Sometimes it’s difficult to separate the identity of a company from that of its CEO. For example, when we think of Amazon and Microsoft, we naturally think of Jeff Bezos and Bill Gates. In the biopharmaceutical industry, it is hard to ponder Alkermes without thinking of Richard Pops.
When Pops joined the company in 1991, it had been in existence for four years. Founded by Michael Wall (now in his late 80s), Alkermes was focused on trying to understand how the blood-brain barrier worked. At the time, there were only about 20 employees, which he saw as an advantage. “I was a 28-year-old first-time CEO without a deep understanding of the whole company. Had I been put in a position of running an organization of 1,000 people back then, that would have been a recipe for failure.” His first huge challenge came almost immediately — the company decided to go public that year. He would go on to successfully navigate the company through various other tumultuous times, although he will be the first to tell you that he has made his share of mistakes over the years. Still, there’s no denying that he has been pivotal in helping Alkermes continuously adapt its business model into a global biopharma company valued at more than $5 billion with approximately 2,300 employees.
The Opportunity To Build “A Skyscraper”
Pops’ first job out of college (1983) wasn’t with a biopharma but with a startup telecommunications company. “That’s where I got the idea that young people can have a big impact in new industries when the rules are being written in real time,” he shares. Next, he was involved with a group in New York trying to understand and develop novel financial structures to bankroll biotechnology companies. It was there that he made the acquaintance of Michael Wall, founder of Flow Laboratories and Centocor, one of America’s first biotechs. “He was a really insightful, nonconformist type of fellow who wasn’t afraid of doing things that hadn’t been done before, and I suppose he saw something in me that wasn’t obvious to me or anybody else,” he says. In fact, when Wall first approached Pops about working at Alkermes, he didn’t even tell him what the job was. Pops was intrigued by the idea of working with someone like Wall, as he was considered one of biotech’s founding fathers. But it was only after several interviews, discussions, and dinners that Pops finally asked what job it was that Wall wanted him to do. “When he said ‘CEO,’ I laughed and told him to stop joking around,” Pops recalls. “But he was very serious.”
Once Pops agreed to do it, Wall provided him with an amazing amount of latitude. “We can do whatever you want,” Pops recalls Wall saying. “We can build it a little bit, package it up, and sell it to a pharmaceutical company, or we can build a ‘skyscraper.’” Pops responded, “Well, the reason I’m coming on is that I’m interested in building a skyscraper.”
Little did Pops know that one of the first and most significant steps toward building that large entity was about to happen within months of his accepting the job. “I smile thinking about it, because I believe it was at my first board meeting when we decided to go public,” he explains. So, in July of 1991, Alkermes launched its IPO, which Pops recalls being rather modest by today’s standards at a $60 million pre-money valuation. “We raised a bit of money, and that started the ball rolling on being able to expand our activities,” he states.
An Evolving Business Model
In the 1990s, there was a lot of excitement about the brain. In particular, Pops says, many people were interested in neurotrophic factors in the brain that could lead to regeneration neurons, opening up the possibility of treating neurological issues such as stroke or Alzheimer’s disease. The problem was that proteins are big and don’t get into the brain. This spurred Wall’s initial premise for building Alkermes. “He used to say, ‘Let’s not try to figure out all the recombinant proteins; everyone else will be doing that. Instead, let’s be the gate-keeper,’” Pops explains. Thus, Alkermes was originally founded to understand the transport systems and restrictive properties of the blood-brain barrier, which is the natural impediment to substances getting into the brain freely. In other words, Alkermes originally had a narrow focus of drug delivery not drug development.
In the beginning, the Alkermes business models expanded along two different paths — neuroscience, because of the company’s focus on the brain, and next-generation drug delivery, as getting things into the brain was a core drug-delivery problem. This twofold business model lent itself naturally to one of Pops’ core business philosophies — diversification. “If you are going to go through the energy of building a company, bringing all these people together, raising money, and making commitments to investors, then figure out a way to make sure it’s more likely to succeed than fail,” he explains. The way you do that is by not having everything depend upon a single scientific hypothesis, drug, or collaboration.
For several years, Alkermes continued expanding its “scientific bona fides” in both areas, ultimately leading to a phase where the company’s business operations were driven by collaboration. Part of this was the result of the company’s early focus on drug delivery, while the other was merely a function of the times. “There was a time in the 1990s when getting funding was really difficult and the cost of capital extremely high,” he explains. As such, Alkermes started to focus on establishing collaborations and developed several licensing relationships with Big Pharma companies (e.g., Eli Lilly, J&J). This led to the company’s experience with a wave of product approvals, along with its first recurring cash flows. It also led to a series of acquisitions starting with Enzytech (1992), which inspired the acquisition of Medisorb Technologies (1996), providing Alkermes with its flagship technology for long-acting injectable drugs. Alkermes acquired Advanced Inhalation Research (AIR) (1999), which came along with its pulmonary drug delivery technology. Each of those platforms led to more collaborations and more business options for the company. But along the way, the idea began to shift. “As we perfected these technologies and built the manufacturing facilities in which to make them, we thought, ‘Why do these just for other pharmaceutical companies when we should be applying them to our own proprietary products?’” he elaborates. That led to Vivitrol, first approved by the FDA in 2006, for the treatment of alcohol dependence, and in 2010, to prevent relapse after patients with opioid dependence have undergone detoxification treatment. “Vivitrol was derived from the work we had done with J&J on RISPERDAL CONSTA for schizophrenia,” the CEO adds. But prior to these approvals, Alkermes and Pops would learn from the collaborations with Big Pharma.
Unequal Collaborations Provide Motivational Moments
It was 2002 when Alkermes experienced a true brush with death. The company was manufacturing RISPERDAL CONSTA — an injectable, long-acting drug incorporating Alkermes’ drug delivery technology — for J&J. The drug was widely regarded as an approvable product, as it was based on Risperdal, an oral form of the medication that had been on the market for nearly 10 years. But in June 2002, J&J received a letter of rejection from the FDA for RISPERDAL CONSTA. While the news caused J&J’s stock to dip a mere 3 percent, Alkermes’ stock plunged nearly 70 percent, an experience Pops revisits almost annually via a course taught at MIT (see sidebar — The Opportunity To Annually Relive Alkermes’ Darkest Days). “We had to lay off several hundred people, as it wasn’t clear the drug would be approvable,” he relates. A few months later, Eli Lilly backed out of funding Alkermes’ inhaled insulin program. “That funding was a major part of our R&D budget. Being impressed by collaborating with Big Pharma companies was probably my biggest mistake as CEO.”
One of the things Pops was most strident about early on was that Alkermes’ collaborators be of high pedigree (i.e., Big Pharma), not tier-two or tier-three sized pharmaceutical companies, and thus why it had deals with the likes of Genentech, Eli Lilly, Pfizer and J&J. “It can be amazingly seductive for a young company looking for some type of validation for the quality of its science to seek a mark of approval from Big Pharma,” says Pops. But a shared vision is important. “Having a lot of the company’s future tied to a partner that may not have your best interests in mind was a really important lesson to learn.”
These experiences also made Pops question to what extent Alkermes needed such collaborations. “In the early days, you need them because you need access to infrastructure,” he explains. “You don’t have something, it’s too expensive to build, and so you want to borrow it from a pharmaceutical company partner.” But the company and its leader learned a lot from their collaboration experiences, especially during that challenging time when Lilly halted its R&D funding. “Those became motivational moments for us. We were determined to become big and powerful enough to be able to do our own drug development and commercialization without needing a partner,” he elaborates. “Once you no longer need collaborations out of necessity, then you can partner to expand value and create opportunity.”
One of those opportunities came in 2011, when the company acquired the Irish operations of Elan. “This provided a significant amount of cash flow and additional oral drug delivery capabilities,” Pops shares. The acquisition also netted Alkermes a CMO, which it wound down fairly quickly. “We still have some vestigial manufacturing contracts, but it’s not central to our business at all,” he emphasizes. The increased cash flow enabled Alkermes to begin funding more of its own internal R&D, leading to programs for the development of ALKS 5461 (major depressive disorder), ALKS 3831 (schizophrenia), BIIB098 (MS), ALKS 4230 (immuno-oncology), along with a whole host of molecules to come. “We’ve actually made the transition from being a drug delivery company driven by collaborations to a research-based company, to a partnering and royalty-based company, to a proprietary products-based company with our own U.S. commercial capabilities as well,” he concludes.
Every company has a corporate culture, and some are certainly better than others. When asked if the leadership team had taken a proactive approach in defining and developing the Alkermes culture from its earliest days, Pops admits such was not the case. “A couple years ago, some of our senior folks were talking about how much the company was expanding and thought we should make a concerted effort to capture and preserve the elements that make this place so special,” he shares. This led to a culture project, an initiative Pops attests to initially being against, because to him it seemed self-evident. But the process of articulating the Alkermes culture turned out to be incredibly valuable. “It wasn’t an exercise in architecture (i.e., building a culture), but one of archaeology (i.e., discovering what it is),” he explains. “And once you can identify it and put it into words, then you are better able to perpetuate it.”
The company took a bottom-up approach. “We talked to hundreds of people throughout Alkermes, from manufacturing in Ohio and Athlone, to people out in the community working with patients, families, doctors, and folks working in R&D,” Pops shares. “I didn’t want this to be an exercise in which the tablets are brought down from the mountain saying here’s what our culture is, complete with a poster that gets put up in a lunchroom that everybody snickers at.” Pops says it was interesting to see the resonance across the company as to what people felt drove Alkermes. “We had to come up with a way of capturing the Alkermes culture in words that are succinct,” he continues. The purpose of the company involves only three things — great science, deep compassion, and real impact. “Science is the essential fabric of what we do,” he says. “Compassion goes back to the patients and the families we are looking out for. But none of it matters unless we have a real impact.”
As the team began analyzing the culture that had evolved, Pops had a realization. “It showed how important having a truly noble mission is for building a company to withstand adversity,” he explains. For example, Alkermes has built a business focused on treating patients whom many have abandoned or ignored, such as people with serious mental illness, depression, schizophrenia, and addiction. “Yet, interestingly enough, every family knows folks suffering from these conditions,” he continues. According to Pops, when you take on a mission that is different from that of many biopharmaceutical companies of today (i.e., very high-priced medicines for very small patient populations), it becomes a significant point of differentiation.
The culture exercise made it clear that the company is in the business of doing so much more than making proprietary medicines commercialized and manufactured by Alkermes. “We’ve had to create a set of capabilities to be able to interact with policymakers, government officials, criminal justice systems, and the world in order to change treatment and systems for the benefit of patients,” he concludes. “And when you do work that’s inherently good and not just profit-oriented, it creates an enormous amount of motivational power for your staff.”
In 2002, J&J received a letter of rejection from the FDA for RISPERDAL CONSTA (an injectable, long-acting drug using Alkermes’ drug delivery technology), which Alkermes was manufacturing. That news sent Alkermes stock plummeting nearly 70 percent. This was an extremely challenging period for the company, an experience Pops says he gets to relive almost annually. “A number of years ago, professors from the MIT Sloan School of Management approached me about writing a case study for two courses about a moment when something calamitous happened,” he shares. Then there’s a day when Pops shows up to class, and on that day one of the students plays the role of Alkermes CEO at that point. The student CEO gives a presentation to describe the problem, while the rest of the class represents the company’s board members, and together they determine a plan of action.
After about an hour, the real Richard Pops is then invited to share what actually happened. The executive notes the class almost invariably gets it wrong, wanting to analyze this or that or get more data. “I make the point that when bleeding from an artery you have to act,” he affirms. “There are two things you have to do, cut expenses and raise more money.” But how does a company raise more money when the capital markets have just rejected the company as evidenced by taking the equity per share value down 70 percent? These are the challenges Pops strives to help the students understand. “Managing in crisis inevitably challenges a leader on the basics of management, such as communicating with your employees and shareholders, and figuring out what your action plan is to keep the company going,” he contends.
There are all sorts of variables that can affect the trajectory of a biopharmaceutical company. “When you walk into work every morning as a leader, you’re not there to just oversee things proceeding as planned but rather the opposite,” he contends. “You’re dealing with what’s changing, what’s going wrong, and making sure everyone understands how to operate in such an environment.”