Celgene: The Pharmaceutical Phoenix

By Sol Barer

I’d like to tell a story; a story with all the elements of a good yarn—bravery, adversity, humanity, disease, arrogance, altruism, greed, naïveté, and ultimate redemption. The story spans 50 of the most turbulent and productive years of medicine, includes tragedy of almost unbearable proportions, encompasses disbelief and cynicism, and ends happily (as all good stories do) with optimism and the validation of suffering. It’s also one hell of a business and science story.

At the end of the 1970s I was employed by Celanese Research Corporation, a multibillion-dollar global company that produced chemicals, fibers, and plastics. I was responsible for accelerating and diversifying our research platform, and since I gravitated toward the more esoteric and breakthrough-oriented research programs, I was charged with building an exploratory research function. Although I was directing research in solid-state physics, electrochemistry, and photochemistry, I became aware of the startling advances being made in the biological sciences. As a chemist, it was difficult for me in those days to acknowledge anything outside of chemistry and physics as true science, but the astonishing potential of the new field nevertheless beckoned me. Soon I found myself immersed in biotechnology.

But I’m getting ahead of myself. Flash back to 1953 when researchers at the Ciba corporation discovered a chemical that acted as a nonaddictive barbiturate. A German firm, Chemie Grünenthal, launched the drug under the trade name Contergan on 1 October 1957, but we remember it by its generic name: thalidomide. The drug was soon available over the counter in 46 countries and was promoted as “completely safe.” Thalidomide’s antinausea response made it an effective drug for morning sickness, and tens of thousands of pregnant women took it. Yet when the first inklings of the imminent global pharmaceutical disaster came in 1959, reporters focused on the drug’s neuropathological effects rather than on its teratogenicity. In 1961, however, a sensational outbreak of phocomelia (a congenital disorder in which babies are born with flipper-like hands and feet) erased any lingering doubts about thalidomide’s risks.

The drug was quickly withdrawn in every country in which it had been sold. In the United States the new drug application, which had been under significant scrutiny by the Food and Drug Administration, was withdrawn by its sponsor, Richardson-Merrell, in 1962. The fact that the drug had not been approved in the United States saved many children and indeed validated the FDA’s existence. The thalidomide incident gave the federal agency the force of both law and ethics in regulating drugs. In many ways the strength of the modern FDA can be traced back to this event.

Thalidomide became the most reviled drug in history. Its name was synonymous with suffering.

In 1965—long after the drug was withdrawn from the open market—Jacob Sheskin, working at Hadassah Hospital at Hebrew University in Jerusalem, provided it to a patient suffering from ENL (erythema nodosum leprosum), a painful dermatologic and rheumatologic condition associated with the mycobacteria that cause leprosy. Sheskin had prescribed the drug to help the patient sleep, but this patient, along with six others, responded dramatically. Within days most of the symptoms associated with the disease disappeared. Within weeks both skin lesions and rheumatologic symptoms had resolved, and the patients returned to normal. From that point on thalidomide became the standard of care for the treatment of ENL around the world, albeit with highly controlled distribution requirements—including, in some cases, sterilization prior to receiving the drug. Nevertheless, it was by no means clear why a drug having sedative and antinausea properties would have such a profound effect in a mycobacterium-mediated disease.

Unsurprisingly the industry wasn’t investing a lot of money in thalidomide research.

The mystery of Thalidomide’s action was finally unraveled in the early 1990s by Gilla Kaplan, a mycobacterial immunologist who worked at Rockefeller University in New York. As a South African–Israeli who came to the United States via a postdoctoral appointment in Norway, she was yet another eclectic entrant into the thalidomide story. Kaplan discovered that thalidomide’s mode of action in ENL was related to its ability to modulate TNF-α, an important cytokine produced by macrophages and T-cells. TNF-α turns out to be a prime villain in a number of diseases, including rheumatoid arthritis and Crohn’s disease. Her discovery marks a turning point in the story— the culmination of the drug’s progression from infamous toxin to cellular regulator—and sets the stage for the next chapter.

Now let’s return to Celanese. By this time the little group I had formed to explore biotechnology had spun off into a separate public company, Celgene. Although Celgene’s original mission to exploit biotechnology for the production of chemicals held promise, we set our sights on the big prize: pharmaceuticals. I was in charge of the new company’s R&D and also held a general manager role. Our senior scientist, David Stirling, and I were constantly on the lookout for a way into pharmaceuticals—ideally through some sort of government contract since the company was at that point barely able to keep the lights on, never mind conduct research. Stirling was on a trip to Rockefeller University when he discovered Kaplan and the improbable story of thalidomide and its potential uses in tuberculosis, ENL, and AIDS. No one with any pharmaceutical background had bought it, but we did.

Celgene’s sights were set on getting approval for thalidomide. This project became the financial engine of the company, with an aggressive program to develop unique analogs that retained all the drug’s beneficial properties while minimizing the negative ones. The fact that thalidomide had immunomodulatory properties not only gave us a handle on improving its biological activity but also suggested that whole new categories of diseases could be treated with oral drugs. And, amazingly, that’s just what we did.

My announcement (I was now president) of this new strategy immediately before an H&Q financial conference led the lone analyst who had been brave enough to follow us to drop coverage as quickly as he could; the investment bankers ran for the exit. Yes, I said what they thought I had said: we were going to transform Celgene into a major pharmaceutical company with little money, no pharmaceutical personnel, and an understanding of the industry that might be considered imperfect at best. This was indeed a vision, but it was a controversial one and was mostly greeted with skepticism, if not outright disdain. But fortunately we had a believer in our newly recruited CEO, John Jackson. Jackson was a veteran of the pharmaceutical industry and a brilliant general manager. He is also a wonderful human being to whom Celgene owes much of its success. We immediately focused on raising money.

Meanwhile another company, EntreMed, had entered the thalidomide field by licensing patents from Children’s Hospital Boston based on the drug’s ability to prevent the formation of blood vessels. Celgene then licensed the appropriate technology from EntreMed, thereby becoming a potential cancer treatment company.

The FDA finally granted Celgene approval for thalidomide for the treatment of ENL on 16 July 1998. Their approval was a response not only to our efforts but also to those of AIDS activists who supported access to the drug as a potential treatment for Kaposi’s sarcoma. The stock market greeted the event largely with a yawn. Even though the drug had been approved (much to the surprise of many), it wasn’t really that effective; even if it was effective, doctors wouldn’t prescribe it; even if they prescribed it, hardly anyone would buy it—or so the critics said. But we disagreed. We saw a door opening to a new world of therapeutics: orally available compounds that profoundly affected the immune system, the dysregulation of which was associated with so many debilitating diseases.

As a condition for its approval, the FDA mandated the strongest possible restricted distribution system to prevent birth defects. Since this system did not yet exist, we created it: the System for Thalidomide Education and Prescribing Safety (S.T.E.P.S.) program. The system we developed is now used as the basis for other restricted distribution systems, including the one for Accutane. We understood the thalidomide victim community’s resistance to the drug’s availability, and our head of marketing and I visited them at their headquarters in Canada to explain our plans and perspective. That visit is the subject of a PBS documentary and a New York Times Magazine article. But that’s another story.

The next chapter of the Celgene story involves the acquisition of our first physician, Jerry Zeldis. Zeldis, a brilliant and eccentric physician and scientist, had received his M.D.–Ph.D. from Yale and had taught at Harvard. He was hired at Celgene to establish the entire medical infrastructure prior to approval of the drug; at this he was extraordinarily successful. He approached his first mission—to understand the scope of thalidomide’s clinical activity—both mechanistically and via hundreds of trials on diverse diseases. His research established the foundation for the targeted development of the next, more potent generation of compounds. Zeldis brought an astonishing degree of insight, creativity, and medical knowledge to the process and built an infrastructure that now includes dozens of clinicians worldwide. And perhaps most important his sense of ethics sharpened Celgene’s focus on the patient as the ultimate customer whose well-being was paramount.

Around the same time David Stirling made a great discovery. Back in the days of Celanese, Stirling (a brilliant and broadly trained biochemist) had focused on the functionalization of hydrocarbons, specifically using the enzyme methane monooxygenase. Stirling discovered an analog of thalidomide, now called Revlimid, that has an amino group at a specific position (any other position led to loss of activity) and lacks one of the carbonyls of the phthalimido group. In vitro assays showed this compound to be orders of magnitude more effective than thalidomide. (Incidentally, neither thalidomide nor Revlimid is particularly effective in animal tests. Traditionally these compounds would have been passed over for that reason alone.) Studies demonstrated that Revlimid was not a teratogen, nor did it have the peripheral neuropathy that proved so troublesome with thalidomide.

Revlimid entered clinical trials and obtained almost unheard-of rates of response in a number of diseases. Evaluations in hematological malignancies in clinical trials showed a profoundly active drug that could resolve chromosomal abnormalities as well as clinical symptoms in myelodysplastic syndromes (approved for patients with a deletion on the short end of chromosome 5 at the end of 2005) and demonstrated a profound response in multiple myeloma (approved in June 2006). And these examples only scratch the surface of the compound’s activity. Dozens of ongoing trials are taking advantage of its mechanisms for the potential treatment of amyloidosis, myelofibrosis, chronic lymphocytic leukemia, non-Hodgkin’s lymphoma, and a host of others. Trials are also evaluating Revlimid in non-oncology indications, such as severe neuropathic pain, suggesting that we might be close to establishing a new treatment paradigm for these very poorly treated diseases.

I strongly believe in the role of research; at the end of the day research is what creates value. And that value is inherent in the benefits to patients. Without those benefits Celgene as a company is irrelevant. Our commitment to research has led us to acquire a leading private intracellular signaling company, thereby giving us a leading position in kinases. We also acquired a stem-cell company that focused on placental stem cells as a way to exploit our molecules’ interactions with and control of these unique cells. We are committed to integrating the science underlying these areas to ensure that we continue to develop new therapies.

And the business? I’m proud to say that Celgene produced revenues of over $500 million in 2005 while providing free drugs to over 10% of our patients in that year—one of the highest percentages in the industry. We’ve been profitable for 13 straight quarters. Our massive investment in R&D topped $190 million in 2005.We have established operations in over a dozen countries so far and have hired some of the best and brightest around the world. Our esprit de corps is palpable: you only need to walk the hallways of Celgene to pick up the sense of excitement. And has the stock market noticed? Yes, thank you. Last year we were the best-performing stock on the NASDAQ 100. Our market capitalization is now around $14 billion, making us the fifth-largest biotechnology company in the world.

Time and time again we faced adversity from every direction. We had no financial resources, so we raised money; we had no people with pharmaceutical experience, so we learned and hired experts; we had no appropriate distribution system, so we created one; there was no precedent for the sale of such a notorious drug, so we established one; there were no treatments for these diseases, so we developed them; there was no precedent for building a major pharmaceutical company from such a base, so we did it. What have I learned from all of this? I’ve been part of establishing a unique company where people and ideals are valued, extraordinary achievements are expected and delivered, and employees understand the direct impact a single person can have on the greater good. The paradigm is to do well by doing good. It’s been my good fortune to be surrounded by people who believe this as fervently as I do.