. "I didn't know what I was doing," he says. "That was a blast."

Mullen returned to Cambridge to take over as CEO in 2000, and three years later merged Biogen with Idec Pharmaceuticals Inc., turning two struggling companies into the world's No. 3 biotech. Besides Tysabri, Biogen sells four other drugs, including Avonex, the best-selling MS treatment.

Tysabri was meant to take Biogen to a new level of profitability. The drug marks a novel approach to treating MS by preventing rogue immune system cells from entering the brain and attacking the myelin sheaths that protect nerve fibers. In clinical trials, Tysabri proved twice as effective as older interferon-based drugs, and had far fewer side effects.

Those results prompted some 5,000 patients to take Tysabri in the four months it was available, and the company is getting 1,000 calls a day from MS sufferers eager to continue their treatment. But no one knows when, if, or in what form Tysabri will be available again. Biogen is meeting with medical experts and reviewing the records of all 3,000 patients in its clinical trials, a process that could take months. Analysts predict that the drug could return by 2006, but with very strong warnings that may scare off patients. Mullen refuses to make any such predictions. Like the engineer he is, he's waiting for the facts.

By Catherine Arnst in Cambridge, Mass.

    Before it's here, it's on the Bloomberg Terminal.