The Soul of Biotech

On Friday afternoon, I formally accepted an offer to transfer into the Enbrel Derm sales force, serving in the Portland, Oregon territory. Relocation timing and details are still pending, but I’ll probably get up there by October or so.

I’m incredibly excited to learn how to sell effectively. Both my district manager and regional director have vast reservoirs of sales experience within Amgen, so I’m confident that I’ll learn a great deal from the feet of a couple of masters.

Plus, this will be an enormous personal adventure. I don’t know a single person in Portland. In fact, I’ve never set foot in Oregon in my life. And I can’t wait to find out what’s waiting for me when I get there.

(So far, people tell me: “beer,” “rain,” and “hipsters.”)

From Episode 1×14 of Sports Night:
Isaac: “Thanks, this won’t take long. There’s gonna be a piece in tomorrow’s Wall Street Journal. Don’t worry about it. (BEAT) That’s all.”

Yes, I still have my job. Furthermore, there’s no rationale (barring the sale of Amgen to a competitor) by which I would not continue to have my job. By now, you’ve probably read all about Amgen’s planned layoffs and cutbacks. While I’m obviously not thrilled about it, I understand why we need to cut expense growth in light of the finalized CMS ruling, which impacts our expected revenue growth. It stinks, of course. The news has affected morale a little bit. Some who sense that their jobs are potentially vulnerable have been wondering whether or not to start planning for a transition. Others have already begun to look for other opportunities “just in case.” Still, I’ve continued to be impressed by the strength and transparency of management near me, up through to the VP level.

In one respect, however, I am disappointed. What I have found to be conspicuously absent from Kevin Sharer’s messages to the workforce is any indication that he or the other executives are willing to share in the pain being experienced by those whose jobs are at risk. In Jim Collins’ Good to Great, Collins points to a “culture of discipline” present in great companies — it is a culture in which members of top-level management forgo luxuries in order to set an example for the rest of the firm. For example, at Nucor, a large steel company, workers’ pay was cut 25 percent during the 1982 recession. Executive salaries, however, were slashed by 60 percent, and the CEO himself took a 75 percent pay cut. By “feeling the pain,” rather than distancing themselves from it, executives demonstrate that they share in the entire company’s reality. Indeed, a recent Scientific American article suggests that the leaders who position themselves among the group rather than above it have generally proven to be most effective.

Kevin made over $34 million in compensation last year, placing 24th on Forbes’ 2006 list of most highly-paid CEOs. Although 2006 was a stellar year for the company, I would imagine that Kevin’s 2007 compensation will still be fairly generous. I wouldn’t ask Kevin or any of his team to take a pay cut without a better idea of the big picture. In fact, I sincerely believe that his senior team deserves healthy compensation for their difficult and important jobs. I simply hope that Kevin is not missing an opportunity to win the loyalty of the workforce by actively participating in the cutbacks and setting an example for the rest of us.

Danny Halperin is a second-year graduate student in Molecular & Cellular Pathology at the University of California at Los Angeles, working in the laboratory of Dr. Peter Tontonoz. Before attending UCLA, Danny spent four years at Amgen in Clinical Immunology supporting pre-clinical and clinical development of biologics. Danny and I sat down over Thai food in Santa Monica on Thursday evening to talk through the relationship between academic and industry research, the promise of pharmacogenomics, and building a healthy R&D culture. This is the first in a series of interviews.

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Normally, I start each post with a single question that I ask myself. This time, I’m starting with a whole list of great questions that Danny Halperin from UCLA asked in response to my first post. Thanks, Danny!

So, I’m curious what kinds of responsibilities do you have in your job? Your background seems to be in computers and engineering so how did you get into market analysis? Are you considering doing an MBA? Where do you see your career going? Do you interact with the business development group at Amgen?

Switching from consulting to market research wasn’t quite as big of a shift as the one from research to consulting, at least in terms of mindset. Our group, Business Analysis and Information, acts much like an in-house marketing consulting firm. In fact, the running joke in the hallways is that BAI acts as a retirement home for ex-consultants. Our clients are the Amgen brands that have yet to launch (for example, denosumab) as well as brands that have already launched (for example, Aranesp and Enbrel). Each staff member is aligned to one or more brands, forming cross-functional brand service teams that include primary and secondary market research, as well as forecasting.

The advantages to consolidating these functions into one group are:

• Best practices within a functional area spread more quickly across brands and can become standard practice within the company.
• Results from different research methods, such as primary and secondary market research, can be triangulated and sanity-checked against each other more easily.
• Working in cross-functional teams teaches us a lot about functions that we don’t work in ourselves all the time. We frequently see staff move around and gain experience in each function to become more well-rounded.

Working in secondary market research, it’s my job to translate the immense volumes of secondary data that Amgen owns into actionable answers to important business questions. The most commonly used data are account purchases and physician prescriptions. Studying trends in these data help our marketing teams measure the impact of market events, whether externally-driven (such as the ESA black box warning) or internally-driven (such as a specific promotional activity). We also work on more sophisticated projects that measure patient outcomes as a consequence of particular treatment regimens.

As for my own career, I am interested in pursuing an MBA, although I haven’t decided on the most appropriate timing. I’d also like to join Amgen’s field sales force at some point. I was truly inspired by my ride-along with one of our reps this spring. For all the flak that reps get, I believe that they serve a critical purpose in helping overworked physicians understand how to get their patients the best available care. I think that’s a great mission, and one that I’d like to share in. Plus, going after the business in an entire territory would tap into my competitive nature.

I don’t formally work with our business development team, although my peers who work on in-line forecasting are often asked to assess prospective product acquisitions, including the recently completed acquisitions of Alantos and Ilypsa. Still, I have met a few people in business development through informal networking, and I could see myself ending up there in a post-MBA role.

If you’ve been following our news, you may have heard about the FDA’s warnings on erythropoetic-stimulating agents, or ESAs. ESAs are a class of agents manufactured by Amgen that treat anemia. The first ESA was epoetin alfa, which was marketed in dialysis as Epogen by Amgen, and marketed in non-dialysis indications as Procrit by Johnson and Johnson (J&J). In 2001, Amgen launched Aranesp (darbepoetin alfa), a longer-lasting agent that can be dosed less frequently. Amgen retained the rights to all indications for Aranesp, and competes with Procrit in the non-dialysis markets such as chronic kidney disease (CKD) and chemotherapy-induced anemia (CIA).

In December 2006, a Danish head and neck study concluded that when Aranesp is used in anemia of cancer (AoC), it triggered adverse events. It is important to note that Aranesp had never been approved by the FDA for use in AoC, and as such, Amgen has never promoted the use of Aranesp in AoC. When Amgen learned of the preliminary data, it informed the FDA within 24 hours, per FDA rules. However, because the data was preliminary, it did not tell investors until late January. (This is what the informal SEC inquiry is about.)

In February, the FDA confronted both Amgen and J&J in February and asked both companies to add a black box warning to their products that advised physicians to use the lowest possible dose of ESAs in treating anemia. Initially, this warning covered all use of ESAs (even use in chronic kidney disease), but after an outcry from the nephrologist community, the FDA amended the warning to include only AoC.

In May, the FDA’s Oncology Drugs Advisory Committee (ODAC) voted overwhelmingly to ban the use of ESAs on patients with certain types of cancer. The committee also recommended placing greater restrictions on ESA usage, including stopping the use of ESAs once chemotherapy treatments are over. Furthermore, the committee unanimously decided that more studies were necessary. As this is an advisory committee, its recommendations to the FDA are nonbinding, although the FDA usually follows its advisory committees’ recommendations.

The following week, based on the ODAC recommendation, the Centers for Medicare and Medicaid Studies (CMS) announced that it would curtail reimbursement for ESAs when used in AoC. Additionally, although CMS would still reimburse for CIA, they added a grace period to the last chemotherapy dose, after which they would not reimburse for ESAs.

ESAs make up a large portion of the CMS budget. Given that budgetary significance, it looks a lot to me like the FDA and CMS are working together to create policies that would reduce the cost of ESAs to the federal government.

But what’s the impact to Amgen? Well, although Aranesp and Epogen aren’t indicated in patients with AoC, we do make some money from off-label use, and that revenue source could taper off. Furthermore, the general cloud of suspicion over ESAs could cause physicians to use lower doses of ESAs or administer them less frequently, even for CKD and CIA. As a result, Amgen’s overall anemia revenues could grow more slowly than anticipated.

Our stock price took a major hit over this month, of course — major enough to make it to a lot of national news outlets. We took a bigger percentage hit than J&J did over Procrit, probably because more of our revenues are concentrated in ESAs than J&J’s revenues are. On the other hand, we have a more flexible cost base, so although it has been a little uncomfortable to make adjustments to cope with the new reality, we’re not going to become much less profitable.

Overall, I have been impressed by how well upper management handled this crisis, especially internally. Communication from the senior team has been forthcoming, and every manager between myself and my VP has sent out communication encouraging us to come talk about any concerns we have. I see a lot of confidence in the hallways, and no one is whispering about jumping ship. I bought our stock at $55 right after ODAC, and it’s already up to $57. We feel good. I feel good.

My only complaint is that I wish we had taken a more aggressive stance in messaging that our drugs are safe and effective when used properly, because I believe they are. Epogen and Procrit have been safely used for EIGHTEEN YEARS. Aranesp has been on the market for six. This stuff ain’t rat poison. Amgen is still learning how to win battles of public opinion, but if that’s our biggest problem, then we’re going to be just fine.

What are your thoughts?