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hepatitis C and cancer. Those ideas are now well on their way to fruition, with a couple of important new drugs on deck for approval at the FDA.
For sure, Gilead isn’t the most admired company in basic research, and it has done a couple of ill-advised acquisitions. But it is No. 1 in HIV treatment, and changed the world by helping turn HIV from a terminal diagnosis into a manageable, chronic disease for people in developed countries. It is widely admired for its business acumen and execution. John Martin is the only CEO the company has had during this growth phase, so it hasn’t yet proven it can successfully handle a transition of power. Gilead’s valuation looks frothy to me—$114 billion market cap, and a price-to-earnings ratio of 41 for the trailing 12 months. But is it built to last? Undeniably.
Illumina. The San Diego-based maker of genetic analysis instruments (NASDAQ: ILMN) is the dominant player in genomics, the maker of lab instruments and consumable reagents that biomedical researchers and diagnostic companies rely on every day. This is a technical, competitive, fast-moving field at the intersection of biology and technology. Many companies have tried and failed to attack Illumina on a number of fronts. Few in the public recognize its name, but as the key enabler of the era of genomic medicine, Illumina is in a position to have a greater impact on the world over the next 20 years than any one drug company.
Culturally, it is widely admired (and in many circles, feared and loathed) for its aggressiveness. When its independence was threatened by a hostile, low-ball takeover bid from Roche, it fought back and won. A little more than a year later, it continues to crush Wall Street sales forecasts, and its stock has doubled since the failed takeover bid. Still, Illumina has only been around 15 years. A single CEO, Jay Flatley, has led the company to this enviable perch, so it hasn’t yet proven that it can sustain greatness after he leaves, like, say, GE has done with multiple generations of CEOs. But Flatley, 60, has recently been adding a lot of depth to his management team, which increases the company’s ability to tackle multiple opportunities at once, and provides an opportunity to develop the person who will run Illumina after he’s gone.
Genomic Health. The Redwood City, CA-based company (NASDAQ: GHDX) is widely admired in diagnostics because it proved to skeptical insurers that diagnostics aren’t just cheap commodities anymore—they provide information about health that’s quite valuable. Genomic Health has continued to thrive and grow under two CEOs—Randy Scott and Kim Popovits. It is now rolling out new iterations of its original OncotypeDx product that predict the risk of recurrence for patients with prostate and colon cancer, proving it’s not a one-hit wonder in breast cancer. By showing the way in molecular diagnostics, Genomic Health has inspired other entrepreneurs to think big about how new instruments can be used to better predict and prevent disease before doctors have to turn to high-priced and often-toxic therapies. The company could be highly profitable tomorrow if it wanted to be, but instead it chooses to get by on low margins while continuing to invest in the future. It’s a sure sign of a company with a view toward long-term excellence.
There are a whole lot of other companies that might not check every box on the list of “visionary” companies, but they do appear to have the diversification and resilience to be “built to last.” Companies like Amgen, Celgene, Biogen Idec, Regeneron Pharmaceuticals, Vertex Pharmaceuticals, Alkermes, and BioMarin Pharmaceuticals all have strong diversified product lineups and pipelines to last for the long run. Mid-sized companies that depend heavily on a single hit product—Alexion Pharmaceuticals, Cubist Pharmaceuticals, Seattle Genetics, Medivation, Pharmacyclics, Incyte—still have more work to do before they can claim they are truly built to last (remember Ariad?).
Despite the trend toward more lean and mean investor-friendly “virtual” companies, there are still some small development-stage biotechs that aspire to long-term greatness. Members of this group—Alnylam Pharmaceuticals, Infinity Pharmaceuticals, Agios Pharmaceuticals, Sarepta Therapeutics, OncoMed Pharmaceuticals, Epizyme to name a few—all need to prove they can first get a single product over the FDA finish line and persuade insurers to pay for it before they can execute on their grander long-term visions.
But no company accomplishes anything big without first dreaming big. The biotech industry is fortunate to still have some companies that dream about more than next year’s big acquisition/transaction. They dream about, as Collins and Porras said, making “an indelible imprint on the world.” That’s something worth all the time, money, and risk that come with the territory in biotech.
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