Launched in April 2006, HAND was a cornerstone of Genome’s corporate social responsibility (CARS) initiatives, and its steering committee had just completed a conference call meeting to decide its future priorities. Two special invitees on the call-?Sandmen Shanty, managing director of Genome India, and Roger Vivaldi, senior vice president and head of the Latin American operations-?had been asked to provide information to help the committee decide which HAND initiative to support going forward.
Shanty was championing the malaria research project with the Indian partner ICEBERG, while Vivaldi was making a strong case for extending the Brazilian research program on Chaos disease with local partner Officio. There were other options on the table, including the idea Of starting a HAND tuberculosis project. When Shanty and Vivaldi left the call, Aggregate focused the committee members on the recommendations they would take to Henry Termed, Genome CEO. Which research initiative would have maximum impact? What was the right future model for partnering?
And what were the funding and resource needs for scaling up the program? Laying the Corporate Foundation Stones From modest beginnings in 1981 as a supplier of enzymes, fine chemicals, and reagents to research labs and pharmaceutical companies, Genome had rowan to become a leader in biotechnology with revenues of almost $4 billion in 2007 (see Exhibit 1 for key financial indicators and Exhibit 2 for stock price movement). It had done so by identifying its patients’ needs, targeting a focused tech oenology capability, and developing a set of values that clearly defined its role as a corporation within society.
From its earliest days, Genome had focused on orphaned diseases (those with too small a population Of sufferers to attract drug development attention), a strategy reflected in its portfolio of drugs (see Exhibit 3 for its major products and Exhibit 4 for a portfolio of products for orphan and neglected diseases). A This section is adapted from Christopher A Bartlett and Andrew McLean, “Genome’s Gaucherie Initiative: Global Risk and Responsibility,” I-ABS NO. 303-048 (Boston: Harvard Business school Publishing, 2002).
Professors Christopher A. Bartlett and Tarn Khan and Doctoral Candidate Parthian Chuddar prepared this case. HOBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright C 2009, 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to whom. Hobs. Arvada. Du/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. 910-407 Genome’s CARS Dilemma: How to Play Its HAND Nurturing an Early Breakthrough Two years after creating the company, founder Henry Blair recognized that he needed help in managing his fast-growing start-up. In 1 983, he hired Henry Termed, a 36-year-old division president at medical products giant Baxter International, bringing him in as Gemmy?s president.
Recognizing the importance of R&D to build a diversified pipeline of products, Termed initiated a series of weekend technology strategy discussions involving top management, MIT and Harvard faculty, key investors, and a few outside advisers. One potential opportunity that caught Trimmer’s eye was an ongoing trial being conducted by Dry. Rose Brady of the National Institutes of Health (NIH). Brady was conducting research on Gaucherie (pronounced Go-shay) ease, and Genome had received a contract to supply an enzyme called GAR.
Gaucherie is an extremely rare and deadly condition caused by the body inability to manufacture the GAR enzyme. It affected fewer than six of every one million people, of whom only a quarter were thought to be ill enough to require treatment. Early trials of Brandy’s treatment were disk pointing. Only one of seven patients in the trial showed any response to the therapy, but the intriguing fact was that in this particular case, the symptoms were dramatically reversed. Most within Genome were pessimistic about the therapy.
In addition to questions about the therapy efficacy, there were two other major concerns-?whether it was safe (the enzyme was extracted from human placentas and there were risks of HIVE and hepatitis C transmission), and whether the investment would earn a significant return. But Termed wasn’t ready to give up. After learning that the one patient in dramatic recovery was a four-year-old boy from the Washington, D. C. , area, he visited the boys family regularly over the next few months and was impressed with the treatment’s effectiveness.
Eventually, despite the many concerns being expressed, Termed decided to proceed with the development. In 1985, soon after Termed was appointed CEO and had taken the company public, Genome made an orphan drug application for the Creased enzyme under the Orphan Drug Act. B The company estimated that if further trials were successful and if the orphan drug status was awarded, it could serve around 2,000 patients worldwide, with projected annual sales of $100 million. Finally, in 1991 , the U. S. Food and Drug Administration approved Creased for marketing in the United States. Weathering Political and Regulatory Pressures
Creased was launched into a difficult political environment for pharmaceutical and biotech companies. President Silicon’s emphasis on health-care reform turned the spotlight on high-priced therapies, and with Gaucherie medication costing $50,000 to $100,000 a year per patient, Genome came under scrutiny. Trimmer’s response was to go to Washington and meet with members of Congress and the regulatory authorities. As he recalled later, “l invited them to visit our operations and offered to open our books so they could see what it cost to develop and produce the product. Our approach was to be completely open and transparent.
We were proud of what we had done and had nothing to hide. ” After showing his visitors the facilities and giving the Congressional Office of Technology Assessment (TOT) open access to Genome’s books, Termed explained the company’s philosophy: “Since the beginning, I have told this organization that our first responsibility is to treat patients with b Under the Orphan Drug Act of January 1 983, companies doing research on rare diseases affecting fewer than 200,000 people in the United States were awarded tax breaks and marketing exclusivity on that drug for seven years postdoctoral. He disease, not to maximize financial returns. ” With this objective, even before Creased was approved, Genome created the Creased Assistance Program (CAP) to provide free medication to the patients in most need. After a detailed examination, in October 1 992, the TOT concluded that while the Orphan Drug Act protection did reduce risks, Genome had invested significantly in and production facilities and the company’s pretax margin on the drug was within industry norms. Building a Global Organization As the Creased trials continued, Genome began building a new $1 80 million manufacturing facility.
With such a small population of Gaucherie sufferers, Termed realized the company needed to expand into global markets in order to generate volume for the plant. As Genome expanded abroad, the CEO insisted that the marketing focus be on the core corporate value of “putting patients first. ” Assembling a go-to-market team for an extremely expensive therapy for a rare and seldom diagnosed disease was a daunting task. Salespeople would have to educate doctors, pharmacies, and hospitals about the disease in a variety of different health-care environments.
Management quickly concluded that the key was to recruit “passionate practical dreamers” as they called them. Termed tapped his Baxter alumni network to hire senior people to lead Genome’s entry into Europe, the Middle East, Asia, Canada, and Latin America into the new millennium. Paralleling its domestic commitment to provide treatment to all Gaucherie sufferers, in 1998 the company launched a global version of CAP called the Gaucherie Initiative with the objective of delivering treatment to those in less developed countries.
To help deliver treatment to these countries, Genome teamed up with Project HOPE (Health Opportunities for People Everywhere) as its global nongovernmental organization (NAG) partner, deciding to focus first on untreated sufferers in Egypt and China. In implementing the Gaucherie Initiative, the embedded corporate value of putting patients first was translated into a “two-price policy’ for the drug-?full price, or free for patients who could not afford it. An independent six- member medical review board was created to review and approve economically challenged patients.
Project HOPE would handle the drugs delivery to developing countries, while Genome agreed to provide free drugs, ay for the program manager and the secretariat, and provide training, travel, and office peripherals for local treatment centers. In 1998, the Gaucherie Initiative took on 60 patients worldwide. Three years later, this number was 140. Shaping a New Industry Image While Genome was developing the Gaucherie Initiative, Termed was becoming increasingly concerned about the failure of the pharmaceutical industry to create sustainable goodwill with Nags, government agencies, and the public at large, especially in emerging markets.
He was astounded in 1999, when 28 big pharmaceutical companies sued the South African overspent and President Mandela personally for passing a law allowing the import of affordable generic versions of patented AIDS drugs to treat millions of sufferers for the first time. While the companies argued that the law treated them unfairly, Nags and AIDS activists argued that commercial interests could not override the human rights of people who were simply trying to stay alive. “l Termed was determined to take a radically different approach at Genome.
Given the company’s patient-focused culture and its sense of corporate social responsibility, he saw an opportunity to seize the initiative by responding to requests from governments in developing countries to invest locally in helping them respond to neglected diseases-?diseases that were not attracting drug development attention despite the large number of sufferers. The company was accustomed to working with 3 government health-care agencies worldwide to achieve its goal of obtaining treatment for rare orphan diseases like Gaucherie.
Now he felt it might be able to leverage those relationships and offer help in finding solutions for more common neglected diseases. Beyond Orphan Diseases to Neglected Diseases In the spring of 2005, as Termed began testing this idea with his staff, Peter Worth, Genome’s corporate counsel, suggested that he talk to his wife Dyane Worth, chair of the Department of Immunology and Infectious Diseases at the Harvard School of Public Health. It was the first step in an exploration of neglected diseases where Gemmy?s capabilities could be brought to bear.
Malaria In her conversation with Termed, Dyane Worth described the work she was doing on malaria in collaboration with the Broad Institute, a joint venture of the Massachusetts Institute of Technology (MIT), Harvard, and the Whitehead Institute. Following that discussion, Termed asked Aggregate to schedule a follow-up meeting with Worth and Eric Lander, MIT professor and director of the Broad Institute. At that meeting, Termed and Aggregate learned that an estimated 500 million people were affected by malaria, a number that was expected to increase to 1 billion by 2025.
They also learned that while malaria caused more than 1 million deaths every year, only 0. 3% of global health R&D was spent on its drug research. Aggregate explained the potential for Genome to contribute: “Vale had complementary skills to academics like Worth ND Lander who were experts in basic research focused on drug discovery. Genome had skills in translating projects from the research stage to a clinical case. Between us, we could make a real contribution. Chaos Disease/Sleeping Sickness Another candidate for the emerging idea of developing cures for neglected diseases was brought to light by conversations Aggregate had with a Brazilian researcher he had met at a malaria conference. They had discussed a parasitic illness called Chaos disease, or American transportations. That conversation triggered a recollection. In March 2004, Genome had bought Ilex Oncology Inc. A biotechnology company focused on the treatment of bladder cancer, solid tumors, and other forms of cancer.
But as part of its oncology repertoire, Ilex had on its shelves a drug called Florentine, which had been shown to have an unexpected yet positive effect on African transportations, or sleeping sickness. Sleeping sickness is a parasitic disease in people and animals that is transmitted by the tsetse fly. It is especially prevalent in Sub-Sahara Africa and affects around 50,000 to 70,000 people a year. After it was nearly eradicated in the twentieth century, relaxation in control methods led to a resurgence.
Although treatments existed, they were highly toxic, and resistance was spreading fast Early research indicated that Florentine was very effective in treating Stage II sleeping sickness, with the only problem being that its requirement for intravenous treatment four times per day was too difficult to be practical in remote sections of Africa. Chaos disease, named after the Brazilian physician Carols Chaos who first described it in 1 909, is caused by a related parasite and is widespread in Latin America.
A disease without a vaccine, it is transmitted to humans and other mammals mostly by blood-sucking assassin bugs. Tuberculosis A third major neglected disease candidate presented itself in 2006 in discussions that followed an approach from the Global Alliance for TAB Drug Development, a New York-based nonprofit dedicated to the discovery and development of faster-acting and more affordable tuberculosis (TAB) treatments. Through that contact, Aggregate began to learn about TAB, and felt Genome might be able to help.
A widespread and highly infectious disease, TAB has a footprint across large parts of Africa, China, South Asia, and elsewhere and is responsible for among the highest deaths of all neglected diseases (see Exhibit 5 for a imprison of neglected diseases). It infects one-third of the world’s population and is spread when those with the disease cough or spit, causing new infections at the rate of one per second. Although most of these cases are latent, about 1 in 10 became full-blown TAB. If left untreated, the disease will kill more than half its victims.
In 2004, there were almost 15 million active chronic cases of TAB, 9 million new cases, and 1. 6 million deaths in the year, almost all in developing countries. Despite these disturbing statistics, TAB was still being treated by a combination of four drugs developed in the 1 sass. Pharmaceutical companies had done little in recent decades due to the disease’s concentration in developing countries, which could not afford expensive health care. Drugs were available to less than half of the most infectious cases, and even when they Were provided, treatment took six months.
The need for constant drug administration and monitoring was beyond the capability of most developing countries, so treatment was often abandoned before it was completed. This had fueled the rise of CDR-TAB, a new and highly drug-resistant form of the disease. Opening a Helping HAND: Forming the Program With these exploratory discussions in motion, Termed decided to outline his vision for how Genome could contribute to the plight of those suffering from such widespread, neglected diseases. The opening of Genome’s U.
K. R center in September 2005 provided him with an opportunity. In his speech dedicating the center, he said: “In the new millennium the challenge will be to find dramatic new ways to serve people suffering from neglected diseases around the world, especially the billions ignored by traditional pharmacy companies in emerging markets. ” Careen Ernestine, vice president of corporate ammunitions at Genome, recalled listening to the speech: “Henries speech caught us all a bit by surprise. He was way ahead of us.
But what he said was not only uplifting and inspirational; it also showed his deep personal commitment to act. It was as if he was tying to raise the game for all of us. That’s how the HAND initiative was born. ” Setting Goals and Guidelines After many internal conversations, in February 2006, Termed formed a steering committee of Aggregate; Ernestine; Ted Sybarite, senior vice president Of scientific affairs; and Jeff Clinger, vice president Of infectious diseases. In April, the committee formally launched the Humanitarian Assistance for Neglected Diseases (HAND) program.
Termed articulated the thinking behind the program’s creation: “Genome’s customers are mostly government agencies that buy expensive medication for rare diseases like Gaucherie. In the long term, these organizations are not comfortable engaging on the basis of cold commerce alone, and neither are we. The HAND initiative is Genome’s way of giving back. ” 5 Technically, any entry on the World Health Organization (WHO) list of Neglected Tropical Diseases could qualify for the HAND program. However, he steering committee proposed some simple criteria to guide its choices going ahead (see Exhibit 6 for minutes from a committee meeting).
Projects had to be related to an “important unmet medical need” where Genome had “technological capability,” “credible partners,” and the “ability to afford the next phase of development, ideally with long-term funding. ” Aggregate explained the rationale behind the company’s strong preference for engaging others in partnerships: “Even if we increased our own investment by two- or threefold to 56 million to $10 million, we would have very little incremental impact. We not only need to leverage our own capabilities, we want to influence others and become an industry role model. He also explained that HAND’s objectives were explicitly “beyond narrow commercial interests” and emphasized that Genome “would not seek profit from these programs. ” Indeed, the company committed to make available all intellectual property generated from the HAND program so that partners and governments around the world could benefit. Building Capability HAND was going to require significant resources, and the challenge for Genome was to provide it with the technology access it needed without improvising the commercial activities that would fund and support the program. Exhibit 7 describes Genome’s R&D operations. ) Like the Gaucherie Initiative, HAND created a lot of excitement among employees. Many at the Waltham, Massachusetts, R&D center that housed its projects wanted to contribute, and for the first year or so, researchers mostly worked on the program in their free time. A couple of the first to participate described the excitement: “A lot of people wanted to be on this program, given its social impact. We were just lucky to be among the first employees assigned to projects.
As the exploration of various neglected diseases and potential partnerships expanded, Genome found it had to commit more resources to the program. As Clinger described it, “HAND started to transform itself from being a hip-pocket organization to being more formal, almost a shadow organization. ” From the employees’ perspective, this created issues of being recognized for working on HAND. One project member quipped, “l work on a HAND project, but also report to my regular cost-center manager. It’s like working 150%. At the end of the day, am not even sure my manager knows what my contribution to the HAND program has been.
Furthermore, as key researchers’ time and energy were diverted to the HAND program, there was push-back from cost-center managers and project managers. Jim Burns, who managed resources in Waltham, often had to play the role of referee. “The HAND program is the right thing to do and we can add real value in areas like formulation,” he said. “But there is a fine balance and we must not overcoming ourselves. ” Clinger agreed: “Everyone is after scarce technical resources like DAMP (Drug Metabolism and Pharmaceutics) and medicinal chemistry-?commercial project managers as well the HAND program partners.
So the question is not just how many resources HAND needs, but what kinds Of resources. ” c Medicinal chemistry is at the intersection of pharmacology and chemistry and involves testing synthesizing, and developing chemical entities suitable for therapeutic use. 6 910407 HAND in Hand: Engaging Partners Along with engaging its own internal resources in HAND, Genome also began exploring various partnerships that seemed to offer the potential for collaborative research in each of the identified neglected disease areas.
It was a slow, iterative process that gradually identified a portfolio of potential long- ERM research collaborators. The Din Experience In 2006, early in its search for partners, Genome initiated discussions with the Drugs for Neglected Diseases initiative. Din was a global organization formed in 2003 when five publication institutions joined forces with leading NAG Doctors Without Borders and the Special programmer for Research and Training in Tropical Diseases (TAR) sponsored by the United Nations Development Programmer (UNDO), the World Bank, and the World Health Organization (WHO).
Given Din’s expertise in neglected diseases and its relied presence, it appeared to be an ideal partner with which to develop and test novel compounds to treat sleeping sickness. In discussions about this possibility, Din seemed glad to involve Genome, and even proposed bringing additional partners like the Swiss Tropical Institute into the project to do some testing. However, Din was in the midst of a transition, and the new team took a different view of how development should proceed.
Din was also sponsoring research on other promising sleeplessness’s drug candidates. Soon, the two organizations started moving in different directions on the project. The relationship remained cordial, and Genome continued to use Din facilities to test compounds. But while the possibility of future collaboration remained open, by 2008 the two organizations no longer funded projects jointly. For Genome, it was an early lesson in how difficult it could be to pursue an objective on a project where partners had different interests.
The Broad/Harvard/MOVE Negotiations Meanwhile, the malaria work with Broad and Harvard was moving ahead. The Broad Institute would contribute in the area of medicinal chemistry and conformation’s the Harvard School of Public Health had expertise in electoral genetics and clinical investigation, and Genome would screen its chemical libraries of millions of compounds to check whether any of the compounds were effective in treating the disease targets.
But in this partnership also, differences cropped up-?this time over funding. In an initial budget meeting, the partners estimated annual funding needs of about $1. 6 million in the first year of the project, increasing to around $6. 6 million in year three. Initially, the Broad Institute explored the possibility that Genome act as the sponsor for the work at the Broad. After making it clear that they were not in a position to finance the entire program, Genome’s representatives offered to help raise the money.