It seemed like a disaster. In July, Wyeth BioPharma — which everyone, inside the company and out, calls Wyeth Biotech — released clinical results showing that its much-touted Alzheimer's drug, bapineuzumab, had failed to meet expectations. Papers screamed with headlines like Wyeth May Be Dead Money After Alzheimer's Setback. Some analysts raised doubts that the drug, which had been seen as a potential blockbuster, could get FDA approval. Its parent company's share price dropped more than 10% in a day.
Yet the mood at Wyeth Biotech's Andover, Massachusetts, research campus remained upbeat, the vibe more rah-rah startup than uptight, market-obsessed Big Pharma. Huge gambles and the constant possibility of failure are integral to the unit, the product of an unconventional decade-long experiment at its parent, pharma giant Wyeth Pharmaceuticals. Most pharmaceutical companies steered clear of biotech back when its methodology — cultivating living cells and using them to churn out complex, large-molecule drugs — was still being perfected. But Wyeth took a big risk. In the 1990s, it acquired two of the country's most promising biotech companies, Genetics Institute and American Cyanimid. Over the following years, it combined them into Wyeth Biotech and spent more than $3.5 billion to grow them.
The result has been a rich symbiotic exchange. Fed by the resources of its parent, Wyeth Biotech has blossomed. And the upstart unit has changed Big Wyeth, too, persuading managers to emulate its ambitious approach and rewarding employees not for showing up but for performance. It has also produced some of Wyeth's best-known, most-lucrative drugs, including the pneumococcal vaccine Prevnar ($2 billion in revenue per year) and rheumatoid-arthritis injection Enbrel ($3.5 billion). Even with disappointment over bapineuzumab, there are scores of biotech products in the pipeline, from anti-inflammatory drugs to treatments for cancer, and "40% to 45% of our revenues now come from biotech," says Mike Kamarck, Wyeth's president of technical operations and product supply. "In a year or two, it'll be more than half." Wyeth as a whole is performing well despite challenging market conditions. Profits have risen 12% in the past two years. In July, the company hiked its earnings guidance for 2008, and in October, it confirmed it was on target to make those numbers.
Perhaps the best measure of Wyeth's biotech success is that other Big Pharma companies are now trying to follow suit. In October, Eli Lilly won a bidding war with Bristol-Myers Squibb for ImClone, a prominent biotech company with several cancer drugs in its pipeline, with an offer of $6.5 billion. In July, Roche made a gargantuan $44 billion bid to gain full ownership of biotech leader Genentech, in which it had a partial stake. And GlaxoSmithKline announced that it would focus more on growth areas like biotech. But in a Credit Suisse report issued last fall, research analyst Catherine Arnold gave Wyeth an edge, calling it "one of the most attractive targets in the global pharmaceutical space" and citing the strength of the company's biologics products as well as its research pipeline.
Wyeth's biotech focus was born of uncertainty within the company. In 2002, a government-sponsored trial of one of Wyeth's flagship products, Prempro — a drug designed to relieve menopausal symptoms — ended prematurely for safety reasons. "It was one of our biggest products," Kamarck says, "and it had its legs taken out from under it."
Amid the turmoil, Bernard Poussot, then president of Wyeth's pharmaceutical division and now CEO of the entire company, pondered the firm's biotech gamble — and decided to double down. He felt that large-molecule drugs, which can be endlessly customized, would eventually transform the industry. "The small-molecule world was shrinking in terms of innovation," Poussot says. "With large molecules, you can be a lot more specific in your treatment approach — you can correct a lot of deviations at the cell level."
But when Poussot floated his biotech hunch in meetings with senior management, he met resistance. "The question was, 'Can we actually do this?' " Kamarck says.
Poussot parried the naysayers with a vehement "Yes!" and an unprecedented gambit. In 2003, to build the company's biotech focus, he created a new business unit devoted to marketing Wyeth Biotech's products — a move meant to send a message about the future of the company as a whole. The biotech-business culture that had fostered so much innovation needed to be allowed to flourish. "It's almost like academia," says biotech-project specialist Lisa Housiantis. "You're given the freedom to try out your ideas."
What nobody expected was that the biotech unit would send not just products and revenues but also strategic cues to the parent company. When Kamarck spearheaded a program to give performance-based bonuses to workers at a Wyeth Biotech facility in Ireland, suits at HQ initially scoffed. "They said, 'Why would you even think of giving a bonus to plant workers?' " Kamarck recalls. But when the Irish workers met all of their stretch performance targets without logging a single hour of overtime, those skeptical senior managers started paying attention. Today, Wyeth's traditional pharma plants in China and Spain are implementing reward-driven compensation programs modeled on those pioneered by the biotech unit.
Another biotech mainstay that Wyeth has adopted is building production equipment that can be repurposed. Wyeth Biotech's scientists have devised ways to manufacture many different drugs using a small number of processes. When one drug's production run is finished, the equipment can switch seamlessly to the next. This approach lowers the cost of drug development: If a drug doesn't work out, you don't have to shutter that production facility — it can be used to make something else. "Our typical changeover time from molecule A to B is less than seven days. Theoretically, I guess you could do 24 hours," says Wyeth Biotech senior director Kevin Hanley, gesturing at a cluster of many-valved production tanks in Andover. Similar multipurpose production facilities are now being built at Wyeth plants all over the world.
The folks at Wyeth Biotech learned lessons from Big Wyeth as well. Kamarck, a scientist by training, deployed a kaffeeklatsch strategy to ensure unity and strong communication among the corporate units. "Just having people from the different sides sit together and have coffee had a huge impact," he says. Hubert Scoble, Wyeth Biotech's VP of development, credits the interaction with teaching him about the importance of focusing research on products likely to find a market niche. Now, he says, "we don't work on something for five years and then say, 'What are we going to do with this?' "
The reputation of Wyeth Biotech and the resources of Big Wyeth have helped secure partnerships with small firms that can benefit the mammoth drug-making infrastructure while offering novel products that complement its internal pipeline. When Peter Thompson, president of the small biotech firm Trubion, was seeking a larger company to help develop some of his firm's treatments for autoimmune and inflammatory disorders, he chose Wyeth Biotech without much hesitation. "I had a sense that there was going to be a shared culture and understanding," Thompson says. "Wyeth made a significant internal commitment to biologics. That puts it in an enviable position now relative to its competitors."
That's the kind of thing the Wyeth Biotech folks love to hear — and it reinforces their belief in their relentlessly forward-looking model and process. "When I look back at our early roots, it's clear we were establishing a blueprint for where the biotech industry is today," Scoble says. "We're in the process of establishing the next blueprint right now."
What's the Difference?
> Biotech: Employs living microbes (often E. coli or yeast) to churn out complex "large molecule" drugs that are similar to compounds that occur naturally in the human body.
> Traditional pharma: With chemical-synthesis methods, produces "small molecule" drugs from plants or other materials. The drugs don't resemble substances found in the human body.
A version of this article appeared in the February 2009 issue of Fast Company magazine.