Late in the afternoon of December 28, 2001, the fax machine whirred at the SoHo offices of ImClone Systems, spooling out a stunning announcement. Citing shoddy data and poor research design, the FDA had spiked the company’s application to file for approval for its much-anticipated cancer drug, Erbitux. For the officers and employees of the hot young biotech firm, it was a very bad day — and the start of two very bad years.
One month later, in January 2002, things got worse. Federal regulators announced that they were launching an investigation into possible insider trading by the company’s founder and CEO, Sam Waksal. Within the company, shock was compounded by a sense of betrayal: Waksal had attempted to unload his stock just before the FDA’s announcement. When that news surfaced, it undermined investors’ belief in Erbitux’s efficacy, casting a pall over the entire enterprise.
But the worst was yet to come. In March 2003, after an excruciatingly painful effort to put the company’s house in order, ImClone’s officers took yet another devastating call from the Feds. Improper accounting for taxes on stock options granted to the Waksal brothers (Sam’s brother, Harlan, had been the company’s CEO at the time) and other executives meant the company would need to restate its earnings for 2001 and possibly for other years as well. It could be on the hook for taxes of $60 million, before penalties and interest. What’s more, in April, ImClone was warned by Nasdaq that its stock could be delisted if its 10-K wasn’t filed by June 23, potentially triggering the collapse of all that ImClone’s staff had worked so hard to build.
“When the stakes are that high, it’s pretty nerve-racking. It’s pound- your-head-against-the-wall.”
“We did everything we could to help, but ultimately it was outside our control,” says Daniel Lynch, ImClone’s incumbent CEO. “When the stakes are that high, it’s pretty nerve-racking. It’s pound-your-head-against-the-wall.”
Six hours short of the deadline, auditors finally certified the company’s financials, averting the crisis. Despite the accomplishment, nobody suggested breaking out the Veuve Clicquot. “I wish I could tell you there was some wild celebrating going on, but we were practically dropping from exhaustion,” recalls Michael Howerton, the company’s chief financial officer.
Since then, the company, led by Lynch, its former CFO, has staged a remarkable turnaround. In February, Erbitux was approved for the treatment of colorectal cancer. In the first quarter of this year, ImClone announced its first significant profits; in an industry in which only some 10 or 15 biotechs are profitable, it was a stunning achievement — especially for a company that had been nearly written off as dead. The stock has rebounded from a low of $5.24 to recent highs in the mid-$80s — an ironic turn of events given that Waksal’s friend, Martha Stewart, ditched her shares when they hit $60, prompting a tabloid-worthy scandal that has put her own company — and her liberty — at risk.
Unlike his predecessor Waksal, a charming and charismatic (albeit felonious) man who threw celebrity-studded parties at his art-filled SoHo loft, Lynch is a mild, methodical guy, a bureaucrat from central casting who commutes from Greenwich, Connecticut and is happiest working behind the scenes. Stepping up, for Lynch, was the unsettling equivalent of being an understudy thrust into the spotlight before a room full of critics. Low-wattage but resolute, earnest and honest, Lynch is unlikely to bring home an Oscar, but he’s unquestionably the man you’d want looking after the box-office receipts.
While ImClone flew high on its stellar scientific credentials, Lynch discovered that the company’s back-office functions — finance, legal, and general management — were in disarray. As the tempest swirled around him, Lynch knuckled down with a program low on headlines and high on painstaking grunt work: Set objectives, communicate objectives, meet objectives. Repeat.
Truth is, courage is sometimes evidenced in small, painstaking advances rather than dazzling acts of derring-do. It’s often not about the cavalry gloriously riding to the rescue, but a band of determined foot soldiers, exhausted and demoralized, slogging through the trenches, spurred on by a cause that’s big enough and important enough to override the little voice inside that says, “Run like hell.”
For two years, Lynch and his colleagues labored to right the ship. Very few of the company’s 440 employees left, despite bad news that wouldn’t stop coming, a sinking stock price, and a barrage of negative publicity that made them popular fodder for gossip columnists. They stayed, he says, for one overpowering reason: They believed in their drug. “What motivated me to get up in the morning was knowing that if I could help get this drug approved, it would improve the lives of patients with cancer,” he says.
As the news went from bad to worse to nail-bitingly awful, the spirit in the office echoed the old saw, “That which does not kill you only makes you stronger.” ImClone’s trouble, Howerton says, “instilled more camaraderie than it destroyed. It was almost a morale booster. Because we thought, ‘If we can rise to meet this challenge and succeed, we’re incredible.’ “
Lynch and his brave-hearted crew finally had their celebration earlier this year, when the FDA approved Erbitux for patient use. Even the buttoned-up CEO risks a smile at the memory. “When it actually happened, it was mind-blowing. Like having a child.” This time, there was champagne.