Sept. 7, 2011

Forbes

Serial Lifesaver

Peter Hirth is showing the pharmaceutical industry a nimbler way to come up with breakthrough medicines.

When K. Peter Hirth had his first big success as a pharmaceutical inventor, he celebrated by quitting his job. Then he went off on his own to invent yet more important drugs in different fields, opening a path to a new kind of drug development. His strategy: launch small startups that can deliver big drugs to big pharma.

Hirth’s springboard came in the 1980s when he was working for ­German drug giant Boehringer Mannheim. He got a major new drug for anemia, called Recormin, approved in Europe and Japan. It still generates $1 billion in annual sales for Roche, which bought Boehringer in 1997. That first success, rare in an industry where most scientists never get a single drug of their own to market, would by itself have made Hirth a star. But he got restless, and for him it was just a start.

“If I had stayed at Boehringer I would have had an incredible career,” he says. “But I would have been promoted every half-year and removed from the projects. The people who are good get promoted, they become vice presidents and fly around the world from one site to another, but the knowledge never gets to where it is needed.” And Hirth, now 60, lusted for the front lines. “The feeling of getting a drug approved is really a feeling that gets you addicted. You want to do it again.”

Off on his own, Hirth joined Sugen, a San Francisco biotech, and spent the 1990s as its president. There he oversaw the creation of what became Sutent, which is now Pfizer’s top-selling cancer drug, with annual sales of $1.3 billion. It is used to treat kidney, stomach and pancreatic cancer. In 1999 he sold Sugen and left to start another outfit, Plexxikon. Plexxikon was bought in April 2011 for $905 million by Japanese drug giant Daiichi Sankyo, and it just launched a drug that has an unprecedented—though temporary—ability to shrink melanoma tumors. That gives Hirth one of the best track records in the ­entire pharmaceutical industry.

His smaller-is-better approach, which might have seemed heretical when he fled Boehringer, is gradually becoming accepted. “You would be hard-pressed to find examples where getting bigger helped,” says Mark Fishman, head of research at Novartis, the Swiss drug giant. A growing trend among big pharmaceutical firms is to buy smaller research shops and leave them alone—as Roche did with Genentech, Sanofi-Aventis did with a tiny ­cancer-drug maker called BiPar Sciences and Daiichi is doing with Hirth’s Plexxikon.

Behemoths like Pfizer and GlaxoSmithKline talk openly about trying to create small, flexible research units that can recreate the cultures of smaller companies, but they haven’t really done it yet. Some radical drug industry veterans even propose breaking up research labs entirely into smaller, outsourced groups (see “Rallying Pharma’s Rebels,” FORBES, Aug. 22).

At Boehringer Hirth focused on making proteins that could be injected into the bloodstream. They are a mainstay of the $80 billion biotechnology industry. But by the 1990s, at Sugen, he was doing something very different, developing cancer-fighting pills that work by blocking enzymes called tyrosine kinases that cells use to communicate with one another. At first kinase-blocking seemed dubious, but by 1999, when Hirth sold Sugen for $650 million to Pharmacia (later gobbled up by Pfizer), it was a standard approach for creating cancer drugs.

These early enzyme blockers had a problem, however: Some enzymes were so similar it was impossible to block the right ones, resulting in serious side effects, such as fatigue and malaise.

Hirth stepped in again. He created Plexxikon in December 2000 to find a way to invent new pills, including kinase blockers, which were more targeted, with fewer side effects. Its first drug, which was not a kinase blocker, was to fight diabetes. When it was ready for clinical trials, he quickly licensed it to Wyeth. The deal paid his company a fast $33 million.

That quick-sale approach was a strategic departure from the way biotech executives usually act. They typically hold on to full rights for their drugs as long as possible, to either maximize their payouts from Big Pharma or to market the medicines themselves. But Hirth figured that Plexxikon’s pill-inventing prowess was so strong that he could create more potential medicines if he raised money by selling off some rights.

The sale turned out to be a wise move: Wyeth eventually abandoned the diabetes drug after similar drugs failed and amid the controversy around Glaxo­SmithKline’s diabetes pill Avandia, which may have caused heart attacks. Plexxikon now has the rights to the drug back, though it’s not pursuing it at the moment (“The field is so scared,” Hirth says). But most important, Plexxikon kept the money and didn’t have to foot hundreds of millions of dollars in development costs. Hirth says he needed to raise only $67 million from venture capitalists in all the years of Plexxikon, and he sold the company to Daiichi for 14 times what investors had put into it.

Perhaps his biggest triumph came in 2005, when Plexxikon created Zelboraf, the melanoma drug that was approved this year. Roche helped the tiny biotech test it. In clinical trials Zelboraf shrank tumors in half of patients, compared with an older drug’s 5%, and extended patients’ lives. It costs $56,400 for a six-month course of treatment, and investment banker Sanford C. Bernstein predicts that its sales could hit $700 million by 2015. (Its side effects include causing a less serious form of skin cancer in some people, and the tumors eventually always come back.)

Hirth’s serial success stands out vividly in a pharmaceutical industry that has for years suffered from a profound innovation drought. He says that large companies should learn from what Plexxikon has done with a staff of only 43, explaining that if he were running a big business like Pfizer, he would form small units of 40 or 50 researchers and fund them sparingly but promise them royalties on any drugs that succeeded. Productivity, he says, would go way up: “It doesn’t take an army; it takes the right people. And that can be a very small group.”