Pharmacylic’s ‘miracle cure’: A cancer drug

In In The News by Barbara Jacoby

By: Jeremy Owens and Lisa M. Krieger


The small biotech company Pharmacyclics was on the ropes, teetering toward bankruptcy. Its one big product had flopped. Its top chemist, co-founders and entire board of directors resigned, frustrated and disappointed. Its new CEO knew almost nothing about biotech. And then the recession hit.

All it had left was a single chemical, bought for chump change because no one else wanted it.

The tale of the company’s triumph from that near-death experience is a stunning example of all that is tumultuous about biotech, an industry where noble pursuits to cure diseases collide with financial pressures to strike it rich — and only a fraction of a fraction ever succeed. Pharmacyclics’ little-known chemical, now a drug called Imbruvica, sent company shares soaring from $2 to $261.25 in one of the largest acquisitions in Silicon Valley history, when pharma giant AbbVie bought the Sunnyvale firm for $21 billion earlier this year.

Even more profoundly, the drug that saved Pharmacyclics also is aiding once-desperate patients, helping to achieve the founders’ original goal: beating back cancer.

“One of the things you learn fighting cancer is never give up. If something’s important, you keep fighting,” said co-founder Jonathan Sessler, a cancer survivor himself. “This is a company that kept fighting.”

Personal mission

Sessler and co-founder Richard Miller did not have grandiose dreams of a billion-dollar biotechnology company when they first met at Stanford University in the late 1970s. They just wanted Sessler to survive. While studying for a graduate degree in chemistry, Sessler had suffered a relapse of Hodgkin’s disease, a type of lymphoma.

Miller was an oncologist and researcher at Stanford who already was a highly regarded entrepreneur after helping to found the successful San Diego-based IDEC Pharmaceuticals, maker of the billion-dollar drug Rituxan for treating non-Hodgkin’s lymphoma.

Together, they helped Sessler defeat cancer — and wanted to help others, finding molecules that could be turned into new therapeutic drugs.

“I followed him as his doctor for many years, and he was a very bright young chemist,” Miller said “He was inquisitive, and he would always ask me, ‘Richard, I’ve got this molecule …’ and I would say, ‘That’s good, that’s cool, but you need to make your molecule do this, then do that.’ ”

After Sessler settled into an academic and research position at the University of Texas, he developed molecules that could disrupt cancer cells and keep them from forming or spreading, which Miller thought could be the basis of a new company.

In 1991, the two men co-founded Pharmacyclics, with financing from Kleiner Perkins. An initial public offering in 1995 brought in more than $25 million, money that helped fund drug development over the next decade.

They pinned their hopes on a drug called Xcytrin, which showed promise in disrupting cancer cells, keeping them from spreading to the brain and making them more sensitive to radiation. The market is large: An estimated half of the 1.3 million people diagnosed with cancer every year are treated with radiation. To conduct major trials to earn federal Food and Drug Administration approval, Pharmacyclics needed more cash.

Bob Duggan arrived as a major new investor.

Investing in a cure

An astute businessman who knew nothing about drug-hunting, Duggan had built a successful career by investing in children’s embroidery sets, fresh-baked cookies, European advertising billboards and robotics. He had been looking for a new project in 2004 with his windfall from the merger of his surgical-robots company, Computer Motion, to Intuitive Surgical. Like Miller and Sessler, he had a personal interest, witnessing his son’s lost battle against brain cancer.

“I thought, ‘If there’s ever something I can do in that area that would make a difference …’ ” Duggan said.

But it soon became clear that Xcytrin wasn’t going to make that difference. As Duggan built his stake in the company and pushed for the drug to be tested on a variety of solid tumors, including brain tumors, Xcytrin kept getting denied by the FDA. Meanwhile, other approaches from competitors caught and surpassed it. While the final set of trials showed that patients receiving Xcytrin along with radiation lived longer than those who did not, the few months it gave was deemed statistically insignificant by the FDA.

Frustrated and disappointed, the men conceded by late 2007 that Xcytrin would never measure up.

“We worked it up as completely and thoroughly as you possibly could, but bottom line, it didn’t work well enough,” Miller said. “I knew that dog wouldn’t hunt.”

That’s a common fate for chemicals, no matter how promising. Only 12 percent of drug candidates that enter clinical testing are eventually approved for use by patients, according to Andrew Powaleny of the Pharmaceutical Research and Manufacturers of America. Some agents, such as those for Alzheimer’s, have a 99.6 percent failure rate. On average, it takes at least 10 years and more than $2.6 billion to bring a chemical from the research pipeline to patients.

But for Pharmacyclics, it was catastrophic. Like many small biotech companies, it had staked all its hopes and resources on this one product.

Wall Street sent shares in Pharmacyclics plummeting to $2. Then, when it seemed that things couldn’t possibly get worse, the recession hit, jeopardizing the chances for new investment.

Duggan, by then a director, decided to exercise a tender offer that pushed his stake to nearly a quarter of the company, and he took the reins as CEO.

He blamed Xcytrin’s failure on poor study design and continued to push the drug, thinking one more trial would turn the FDA’s head. And he demanded changes to the board that Miller didn’t want to see.

In turn, Miller criticized Duggan’s qualifications. “He has no medical background,” Miller said. “I have a lot of respect for him, but he doesn’t know anything about science.

“The bottom line is, sometimes nature is cruel,” he added. “Sometimes something is good, but just not good enough.”

With tensions growing, Miller left the company with more than 1.5 million stock options and a one-year severance package, including his $438,000 salary. Then he went to start another biotech company. Sessler went, too. So did the entire board of directors, en masse. “I didn’t want to stay in that environment,” Miller said.

But he left behind a gift — one of the most lucrative Plan B’s in Silicon Valley history.

The break

In 2006, as hopes for Xcytrin were fading, Miller got a tip that Celera Genomics was looking to sell off some molecules in its research pipeline. He visited the company, based in Alameda, famed for its role in sequencing the human genome, to talk about purchasing a few.

One particular chemical caught his eye.

“They sort of glossed over it,” Miller recalled. “But I knew from my background that it was potentially very important.”

While Miller saw promise, Celera saw problems. The chemical inhibits a protein called Bruton’s tyrosine kinase — essential to immune system B cells. So it seemed likely to do more harm than good.

In animal trials, it had been lackluster. While most drugs pass through the system, this chemical is known as “covalent.” It forges a lasting bond and shuts down the protein permanently.

The pharma industry traditionally has steered clear of covalent chemicals, said Lee Greenberger, chief scientific officer of the Leukemia & Lymphoma Society and an expert in blood cancer research and pharmaceutical development. “It is tried with great trepidation.”

But Miller, an expert in blood cancers, knew something that Celera didn’t: In B-cell cancers, this protein is hyperactive — and by inhibiting it, cancer progression might be delayed. And the chemical doesn’t completely knock out the protein, so normal B cells can survive, Greenberger said.

The chemical had been discovered decades earlier, through lab work funded by the society, Greenberger said. But it had languished because its target — the B-cell protein — wasn’t thought to be a big driver of disease.

Miller worked out a deal to buy several of Celera’s pipeline candidates, including this B-cell prospect, for a cost of about $6 million, with $2 million in cash. Then he recruited about a half-dozen Celera scientists to improve the chemical and better understand its mechanism.

This kind of deal-making is a routine part of biotech drug development, with hundreds of such negotiations made every year, said Dave Thomas, senior director of industry research and analysis at the Washington, D.C.-based Biotechnology Industry Organization.

“There could be a whole variety of reasons why Celera ended up selling it,” Greenberger added. Perhaps the problem was the tepid lab data and risk of toxicity. Or maybe they weren’t interested in the small market for drugs for blood cancer — compared with, say, breast or colon cancer. Or maybe the company just had too many competing programs.

“It was a sleeper,” its potential unrecognized, Greenberger said.

Many drugs are abandoned or forgotten in the pipeline of pharma companies — never reaching patients — but a few have been rescued, to great acclaim. An $8 million purchase of several drugs to treat the liver virus hepatitis B has turned into a $110 million stake in Arbutus Biopharma, a 1,275 percent return. Even the blockbuster Lipitor, a cholesterol reducer, also nearly died at birth. After animal tests showed no benefit over an existing drug, and no process for scaled-up production, maker Warner-Lambert agreed to fund only one human trial. Lipitor went on to become the world’s first $10 billion-a-year drug.

The purchase of what would become Imbruvica, a biotech version of a Hail Mary pass, was risky for Pharmacyclics, down to its last $20 million and soon running on fumes.

Duggan, who still favored Xcytrin, questioned the CEO on it.

“We’ve got this as a backup,” Miller responded.

Then, within two years — with Xcytrin dead, Miller gone and bankruptcy imminent — Duggan turned to that backup.

Big roll of the dice

Duggan spent $6 million of his own money to keep Pharmacyclics on life support and get the chemical into human testing.

The company rolled the dice — and got sevens.

The results were astounding, not just because the drug managed to fight off certain cancers, but that it did so while doing little damage to healthy cells and the well-being of patients. While there is toxicity, it can be controlled.

An old foe — the FDA — became a new friend. The agency used a new “breakthrough therapy” designation to speed approval of the drug.

In 2013, Imbruvica was approved for treatment of chronic lymphocytic leukemia and was later cleared for treatment of other types of cancers. It has been tested on more than 6,000 patients, with more tests under way for a range of other cancers and even solid tumors, Duggan’s original goal. In addition, 46 other countries, including the entire European Union, have approved the drug for use. Annual sales are expected to hit $5 billion; if it earns approval for other types of cancer, sales could reach $7 billion a year.

While Imbruvica doesn’t cure cancer, if taken daily it controls the disease for two to three years, and maybe more, extending the lives of terminal patients. It’s the best hope for those who have failed conventional treatment, or people whose genetics mean they aren’t helped by existing drugs. It’s a simple daily pill, not requiring intravenous injections, like other treatments. And it doesn’t suppress production of normal cells.

The first drug of its type to enlist this internal cell-killing approach, it has opened up a whole new area of research. Even after the primary patent expires in 2026, it will be remembered for opening up a broad therapeutic vistas.

“It has a real impact,” Greenberger said. “The company was brave enough to put it in clinical trials and stick with it.”

Bidding war

A phoenix rising from the ashes, Pharmacyclics’ staff swelled to 500. Its sales — and company revenues — skyrocketed. A single pill costs $90, working out to $98,550 to $131,400 per patient every year, depending on the diagnosis. Patients must take it for the rest of their lives, guaranteeing steady demand. Company revenues more than tripled in 2013 and rose another 180 percent in 2014 to $730 million.

This year, pharmaceutical giants came calling. A bidding war broke out for the Sunnyvale company, and North Chicago-based AbbVie won in May with an astounding offer of $261.25 per share, for a total of roughly $21 billion. AbbVie said it expects Imbruvica’s annual sales to reach $5 billion. The acquisition ranks as one of the top 20 pharma deals in history.

Only two Silicon Valley acquisitions involving a company came with a richer price tag, without adjusting for inflation: Genentech, the region’s first biotech effort, was taken over by Roche for $44 billion in 2008, and Hewlett-Packard bought Compaq for more than $25 billion in 2001.

The two men behind the chemical, now estranged, cherish the roles they both played in its unlikely birth.

“The drug is working,” said Duggan, whose stake in the company became a $3 billion fortune. “We had the courage to work the drug and to spend the money necessary to keep trying.”

While Miller left the company with more than a million stock options, it isn’t clear whether or when he sold them. He isn’t saying. But there’s another rewarding side to Imbruvica’s runaway success: Miller now uses the drug to treat his cancer patients.

“I am using a drug I helped develop,” he said. “That is very gratifying.”