Biotech is celebrating a platinum anniversary next week: 20 years since J.P. Morgan took over the industry’s biggest conference, an annual ritual of brokered mergers, broken promises, and breakthrough science.
The J.P. Morgan Healthcare Conference is more than a venue for deals. It’s a place where fierce arguments break out, where industry memes get made, and where biotech examines its warts and wrinkles.
With that in mind, STAT decided to look back at the record. What emerged was not just a series of recollections about a conference, but the history of an industry, chock-full of lessons about management, leadership, and communication. Over the past two decades, many of the biggest heroes and villains in the pharmaceutical industry have graced the stages of the Westin St. Francis Hotel in San Francisco, where the conference has been held since it began 38 years ago under the auspices of Hambrecht & Quist, a now largely forgotten investment bank.
J.P. Morgan’s tenure started when the current crop of pharmaceutical giants were only just being created in a consolidation wave. The conference witnessed the 2000s crisis around drug safety, the era’s big biotech boom, and the birth of a thriving sector. And today, for better or worse, it is still where the action happens.
Here, then, are some specters from JPMs past.
2000-2001: The beginning and end of the genome boom
Genetics at the turn of the century felt like an insurgence. At H&Q in 2000, Roy Whitfield, the CEO of a tiny startup called Incyte, bragged that his company had “revolutionized drug target discovery,” adding: “We have sequenced, patented, and broadly licensed more genes than anyone else in this first critical phase of the genomics revolution.”
Incyte’s stock price quadrupled in the first few months of 2000, giving it a market capitalization approaching $8 billion. Other gene database companies similarly saw enormous appreciation. Mark Levin, the CEO of Millennium, boasted the company’s genomic platform would deliver an approvable drug every year. In May 2001, Celera, Incyte’s highest-profile rival, was feted on the White House lawn for its role in sequencing the first draft of the human genome.
And, then, Wall Street soured on genomics stocks, as the whole market plummeted. Investors realized that the business of selling genetic data was far less lucrative than they had thought. In 2001, Incyte hired former DuPont Pharmaceuticals CEO Paul Friedman to turn it toward drug discovery, shifting the company into its current form.
2002: ‘We screwed up’
It was the start of one of the most sensational scandals in biotech history — and the chain of events that would send domestic doyenne Martha Stewart to jail. A haggard-looking Sam Waksal, the chief executive of ImClone Systems, entered the meeting room at the Westin St. Francis hotel to face an overflow crowd of seething investors.
Two weeks earlier, the Food and Drug Administration had rejected ImClone’s groundbreaking colon cancer drug Erbitux. For years, a cocksure Waksal had promised Wall Street that Erbitux would be approved quickly and deliver billions of dollars in sales.
”How did we get in a situation where I’m standing here trying to explain how we got a [refusal-to-file] letter in an indication where nothing else worked?” Waksal asked, according to press reports at the time. ”We screwed up.”
J.P. Morgan had opened two overflow rooms for investors and others to hear Waksal and piped in audio. What they learned was that ImClone had ignored repeated FDA warnings about certain Erbitux data.
From that first, damaging disclosure, the scandal only got worse. Waksal was ousted as CEO. He was arrested and charged with tipping off friends — including Stewart — and family in the days before the Erbitux news was made public. He pleaded guilty to insider trading and bank fraud, and spent five years in federal prison.
2003: Bulls, bears, and wire fraud
In 2003, JPM attendees gathered for a standing-room-only breakout session to hear from InterMune.
The company was engaged in a brazen off-label marketing push, trying to get an old drug called Actimmune used as a treatment for idiopathic pulmonary fibrosis, a serious and deadly lung disease. InterMune CEO Scott Harkonen claimed the drug helped IPF patients live longer — based on selectively parsed data. Critics, including short sellers, argued that Actimmune was nothing more than a toxic placebo.
Six months later, Harkonen had resigned. Years later, he was arrested and convicted by federal prosecutors for wire fraud related to the dissemination of false and misleading statements from the Actimmune clinical trial.
2004: Genentech’s big hit
Genentech was red hot at the start of the J.P. Morgan Healthcare Conference in January 2004. Months before, the biotech had presented Phase 3 clinical trial data showing for the first time that Avastin — an entirely new type of targeted therapy — helped colon cancer patients live longer by preventing new blood vessels from feeding tumors.
Investors packed into Genentech’s J.P. Morgan presentation, eager to hear the company’s plans for Avastin’s imminent approval, commercial launch, and expansion into other types of cancer. Avastin would go on to become one of the most significant and important cancer treatments ever developed and a blockbuster commercial product for Genentech.
2005: Merck staggers after Vioxx withdrawal
In September 2004, Merck announced that it would pull its arthritis pain drug, Vioxx, from the market because a study that linked the widely prescribed medicine to heart attacks and strokes. The company’s CEO, Raymond Gilmartin, took the stage to try and reassure investors that Merck was still on strong footing.
“We were financially strong before the voluntary withdrawal of Vioxx,” Gilmartin said, according to a transcript. “We’re finally financially strong post the withdrawal of Vioxx.” But the scandal became a public firestorm, creating new scrutiny of the way the FDA regulated drugs. Why, critics wanted to know, had concerns that Vioxx might be riskier than other painkillers lingered until Merck took such a big, dramatic step?
Gilmartin resigned that May, and was replaced by Richard Clark, a Merck lifer. It would be years before Merck recovered from the hit to its reputation.
2006: Vertex’s would-be game-changer
Vertex Pharmaceuticals CEO Josh Boger was brilliant and boastful. During his J.P. Morgan presentation in 2006, he argued Vertex’s still-nascent hepatitis C drug, VX-950, was the biotech equivalent to Apple’s iPod. “Every so often, there’s a game-changing product — one that transforms a product category, one that transforms a company and one that transforms an industry,” he said.
Boger was partially right. VX-950, renamed Incivek, was approved in 2011 and significantly improved hepatitis C cure rates. It quickly became Vertex’s first billion-dollar product. But just as fast, Incivek sales disappeared as more potent and better tolerated hepatitis C drugs reached the market. Incivek might have transformed Vertex, but it also almost killed the company.
2007: The dawn of Big PBM
Whether they knew it or not, conference attendees were getting a peek at the future of the drug industry in January 2007, as CVS and Express Scripts battled over the pharmacy benefits manager Caremark Rx. At the time, Caremark and Express Scripts were the second- and third-biggest PBMs, trailing Medco in a competitive market.
Caremark had entered into a $21 billion deal to merge with CVS, then merely a drugstore chain. Express Scripts wasn’t having it, and announced its own hostile bid.
At the Westin, Caremark CEO Mac Crawford decried “unsolicited proposal” Express Scripts had made in December. “There is no strategic benefit to this transaction, nothing new that is brought to the table. The financial benefits we believe are illusory,” Crawford said. “The risk of antitrust delay is high.”
Crawford’s comments helped fend off Express Scripts, and the CVS/Caremark deal closed in March.
The reason for the battle would become clear later: The PBM business was fundamentally changing from simple prescription processing to negotiating drug prices and excluding medicines from formularies.
A decade later, Express Scripts has merged with Medco and been acquired by the provider Cigna, while Optum, UnitedHealth’s PBM, has spent billions on smaller acquisitions. The resulting arms race has left three companies presiding over about 80% of the market, giving PBMs unprecedented power over how drugs get paid for in the U.S.
2008: The Vytorin shuffle
Sometimes what a CEO doesn’t mention is as interesting as what he does. On Jan. 8, 2008, Merck’s Richard Clark didn’t say anything about the controversy around the two blockbuster cholesterol drugs, Vytorin and Zetia, that Merck sold with Schering-Plough.
But Schering’s chief executive, Fred Hassan, had spent most of a 40-minute session talking about the drugs the week before. Press reports had accused scientists at Schering of dragging its heels in analyzing a study using artery imaging technology to study the medicines. A week after J.P. Morgan, the companies released the results: Vytorin, a combination pill that combined Zetia and the older Merck drug Zocor, appeared no better than Zocor alone.
Shares in both companies fell. In 2009, Merck bought Schering-Plough for $41 billion, in part to capture all the economics of the medicines. In 2014, a huge study comparing Vytorin to Zocor showed it had a small additional benefit in reducing the rate of heart attacks and strokes.
2009: The financial crisis doesn’t spare biotech
The global market downturn that spelled the end for Lehman Brothers and Bear Stearns had crushing effect on biotech, palpable at the industry’s annual get-together. Stock prices fell, liquidity dried up, and a few venture capital firms went into hibernation, if not out of business entirely. In meetings and presentations at the conference, questions focused less on growth than on survival. J.P. Morgan even canceled the conference’s traditional opening-night gala, held at San Francisco’s City Hall, perhaps because a lavish party bearing the name of a bailed-out bank would have been optically problematic.
2009: The case of the backward DNA molecule
By 2009, Genentech CEO Art Levinson had become an industry legend. He was known for his scientific acumen, his skill as a manager, and his sharp tongue.
When he took the stage at the Westin that year, he was presiding over a room in which the mood was already grim thanks to the financial crisis. He directed his attention to the conference organizer, noting that ever since J.P. Morgan had taken over the conference, its pictures of DNA were “backwards.” That is, instead of being a right-handed helix, the molecules turned in the wrong direction. “This is a left-handed helix, and this does not exist in nature,” Levinson said.
“Perhaps in a parallel universe, but nowhere on this planet.” He turned to the J.P. representative and said: “We’re representatives of an industry that as of last night had a market cap of $301 billion. It’s almost a third of $1 trillion, we should get the structure of DNA right.”
Roche had always owned a large stake in Genentech; later that year, it bought the rest. Levinson fought the deal, and left after it was concluded. He is currently the chairman of Apple and the CEO of Calico, a drug research arm of Alphabet.
2010: Genzyme vs. Icahn
Genzyme in the early days of 2010 was a biotech company in crisis. A year’s worth of manufacturing problems had caused drug shortages, a drop in earnings, and a plunging stock price. Meantime, billionaire investor Carl Icahn was buying a stake in Genzyme and started a proxy fight to wrest control of the company’s board.
Genzyme CEO Henri Termeer used his podium time at the conference to accept responsibility for the company’s problems, but also insisted that he was the best man to lead its recovery. “I accept with great humility that these manufacturing interruptions have happened under my watch,” Termeer told investors during a breakout session.
Genzyme and Icahn settled their differences later in 2010. And then in early 2011, Sanofi acquired Genzyme for $20 billion.
2011: The future through a straw
It felt a bit like a publicity stunt. Vertex asked investors attending its 2011 presentation to breathe through narrow plastic straws so they could feel what it was like to live with the respiratory impairment caused by cystic fibrosis.
At that time, Vertex was still very much focused on the approval and launch of its first hepatitis C drug, but cystic fibrosis was becoming an increasingly important part of the biotech’s R&D plans. From those straws, a dominant cystic fibrosis drug franchise was born. The company’s first CF drug, Kalydeco, was approved the next year, and could help just 4% of CF patients. Last year, Trikafta, a new Vertex treatment, was approved to help 90% of them.
2011: Shkreli vs. a billionaire
Before Martin Shkreli was getting in trouble with the general public, he was taunting billionaires. In 2011, he picked a fight with MannKind founder and CEO Al Mann during the latter’s breakout session with investors. Shkreli was shorting MannKind stock at the time. Tempers flared. Insults were exchanged.
2012: An eye-catching surprise
When Regeneron’s Eylea, a treatment for a cause of blindness, was approved in late 2011, expectations were not high. Analysts figured the drug could generate a few million dollars in its first quarter.
So it was with characteristic glee that Regeneron CEO and founder Leonard Schleifer took the stage in 2012. “The expectations I’m told out there for the launch were somewhere between $2 million to $5 million in the initial launch, period,” he said. “So, how did we do? OK. So we did very well. We did $24 million to $25 million of unaudited net sales to distributors in 2011 since the launch on Nov. 21.” He noted that this was “an order of magnitude” better than expected.
Schleifer said Regeneron expected annual sales of about $150 million in Eylea’s first year, but warned that it was early and that the company couldn’t be entirely confident in those numbers. A month later, he added another $100 million to that forecast. Not surprisingly, Regeneron’s share price spiked. In 2018, Eylea generated $4.1 billion in annual sales. Regeneron now sports a $41 billion market capitalization.
2013: Twitter takes off
The very first tweet was sent in 2006, but it would take another seven years or so before Twitter became a major force at J.P. Morgan.
The conference hashtag started being used slowly — you’d be forgiven for blaming the bad Wi-Fi in the Westin St. Francis — with about 300 #jpm10 tweets in 2010, about 1,000 #jpm11 tweets in 2011, and close to 4,000 #jpm12 tweets in 2012, according to a contemporaneous count by public relations professional Brian Reid. But it’s safe to say that 2013 was around the time the hashtag really exploded: #jpm13 was used about 7,000 times that conference, setting the stage for the next year’s gathering to break into the five digits.
In the years since, Twitter has democratized the conference. It’s given the folks at home a way to follow along, in real time, with what’s happening in presentations, during breakout sessions, and out in Union Square.
2014: A young dealmaker strikes
Anyone who goes to J.P. Morgan knows the most important conversations happen over dinner or drinks.
Such was the case for Brent Saunders, then 44, in 2014. The previous year, he’d been CEO of eye care maker Bausch & Lomb. Then it was sold to Valeant Pharmaceuticals for $8.7 billion. As soon as the deal closed, he had been put in charge of Forest Labs, a company known for its antidepressants and antibiotics. At J.P. Morgan, he had a steak dinner with Paul Bisaro, the CEO of the generic drugs company Actavis, formerly known as Watson Pharmaceuticals.
Over dinner, they hatched a plan for Actavis to buy Forest for $28 billion. Saunders had been CEO for just five months. Later, Saunders engineered Actavis’ $67 billion purchase of Allergan, the maker of Botox. Investors chilled to the new drug giant, but Saunders is still good at deals. Last year AbbVie agreed to buy the new Allergan for $63 billion.
2015: The age of Keytruda begins
Again and again, Merck CEO Ken Frazier has come back to the idea that it is his job to protect the company’s legacy. It was something he said when he was Merck’s general counsel, charged with defending the firm from a flood of Vioxx-related lawsuits. It was an idea he returned to at the Westin in 2015.
“I just want to be clear that we have a lot of respect for the other companies in this industry, but we also have a very strong legacy based in research,” Frazier said. “And our goal as a company is to move back towards the kinds of productivity that we saw in R&D historically at Merck, bringing forward first-in-class products that make a huge difference to humanity.”
Not a small goal. But that year, Frazier could crow about a big drug: Keytruda, the first of a new class of immune-targeting medicines. Bristol-Myers Squibb had laid the groundwork for such drugs. But Merck had managed to get approved first, and then, clinical trial by clinical trial, became dominant. “Keytruda is an example of unprecedented execution and focus across the research, manufacturing and commercial divisions of Merck,” Frazier said.
He was right.
2016: Biotech’s infamous afterparty
“There are the models!” yelled an unnamed biotech man in line for a J.P. Morgan party, unwittingly kicking off a still-vibrant conversation about the culture of the conference. As Bloomberg reported, he was heralding the arrival of women hired to mingle with a predominantly male crowd at an event held by LifeSci Advisors, an investor relations firm.
The ensuing weeks brought industry-wide outcry, an apology from LifeSci, and a lot of promises to do better. But the party also shined a light on subtler, still unsolved gender issues at the conference and with biopharma as a whole.
2017: Pharma faces a ‘murder’ charge
As the sun rose on the third day of J.P. Morgan, the leaders of the drug industry found out just what the incoming president thought of them. Donald Trump, weeks away from inauguration, used the occasion of his first post-election press conference to declare that pharma is “getting away with murder” when it comes to drug pricing. That sent scores of conference attendees to the Bloomberg terminals scattered about the Westin St. Francis, watching as biotech stocks plunged on the apparent emergence of an anti-industry president.
It’s worth remembering that, in the early days of 2017, biopharma was still trying to parse the doctrine of “seriously but not literally” when it came to Trump (some were willing to pay seven figures for a clue). Three years later, Trump’s rhetoric hasn’t softened much, but the White House’s efforts to lower the cost of medicine have largely floundered.
2018: The year of the Michaels
On the eve of the conference, STAT published a story that led with a simple, memorable factoid: More men named Michael would be giving company presentations than female CEOs.
Almost immediately, “the Michaels” became a meme. Conference-goers couldn’t stop talking about it. Corporate Twitter accounts promoted their female CEO’s presentation as part of a tiny club. Jonathan Bush, then the CEO of Athenahealth, joked during his presentation that he, as a non-Michael, hoped the crowd would “appreciate my contribution to the diversity of the conference.”
The Michaels went viral near the peak of the #MeToo cultural reckoning about sexual harassment and the hurdles women face in the workplace. And they gave a name to the biotech industry’s male-dominated upper ranks.
2019: J.P. Morgan fatigue sets in
With each passing year come the familiar gripes about cramped spaces, overpriced hotels, and entropic conversations that fade from memory the second they conclude. Despite those complaints, the conference isn’t going anywhere anytime soon thanks to a long-term contract with the Westin St. Francis hotel, which means the smaller meetings that orbit J.P. Morgan are staying put, too.
And thus, in 2019, the annual kvetching turned to action: People started vowing to just stay home in January. The early members of the separatist movement are mostly high-profile investors who, by virtue of having lots of money, can make people come to them. But if frustrated tweets are any indication, more and more biotech types will choose to watch from afar each time the industry descends on San Francisco.
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