A global pandemic might seem like a crazy time to change chief executives. But don’t tell that to Vertex Pharmaceuticals — or the Boston biotech’s shareholders.
Jeff Leiden handed over the CEO’s office to his chief medical officer, Reshma Kewalramani, last week, fulfilling a succession plan more than a year in the works. Vertex shares kept climbing, to an all-time high this week; it was one of the few Massachusetts stocks to rise during the stock market free fall in the first quarter.
What’s their secret? Well, it’s really not that much of a secret at all: Leiden chalks the successful transition up to proper planning. Of course, he had no idea the coronavirus would upend the world order. But he laid the groundwork for a gradual transition — he stays on as executive chairman for three years — and built up extra inventories of cystic fibrosis treatments and redundant supply chains that could withstand interruptions. (Vertex’s manufacturing plants are still operating during the crisis.)
As a result, Vertex pledged on March 27 that it will stick to its business outlook for the year, with more than $5 billion in revenue expected. It also said it had more than enough drugs to meet the needs of cystic fibrosis patients. However, it conceded that a number of clinical trials for new medicines would either need to shift to “virtual” clinic visits and home care, or be put on hold.
Investors seemed more impressed about the forecast, and less worried about the trials. The stock, in general, kept rising, reaching an all-time high of $267.45 during intraday trading on Tuesday, before losing some ground. (The shares closed down 1 percent on Thursday, at $246.61, though they’re still up 12 percent year to date.)
Vertex has come a long way under Leiden’s leadership. He was named CEO in December 2011, less than a month after rival Gilead reached a deal to buy Pharmasset, a company with no drugs on the market but one treatment that showed promising results for hepatitis C. This is important because Vertex had just built a billion-dollar franchise around its own hepatitis C treatment, Incivek. It did not take long for Gilead to outmaneuver Vertex with a better drug. By 2014, Incivek was done, and Vertex walked away completely from that business.
Leiden was determined to ensure the company would not make the same mistake. While building the cystic fibrosis franchise, Leiden said, the company worked continually to study better treatments. Its fourth treatment for the disease, Trikafta, won federal approval in October. The drug could help 90 percent of those suffering from cystic fibrosis around the world, making it the most effective treatment on the market.
Meanwhile, Vertex is diversifying, with drugs in clinical development to treat five different ailments, in addition to cystic fibrosis. Vertex deliberately focuses on specialty markets that don’t require much salesmanship; fewer than 20 of Vertex’s 3,000 employees are sales reps for the cystic fibrosis drugs. This enables the company to spend more than 70 percent of its operating expenses on research and development, an unusually high number for a biotech of its size.
Going forward, Leiden will focus on government relations and business development. Also on his to-do list: getting a new cell and genetic therapy facility in South Boston built and running next year, and helping the company respond to the pandemic right now. Kewalramani will handle the day-to-day operations as CEO. This will be a full-time chairmanship, although Leiden hopes to pare back his commitments to Vertex over the course of the three-year transition.
Leiden has emerged as one of the Boston business community’s most prominent civic leaders. Vertex has taken a major role in helping the Boston public school system with science education, for example, and Leiden helped launch the Boston Resiliency Fund, to raise and distribute more than $22 million to help charities in the city respond to the coronavirus. (Vertex has committed $5 million to address the pandemic, including $1 million for the Resiliency Fund.)
Come this time next year, Leiden will chair the Massachusetts Competitive Partnership, the group of top corporate executives that convenes regularly to brainstorm ways to guide the state’s economy. As part of that group, Leiden helped usher in a new crop of digital health startups, to seed the next generation of leaders in the field; Leiden will take over for current chairman Bob Reynolds on Jan. 1.
The mark of a strong leader: someone who leaves an organization in a much stronger position once it’s time to hand over the reins. Judging from Vertex’s stock price, investors are betting that Leiden has done exactly that.