00:00:00EVERSON: Mr. Termeer, let's start with your early years.
TERMEER: I was born in 1946, in a town in the Netherlands, called Tilburg. I
00:01:00lived there through the age of nineteen or twenty. Tilburg is a medium-sized
town--it had a population of 140,000 when I lived there. It was the eighth
largest town in a very small country.
EVERSON: Is Tilburg the main town in the region?
TERMEER: No. A better-known town is Eindhoven, where Royal Phillips Electronics
has its headquarters. The other towns are Breda and Den Bosch. All are about the
same size. Tilburg is in the south of the Netherlands, close to the Belgian
00:02:00border, between Amsterdam and Brussels. There is a university [Katholieke
Universiteit Brabant] that focused primarily on social sciences like economics.
Now it has many different faculties.
EVERSON: Tell me about your parents.
TERMEER: My mother is still alive. She's ninety-two. My father passed away eight
years ago. My mother was born to Dutch immigrants in Strathmore, Alberta,
00:03:00Canada, a small town outside of Calgary, on the prairie. It is lovely. The space
is amazing, with big horizons. My grandmother was a great adventurer. She did
not want to sit still, and it was this urge that convinced her husband, my
grandfather whom I never met, to go on this immigration adventure and start a
new life. They were very happy. My mother still recalls meeting Indians. The
family had a ranch, and lived in Strathmore until my grandmother began having
difficulties with her eyes. The doctors felt that the very sharp air in the
Rocky Mountains was not good for her. She needed the Dutch clouds. So, the
family went back to the Netherlands when my mother was about six or seven years
of age. It was sad in a way, because her father had given up an interest in the
family business when he left the Netherlands. When he returned from this
00:04:00adventure, he had to start from scratch. My mother's brother actually went back
to Canada many years later. He had been born in Strathmore. When he was in his
thirties, he left the Netherlands with his family and went back to Calgary. He
00:05:00died there not long ago. My mother's family was always very connected to Canada.
My father was born in the Netherlands, in Tilburg. His father had a small shoe
00:06:00manufacturing operation, and he became active in it. The family has a book
tracing the Termeers back five hundred years. It's not a prominent family. It's
just a normal family, but they wanted a way to reconstruct the family roots. My
00:07:00mother and father met in Tilburg and eventually produced six children. I was
number four. The first two were girls, then four boys. I was the second boy. The
first four were each one year apart, and then there was a five-year gap before
the last two. In good Catholic fashion, my mother had two miscarriages. That's
why there was a hole. My siblings are mostly still in the Netherlands. My eldest
sister has lived in different places around the world, but settled long ago in
Rouen, France. Most of my brothers and sisters are connected to France. They
have second homes there. The French connection grew over time, for no particular
reason other than that it is a pretty country. Now we're divided up between
00:08:00France and the Netherlands. I'm the only one over here.
EVERSON: Do you go back?
TERMEER: Often. We're close. We have all done well professionally and are very
independent, but we like to get together. We get together for big reunions and
for smaller reunions, just brothers, sisters, spouses and my mother. We also get
together with all the grandchildren--a big crowd. We meet quite regularly, and I
00:09:00sometimes fly them over here.
EVERSON: Was your mother employed?
TERMEER: No, she was a housewife.
EVERSON: What was family life like? What roles did things like music or religion
play in your family?
00:10:00TERMEER: My mother was a good pianist. All the kids were asked to play the piano
too. It was not successful, but making music was always great fun for the whole
group. I played the trumpet for a little while, not very well. I tried the
violin because my father had played it. That was too hard on everyone's ears. I
never became a music person. But my parents really liked the performing arts. We
00:11:00regularly went to concerts, ballets, and the theater as a family. We were quite
Catholic. Our family would sit in the front row of the Catholic Church, every
Sunday morning, and we went to a Catholic school as well.
EVERSON: Was that a private or a public school?
TERMEER: I don't remember whether there was a distinction. It was clearly run by
priests and people in black outfits. The Catholic Church probably had a great
00:12:00deal to do with how it was run. Whether it was financed publicly, I don't know.
There was a very strong Catholic influence on our schools. They were very good,
highly disciplined. I actually have good memories of my time in primary school.
00:13:00I went to St. Thomas and then St. Christopher. There was also the Montessori
school that each of us attended before primary school. I don't remember much of
00:14:00that. My high school was St. Odulphus, also Catholic. When I came out of high
school, I went into the Air Force. National military service was mandatory at
that time in Holland. I was fortunate to be selected to go to officer's school.
If you were a regular soldier, you had to go for twelve months, or if you became
00:15:00an "under officer"--a sergeant--you stayed for eighteen months. If you became an
officer, you had to stay for two years, but you got real training and were put
in charge of a number of different things. I stayed two years and became an
officer. It was a very important experience for my future. After two years of
service, I went to university to do economics.
00:16:00EVERSON: Did you have to travel away from home for your military service?
TERMEER: I went to Breda, which was pretty close to home, for basic training and
boot camp, and then to a nearby airbase, but I spent about a year and a half in
00:17:00the Hague, again on an airbase. I wasn't a pilot. I was in charge of logistics,
materials inventories, and the warehouses at this base where a lot of plane
repairs were done. When you're young, being asked to take responsibility for
managing people or operations is a magnificent experience. I learned a lot.
Thousands of things needed to be managed and controlled in order to keep the
planes in the air. We had a large group of people that did this work, many of
them professionals. I was in charge, and I was a kid, nineteen or twenty years
old. Fifty-year-old sergeants had to acknowledge me as an officer. They resisted
a little bit, and tried to challenge me, to see whether I was really worthy of
00:18:00being the boss. It helped me build a high level of confidence at an early age.
Even though I was young, I could manage and get along with people. I was able to
be friendly with subordinates while maintaining good discipline. Designing and
implementing data management systems was another great experience, because
computers were not well developed at that time. There were no national systems
00:19:00EVERSON: Do you mean inventory controls?
TERMEER: Inventory controls, replenishment processes, implementation of SOPs
[standard operating procedures], and all those kinds of things. For an
impressionable young man, the management experience was great. You can't learn
these things in school, and nobody in business would take the risk of putting
00:20:00somebody so young in there. The military training was a great experience, too.
There was continuous training in terms of basic health, survival, and military
operations. I had two great years in the military. They were formative to me in
terms of my self-confidence. I realized then that I wanted to run something. I
wanted to be in charge.
EVERSON: Was this the first time you had played a leadership role?
TERMEER: No. I had taken a leadership role before, at a much younger age, in the
Boy Scouts. I also decided at that time that I liked business, or the processes
00:21:00of business. I started to read Wall Street Journal-like newspapers and
familiarize myself with the world of business, even though there was a lot, of
course, that I didn't understand. I read about what was happening in industry.
EVERSON: When you were in the Boy Scouts?
TERMEER: Yes, even before I finished high school. I also played a lot of chess
in high school. I played it fanatically for three years--so fanatically that I
stopped doing my schoolwork. I failed for a few years because I was going to
00:22:00chess tournaments. When you're young, you're very impressionable. You become
successful at something, and people give you compliments, and you think, "This
is more important than studying." I bought books about chess and spent a lot of
time learning about the game, reading about openings, closings, and all of the
different plays. There was a fellow at the local university--which was then a
leading economics institution--a professor by the name of Max Eeuwe, who became
a world champion. He was well known because he was the first and only Dutch
00:23:00world champion in chess. He was a theoretician. It made an impression on me. I
felt that chess was really where it was at. Of course, it wasn't. It got so bad
that I would play chess in my head, and didn't really need the board. I would
sit quietly in class, so the teachers had no idea. They thought I was paying
attention, but I didn't hear a word they said. One day, my mother said, "Enough
is enough." She is a magnificent woman, very decisive. I woke up one day, and my
00:24:00chess pieces were gone, all the books on the shelf were gone. She said, "It's
over now. No more chess." She thought I would react terribly, and was prepared
to manage that reaction. She told the school I would no longer participate and
would no longer represent the school or the city. I must have realized that this
was not a good way to go on, because I was fine about it. I don't remember it as
traumatic. I've never played chess since. I read the chess column in the
newspaper, but I don't miss it.
EVERSON: That's a very decisive change.
00:25:00TERMEER: That period was important for me, and the sudden stop.
EVERSON: These were your high school years?
TERMEER: Yes--twelve, thirteen, fourteen. My parents were an enormous influence
on all of us, my brothers and sisters and me, at that time. They were talented
in dealing with kids, in giving them disciplined input while being warm at the
00:26:00same time. We were very fortunate.
EVERSON: You earned a BA in economics at the University of Rotterdam.
TERMEER: No. I never got a BA. There's no such thing in the Netherlands. You go
straight to the equivalent of a master's degree. I studied economics, and had to
write a thesis. Midway through the program, I went to England, to a shoe company
like my family's. They had many retail stores around the UK and throughout
00:27:00Canada, Australia, and South Africa--the Commonwealth countries. The company was
called Norvic. It doesn't exist anymore. They had a retail headquarters in
London. I went there to write about the early computerization of retail stores
and the economic effects.
EVERSON: This was your thesis?
TERMEER: Yes. I never returned to school in the Netherlands. I wrote the report,
which I submitted as a thesis, and then the company asked me to implement what I
00:28:00had proposed. It was very interesting. It was a relatively big firm. They had
hundreds of stores. They invited three companies to help them computerize their
operations because they couldn't keep track of their entire inventory -- they
had trouble monitoring, replenishing, and changing it. They invited IBM, ICL
[International Computers, Ltd.], and Cambridge Computer Services (CCS) to
develop plans. They put teams from each in a corner of a big conference room. I
had the fourth corner. We were competing, but it was a very friendly situation.
Over a period of a few weeks, each team had to develop a proposal for
computerizing operations. I gleaned what I considered the best of the best and
00:29:00wrote a proposal. When I handed it to management, they liked it best, and asked
me to implement it.
EVERSON: That's very impressive. Was the proposal your thesis or was it separate?
TERMEER: It was separate. The thesis was mundane. I can't remember much about
it. I remember the proposal because it became the first step that this company
took to computerize itself. I was in charge of it. This was my first real job,
my first real salary. They allowed me to choose one of the three firms to select
00:30:00the hardware, do the programming, and all of that. In the military, I had been
paid a little money, but not much. This was the first time I got money that
allowed me to live in a normal way. I stayed with Norvic for two and a half
years. They had manufacturing plants in East Anglia. I moved there and
computerized the factories. We became one of the first computer service
companies in that part of the UK. We started doing payrolls for competing shoe
00:31:00companies, and production planning. The department broke even. We were able to
service the company and other companies, as well. Norvic provided a very good
00:32:00service for free. This was 1968. I was at Norvic until 1971. When the company
accepted my proposal, I chose Cambridge Computer Services to assist with the
implementation. I traveled to Cambridge regularly to work with them. We
connected to a large computer in Cambridge through telephone lines. I learned
about computers as I went. My experience in the Netherlands had given me some
00:33:00insight into automation. My background in economics gave me some knowledge of
systems input. Back then, it was pretty straight forward. I wasn't a programmer.
I was really a systems engineer and a manager. I brought in programmers from CCS
to do the highly technical work.
EVERSON: Was systems engineering something that you learned in your economics courses?
TERMEER: Yes. I learned it in the military as well. Shoe manufacturing was
00:34:00similar. There were inventories that had to be replenished, and twenty-five
steps in the factory production of shoes, in which all kinds of different
materials are used. There were no spreadsheets then, but we invented a system
for ordering and keeping an inventory of materials.
EVERSON: Did you move to East Anglia as a full-time employee?
EVERSON: Did you eventually set up your own computer consulting service?
TERMEER: No. Norvic had departments that sold computer services to other
00:35:00companies, many of them competitors. We had to set up walls to make sure that
information didn't leak. That kind of stuff was very new. An East Anglia
newspaper wrote an article on the service company that grew within Norvic, and I
was interviewed for the first time. They were quite curious and I was excited,
particularly about being able to say, "We can service the company, but also
00:36:00generate revenues and actually break even as a department." It was a valuable
learning experience for running a business. The kinds of people I had to attract
were not those typically found in shoe factories. They were mostly young people.
We had lots of data entry work, so we trained unschooled people for that. That
was a good experience. Our system replaced a complex card system. At the London
location, there was a large hall full of card racks. Every card represented a
00:37:00pair of shoes--one of a hundred different styles and a particular
size--distributed among hundreds of retail stores. The cards had holes in them.
Indian and Pakistani ladies would work with them to sort out what was happening.
It was very charming to see, very colorful, but it was never timely, and always
EVERSON: IBM was one of the three firms you mentioned.
TERMEER: IBM and ICL. I don't know what became of ICL. They were taken over by a
00:38:00larger firm. IBM was there. We worked with the 370 processor, which was fast for
EVERSON: Were you setting up these systems from scratch?
TERMEER: Yes. My title was Group Systems Manager. In the process, I met my first
wife. I also met English people who had gone to business schools in the United
00:39:00States, and were asked by their business school to recruit potential students.
Those were the early days of international students attending American MBA
programs. That's how I ended up going to the United States.
EVERSON: Did you meet your wife in London?
TERMEER: No, I met my first wife in Norwich. We later divorced. Her name was
00:40:00Maggie. She grew up there. We were there for a short time, and then she joined
me when I came to the United States. We left in September 1971.
EVERSON: Were there people who influenced your decision to move?
TERMEER: Yes, particularly ex-MBA students who had become recruiters for
00:41:00American business schools. I met people from Cornell [University], Harvard
[University], and the University of Virginia. The University of Virginia [UVA]
person I got to know best because he also lived in Norwich. He convinced me to
go to UVA, which was then a new school. I wrote to all three schools, and
completed very long applications. In the end, I decided to go to UVA because
00:42:00they expressed a real interest in me. There were only five foreign students in
our class of one hundred and five, and I was one. They wanted to remedy the
shortage of foreign students, so they offered me a marvelous place to live. It
was very nice. I didn't know much about the University of Virginia. I didn't
know much about Harvard either, for that matter, other than the name, and I knew
nothing at all about Cornell. Going to UVA was by far the best financial
decision in the absence of real knowledge. The former students were very helpful
in the recruiting process.
EVERSON: Were these people hired recruiters?
00:43:00TERMEER: No. They were alumni who had been asked or maybe volunteered to look
around for students that could come to their school. They were competitive. They
really did their best to convince you that their place was the best.
Financially, UVA was much more attractive than the others. They gave me a home.
They gave me a scholarship for the first year and I had to pay something very
marginal for the home. I had always been self-sufficient growing up. I always
00:44:00paid my own way. I was never satisfied to go to a school to sit and then go to
my family for money.
EVERSON: Did you work in high school?
TERMEER: Yes. I worked for my family's business. I worked Saturdays and earned
as much as I could. When I was studying economics, I worked days and studied in
the evening. I learned a lot about economic systems at my day job. At Norvic, I
00:45:00had earned good money. I had a nice car and a good life. I saved up, and then
sold everything in order to support myself at UVA and buy a little car, but I
couldn't have done it without support from the school.
EVERSON: Do you remember the name of the recruiter from UVA?
TERMEER: John Baker, if I remember correctly. He was a well-known tennis player
and lived in Greenwich, Connecticut. He moved there after completing his MBA. I
00:46:00met him in the UK. I had never been to the US. It was a great adventure. I
arrived at JFK with my girlfriend, Maggie. We had five cases--four were hers,
one was mine. We sat innocently in the terminal waiting for a bus to Greenwich,
00:47:00Connecticut. We were meeting our host there. He was to take us to the city, and
make sure we got to Charlottesville, which was a long way. When the bus arrived,
we realized that my girlfriend's suitcases had been stolen. I had my case and
she had nothing. It was very sad. We were running around in a panic for a few
hours, and eventually took a later bus. That was a good lesson. We had no money,
00:48:00so we said, "OK, let's regroup." We stayed in Greenwich for two days, and then
took a Greyhound from 42nd Street. It was September, still very warm. The bus to
Charlottesville was filled with all kinds of colorful people. Those first
moments in a completely new country really made an impression on me. And that
bus trip took forever. In the Netherlands, you can get anywhere in half an hour.
Living in Charlottesville was a great experience. We had two good years there.
They gave me a place behind the William Faulkner house, an old slave cottage. It
had two floors. We lived upstairs. The room downstairs wasn't used. We quickly
00:49:00discovered a cultural difference. This was the South. They gave me the house,
but not to live in sin. There was frowning as soon as we arrived.
At orientation, they mentioned that I would have to work day and night because
00:50:00the program involved three cases a day and an examination every seventh day.
They said I wouldn't be able to look after my girlfriend, and that she could
only stay six months because she didn't have a student visa. If she married me,
all of that would change. So, two days after our arrival, we decided to get
married. We notified the school and our "big brother," a second-year student
whose family was looking after us. The family organized the wedding behind our
00:51:00backs. They said, "Don't worry about a thing." They organized a wedding on
Jefferson's old grounds. It was probably one of very few weddings to take place
there. It was quite lovely. They asked us what we liked. I said, "I like
classical music." My wife said, "I like candlelight." They put candles around a
beautiful, classic garden, and invited all of the students and faculty. Our
parents weren't there, but they made it magnificent. Somebody gave us a car, and
we got a room at the Holiday Inn in the Shenandoah Mountains for one night. We
00:52:00had new suitcases, of course. The wedding was a tremendously powerful statement
of welcome. Nobody knew us, and we had only been in the country a month. Giving
us that great embrace was, I thought, very impressive. That was my first
impression of the United States.
EVERSON: How did you find the MBA program over the next two years? Was it lots
TERMEER: Yes, and lots of fun. I did a lot of things on the side. They had a
consulting group, and I got some credits for doing that. I did some work at the
00:53:00World Bank and wrote my thesis there. I audited a course on international law. I
made great friends, learned a lot, and I loved the case method. All of it
convinced me that this was the right direction for me.
EVERSON: What about Maggie?
TERMEER: She did a little bit of babysitting and helped in some antique stores.
It was tough on her because I was extremely engaged. We had many friends, but
00:54:00she found it lonesome. Our parents came to visit, which was nice. I worked hard
because I had to earn a renewal of my scholarship for the second year. The
00:55:00second year was like the first with a few more electives. Between the first and
second year I went back to Europe to look for a job. I went to Unilever, the
consulting unit of The Economist magazine, and Royal Dutch Shell. They were very
unsatisfactory. They didn't have a good understanding of what an American MBA
00:56:00meant. That experience made me want to work in the United States. UVA had an
on-campus recruiting program. Eventually I ended up at Baxter Travenol.
EVERSON: Were you recruited straight out of your MBA?
TERMEER: Yes. I interviewed with all kinds of banks and consulting firms. I
didn't really know what I wanted to do other than get experience. I had a work
visa for only two years. It was a special kind of visa. I intended to go back to
Europe with American school and work experience, and to see what would come of
00:57:00it. My last interview on campus was with Baxter. They were looking for people
who spoke European languages and understood European cultures, to become general
managers in Europe. It was an attractive opportunity. We moved to Chicago late
in the summer of 1973. I started as an Assistant to the International Marketing
00:58:00Vice President. It was a rapidly growing company at the time. It seems very
small compared to where Genzyme is today, but they had about two hundred seventy
million [dollars] in revenues and were active globally. They made interesting
products: artificial organs, kidneys, blood bags, stuff like that.
EVERSON: Was this your first exposure to biological products?
TERMEER: It was my first exposure to healthcare and medical products. Baxter was
recruiting in five or six schools. Fortunately, UVA was one of them. Harvard was
00:59:00another, as well as the University of Chicago, and Stanford [University]. They
brought in students and made them assistants, creating a natural mentorship
program. Within six months to a year, the trainees would move on to more
permanent positions. The program was managed by the CEO, Bill [William B.]
Graham. There was a book written on it by Monica Higgins, a professor at the
Harvard Business School. It came out last year. She called us the "Baxter Boys"
because a disproportionate number of ex-Baxter people started biotechnology
companies. There is a big piece on me in the book.
EVERSON: The book was focused on careers?
01:00:00TERMEER: On career imprints. You go through a career in one company--I did it
for ten years--and then you start and shape another in a similar mold. The idea
is that early career impressions become reproduced. Anyway, I joined Baxter as
an "assistant to," but I didn't like being an assistant, so I asked them for a
real job. After three months, I became the International Product Planning
01:01:00Manager--a big title for a young man. The job specifically focused on Hyland
Therapeutics, an Orange County, California, subsidiary. Hyland made plasma
products--proteins isolated from plasma--and diagnostic products. They were one
of four Baxter divisions, and the only one not in Chicago. They were in Costa
01:02:00Mesa, near Irvine. This was the beginning of biotechnology. You took plasma and
pulled it apart, fractionated it. Hyland sold Factor VIII, Factor IX,
immunoglobulins, and albumin. The plasma was collected through plasmapheresis
performed at collection centers all around the country. They paid people for
plasma. They returned the red cells and paid for the plasma.
EVERSON: Were these independent centers?
TERMEER: We owned the centers. That's another very big issue--the plasma industry.
EVERSON: I suppose the practice started during World War II.
01:03:00TERMEER: Yes. There were ethical concerns about the payments. Very vulnerable
people were being paid. Companies are permitted to bleed people just twice a
year for plasma, but some donors would come back more often. Some blood came out
of South Africa, Belize, and Nicaragua, countries virtually owned by political
figures. I was in charge of certain aspects of this business, later on. I
learned a great deal. At the time, I was primarily trying to figure out how to
01:04:00make diagnostic and therapeutic products that we could sell internationally. I
would go to our subsidiaries, which were very small, and tell them about our
products, how to market them, how to run the sales force, and how to prepare. I
didn't know that much either, because I wasn't a specialist on these products. I
learned as much as I could.
EVERSON: Your goal was to understand both how to develop and market them internationally?
TERMEER: Mostly how to market them. There was one product that was thought to be
very important, for Chagas disease, a parasitic disease, sometimes called
01:05:00"sleeping disease." It's very prevalent in Latin America. We developed tests for
Chagas disease based on feedback indicating that it would be a big market.
Baxter asked me to head up this project. They said, "Figure out a way to set up
the connections." That was a very Baxter thing to do.
01:06:00I traveled to Venezuela and to Brazil, and approached the CDC [US Centers for
Disease Control] and the military. The military was very concerned about
exposure to Chagas. I learned a great deal, including that we had no business
trying to do this. There was no real commercial market, and other companies were
very focused on doing it. It was an extremely interesting experience to go to
very foreign places, and to meet people who were powerfully motivated by the
science and the healthcare concerns related to this particular disease. That was
the early part of my career at Baxter. Not long after was the year of the great
01:07:00oil shortage. Baxter didn't have high international sales. It was decided that
we needed to squeeze assets, inventories, and accounts receivable to make
operations as efficient as possible. A team of five people was pulled together.
One was heading it up, reporting directly to the CEO, and for each of the four
divisions there was one person pulled out of the general corporation to focus on
completely reengineering how business was done: minimizing inventories,
minimizing the sales force, minimizing assets, working capital, and investments.
01:08:00They asked me to do the Hyland piece. The others were young, but they had been
with the company for three, four, or five years. I had been there for less than
a year. I had just bought a house in Evanston, Illinois but was transferred to
Brussels for this project. They had given me an apartment in Costa Mesa,
California when I moved there, because I was going back and forth all the time.
Now I was given an apartment in Brussels. I thought, "Wow. American business."
01:09:00My wife and I moved to Brussels for three months. I traveled around to all the
subsidiaries to set up new systems. It was an incredible amount of fun. It was
such a strange time, and such a focused project. Reporting directly to the CEO,
you could get a lot done. It was a very good experience, but it only lasted
Afterwards, they asked me to come back to Chicago for a new position. I stopped
01:10:00working on the Hyland stuff and became the International Marketing Manager for
the Artificial Organs Division--artificial kidneys, dialysis equipment,
heart/lung machines, stuff like that. That lasted for several years. It was very
interesting. Great pioneering work was being done in dialysis at that time, and
in the development of heart and lung machines for open heart surgeries. It was
not dissimilar from the job I had been doing before, except that it was on a
larger scale, and in a more senior role.
01:11:00EVERSON: Was this position also marketing focused?
TERMEER: Yes. I was faced with questions like: "How do you do business?" And,
"How do you get regulatory approvals?" It was amateur hour at that time in terms
of regulatory approval since everything was so new. Europe was doing well in
this space. We competed with the Swedes in particular.
EVERSON: Did you lose your apartment in Costa Mesa?
01:12:00TERMEER: I lost my apartments in Costa Mesa, Balboa Island, and Brussels. I
became the general manager for Baxter in Germany in 1976. The process started
mid-1975, when I was asked whether I wanted to become the general manager at a
joint venture in South Africa. I spent three weeks there but I didn't like it.
Their political circumstances were very complex. Plus, there's a long history
01:13:00with the Dutch in South Africa, so I decided against it. Baxter also offered me
an opportunity to go to Brazil. They were preparing me for a general manager
position, and I was looking forward to it. In early 1976, they took me by
surprise and asked me to become the general manager in Germany. It was their
largest sales and marketing subsidiary, and the largest market outside the
United States. That was very exciting. I had arrived back from a business trip
01:14:00in Europe on a Saturday and by Monday morning, the president of the division
called from Deerfield asking, "How was your trip?" I had visited one country a
day, and when he asked about Germany, I said, "Well, they have a lot to learn,
but they're getting there." Then he asked, "How would you like to be the general
manager, the geschaftsfuhrer?" I was shocked.
The general manager had gotten himself into trouble with the unions and there
01:15:00was a strike. Baxter was very anti-union. They were concerned. They made a
decision to change the management. I called my wife and asked, "What do you
think?" That night, I took a red-eye back to Europe. I went to Brussels and
picked up my new boss. We flew to Munich late that night. He met with the
incumbent general manager in the airport, while I stood behind a pillar so he
wouldn't see that I was there. They had dinner, and he resigned. The next
01:16:00morning I took over at seven o'clock. By ten o'clock, all of the employees
except for the management went on strike. Big signs appeared and women came in
wearing black as if in mourning. The ex-general manager was a good friend of
mine. He was an Australian with a Czech background who had gone through Harvard
Business School. He was a really smart, nice guy--probably too nice. He got
himself into problems with some of the employees, and that got him moved out of
01:17:00his office. Although it was painful, we were friendly, so it was okay. The
strike started as soon as I moved into his office.
EVERSON: Backing up for a moment--you called your wife, and that night you moved permanently?
TERMEER: Well, permanent is too big a word. It was a quick decision, but I was
twenty-nine. We didn't sell the house. We rented it out and became expatriates
in Munich. I spoke German which helped greatly. I spent the first day just
01:18:00meeting people. My new boss stayed for a few hours, then I turned around and
asked, "Where's Gabe?" He was gone. He wanted me to be independent. By the time
I got to dinner that night, most places were closed. I stopped in a wine cellar
and "ate" a bottle of wine. I got nicely drunk. I staggered to my hotel. I was
tremendously excited by the opportunity. I felt very sorry for George, the
ex-general manager, but we became good friends afterwards, so things worked out
very well. My wife joined me a few months later. I had three very good years
01:19:00there. Germany had strong local healthcare companies that were competing hard
with Baxter. Baxter was trying to make its way in the market, and the Germans
were resisting. The dynamics of competition was in our favor. We sold all the
products that Baxter sold throughout the world, and had divisions for each of
them. Our infrastructure was compact. We had a regulatory infrastructure and a
clinical infrastructure. We had warehouses and everything else required to run
the operation. Everyone was German except for me. It was a very good experience.
The company grew tremendously over those years. I learned a lot about
01:20:00management, and gained a lot of confidence.
EVERSON: You mentioned that the German subsidiary didn't have a manufacturing facility.
TERMEER: It didn't, but it had everything else. It had very little research
capability, except for a particular technology in artificial organs for kidney
dialysis. It was mostly marketing and sales, distribution, regulatory, and
clinical development for Baxter's products: artificial organ products, the
01:21:00Hyland products, Factor VIII and Factor IX, and hospital products like IV
solutions and the blood bags. In addition to diagnostics, those were the four or
five main areas, with managers in charge of each. We had a sales force, in-house
marketing people, and financial specialists. I think I may have had a hundred
people at the beginning and around three hundred people when I left. As a
01:22:00subsidiary, we built all of the markets, but the largest single market we
had--it may have been larger than the US--was Factor VIII. There were strong
clinical leaders in Germany who upgraded the treatment of patients to, by far,
the best in the world. It was prophylactic for children in many cases. That
01:23:00market developed quite well. I benefited from that, coordinating much of the
clinical work in terms of proving that early treatment was a good thing to do.
The Germans were very important participants at international hemophilia meetings.
EVERSON: Was this prominence specific to hemophilia, or was this the general
pattern of German healthcare leadership?
TERMEER: This may be naïve in hindsight, but I attributed it to a law in
Germany at the time that said something like, "No citizen, if it can be avoided,
should be disabled." If you can manage the health of a citizen in order to avoid
01:24:00an ailment, then that individual has an absolute right to treatment. In
hemophilia, that means stopping bleeding that might otherwise occur. Germany was
very decisive in the way they looked at the treatment of hemophilia. Of course,
there was a global shortage of product which drove the price up. The German
prices were higher than elsewhere, but their consumption was also higher than
elsewhere. Other countries would complain that the Germans were cornering the
01:25:00market. Economically, Germany was doing extremely well. The ethics of the
business were very interesting.
EVERSON: Who were you selling to?
TERMEER: Mostly to specialized hematology centers where patients are still
treated today. I learned a lot about the history of rare diseases in Germany,
01:26:00and how they were viewed ethically. In the Second World War, citizens with
genetic diseases were in a very difficult position. They were ostracized, not
supported at all. Many families went into hiding, so to speak, for generations.
01:27:00I learned a lot about the international politics of genetic diseases. These were
life lessons that are still valuable to me today.
EVERSON: Am I right that Factor VIII development occurred at the Hyland Division
EVERSON: Is there anything more we should talk about regarding your German
history? Are we ready to move to LA?
TERMEER: Yes. We still had the house in Chicago, and all that time, I knew that
we would eventually return to the United States. Due to my success with Hyland
products in Germany, I was asked to come to California, to Hyland again, this
time as vice president in charge of the research, development, global marketing,
01:29:00and regulatory divisions. It was the first time that Baxter set up a global
division. Usually it was a domestic component, with the International Division
taking care of the international piece. This time Hyland became organized on a
global basis. I became Executive Vice President, and a bit later I also took on
manufacturing, and all other functions except human resources. My hope was to
become the President of the division, but I left before that happened.
01:30:00EVERSON: So you were very connected to the United States?
TERMEER: Yes. It was an extremely challenging environment, but very nice. I was
in my early thirties by then. American industry was moving rapidly. I couldn't
see these stale European firms making the same kind of progress. I was
01:31:00enthralled by American entrepreneurship. This new development at Baxter was very
entrepreneurial. There was tremendous camaraderie in the company. People got to
do things they had never imagined. It was a great culture shock from Munich to
California, and again in Boston, but it was a lot of fun.
EVERSON: So you had the personal goal of becoming President upon that move?
TERMEER: I knew I could eventually run the business, and they were very open to
01:32:00that. That's why they let me run a good-sized division. I had even more
responsibility two years later, but Genzyme intervened.
EVERSON: What sorts of activities were related to biotechnology at Hyland?
TERMEER: I ran research and development, and that was the intersection. We were
acutely aware of the limitations of plasma. We had exposure to non-A, non-B
hepatitis. Hepatitis C wasn't yet identified, but we knew people got non-A and
non-B hepatitis, and we couldn't test the plasma for it because there was no
01:33:00test. A few years later in 1981, the whole HIV crisis began. Genentech was
started in 1976, and went public, and was a great success story. Genetics
Institute [GI] had been started, Hybritech had been started, Genex had been
started, Biogen had been started, and they looked at known proteins early on.
They looked at a lot of stuff, including Drain-O, indigo, whatever. It's kind of
funny to think that people were trying to develop biotechnology companies on the
01:34:00basis of industrial products. They also looked at blood products. There was an
established market, and it was clearly crazy to collect millions of units of
blood, or plasma the way we were doing it, so it made sense to investigate
alternatives. If you could produce albumin or Factor VIII by recombinant means,
that would be good. Many of these companies started to produce known proteins.
Genentech started with insulin and human growth hormone. The whole thing with
01:35:00cadavers entered there. The challenges with plasma proteins turned out to be
big. We had no recombinant technology at Baxter.
EVERSON: Did you know about recombinant therapy in 1979?
TERMEER: Yes. We were a well-known company in the protein business, and biotech
companies needed money, so they would come to try to sell their services. I went
to all the well-known biotechnology companies, and did contracts with a number
of them. We started a contract with Genetics Institute for Factor VIII and
01:36:00Factor IX, and albumin. We worked with Hybritech on some highly specific
immunoglobulins--hybridomas for septic shock. In the process of setting up these
contracts, you visit people, you negotiate, and you make choices. You learn a lot.
EVERSON: You meet people.
TERMEER: Right. And they get to know you. We were a powerful company because we
had money and a very obvious need. Biotech companies wanted to work with us.
01:37:00Baxter was in the blood business, in terms of purifying it through dialysis
machines, collecting it in Fenwal bags, and then breaking it apart through
fractionation, and adding IV solutions to it. Hyland and Baxter knew a lot about
blood and blood ingredients.
EVERSON: And these were skills that molecular biologists in these small
companies didn't possess.
TERMEER: That's right. We knew all about red cells, damaging red cells, blood
machines, and so on. We knew about EPO [erythropoietin] and t-PA [tissue
plasminogen activator]. Anyway, it was this interaction with biotech companies
01:38:00that led me to leave. There was a change in CEO at Baxter, from Bill Graham to
Vern [Vernon R.] Loucks. The company became much more oriented to the "low-tech"
side of the healthcare field. They were not about to go into biotechnology. I
was not allowed to develop biotechnology capabilities within Hyland, although we
were continuously exposed to it. A well-known consulting firm told Baxter that
it was too late because the experience curve that had been accumulated in the
biotechnology industry was so large in established companies like Biogen, GI,
01:39:00Genentech, and Amgen that it was too late to catch up. This was the early 1980s.
It was a well-known consulting firm--bad advice. We were at the very beginning
of the technology then and Baxter was led to believe that it was already mature.
01:40:00We had lots of discussions in the company about this. I decided I had to look
01:41:00elsewhere because the company was losing its courage to do new things. Science
gets squeezed as companies mature. Operating realities overwhelm companies'
abilities to go into the unknown. Organizations can tolerate only so much
uncertainty, and the number of people employed on the "known side" becomes so
large that it overwhelms the few who want to go to the "pioneering side."
EVERSON: Okay. Should we stop here and pick up on those new opportunities in our
[END OF AUDIO, FILE 1.1]
[END OF INTERVIEW]
EVERSON: Mr. Termeer, when we last spoke you described how you had moved to LA
01:42:00in 1979 to head up R&D at the Hyland Division of Baxter, and how, in that
position, you were often in contact with biotech companies. How did you then
become interested in moving into biotech yourself?
TERMEER: From 1979 through 1983, I was at Hyland. Those years were difficult for
01:43:00Baxter. They had been growing for a long time, but management changed and the
direction changed. Loucks took over from Graham and the company became much more
device-oriented and less science-oriented. Biotech was just beginning, but
Baxter wasn't interested in it. Young biotechnology companies were looking for
management, and venture capitalists wanted people in more mature companies,
particularly Baxter, to engage in entrepreneurial activities with these
01:44:00companies. I got many calls, as did other Baxter executives. People that I
worked with and respected left, either to start their own biotechnology
companies or to take over existing ones. That was a very intriguing prospect for
me. I always felt that at some point in my career I would become involved in
building my own company. I was very happy at Baxter, but I noticed that it was
going through a change. I became more receptive to taking calls. I went to see
venture capitalists and companies, and became acquainted with the possibility of
stepping out of Baxter and engaging the uncertainties of a completely new
situation. I seriously considered a few offers, but didn't find the right
01:45:00connection until I got a call from the venture capitalists that were supporting Genzyme.
The company had been formed a year and a half earlier, in 1981, and had
seventeen employees in Massachusetts. It also had a small diagnostics operation
in England, and had recently developed close ties with a group of professors
from MIT. One was at Harvard. They were well-known, full professors who had a
lot of multidisciplinary postdocs. They formed a consulting company called BIA,
01:46:00Bio Information Associates, and received shares in Genzyme as part of building
that early connection. Genzyme was just starting out and they were trying to
figure out what to do with it. During the interview process, I met the
management, primarily Henry Blair and Sheridan Snyder. I met venture capitalists
Ed Glassmeyer from Oak Ventures, John Littlechild, and David Cooksey from
01:47:00Advent. I also met the head of Montgomery Securities' Bridge Fund, Tom Weisel.
Montgomery was a boutique merchant bank with an arm that invested in companies
like Genzyme. These funds were looking for someone like me to become CEO. The
professors, the venture capitalists, and I all decided to join within four
01:48:00months of each other. I was last because I was waiting for the money to go in.
01:49:00Snyder was Chairman and CEO, and the largest shareholder, but the venture
capitalists wanted to get someone with a proven track record in the healthcare
field. Snyder had been in the packaging field and was a very successful serial
01:50:00entrepreneur. He wasn't happy about yielding to the venture capitalists' demands
to bring in someone like myself, but he was tolerating the process.
The company had recently acquired a small diagnostic enzyme business in the UK
that had been found by Henry Blair. Blair was a scientist at Tufts [University],
engaged in enzyme research. He's really the founding scientist at Genzyme, the
person who brought in the enzymology, the enzyme production techniques. Blair's
company was called Whatman Biochemicals. It was a subsidiary of Whatman Reeve
01:51:00Angel, Ltd., which provided enzymes to the clinical chemistry industry. Genzyme
bought Whatman Biochemicals with money from Oak Ventures, the earliest venture
capital investors. An important element of Genzyme's success was acquiring an
NIH [National Institutes of Health] contract. It involved the supply of an
enzyme that was later used for Gaucher disease.
TERMEER: Yes. The NIH was experimenting with the enzyme as a potential treatment
01:52:00for Gaucher disease. Genzyme supplied it. In the early days, we collected
placentas and extracted the enzyme. We purified it and sent it to the NIH for
their experiments. In that same time frame, 1983-1984, they started to
understand that the enzyme alone was not enough for the treatment of these
patients. They needed to target the enzyme, and for that they needed to modify
01:53:00the glycosylation. That eventually became Genzyme's Ceredase. Dr. Roscoe Brady,
the godfather of the whole field, had been experimenting with very large doses
of the unmodified enzyme but couldn't achieve clinically relevant results. In
1984, the first patient, Brian Berman, was injected with a modified enzyme, and
01:54:00we started to see remarkable results. However, there were eight patients in the
group after Brian with no results. The failure was dose-related. They used the
same units of enzymes on much heavier patients, but it was discovered later that
you needed to change doses depending on body weight in order to see an effect.
Brian is a well-known patient. He's now a young married man. As a kid, he was
very sick. When he was three years old he had a belly that looked like he
swallowed a basketball. He was supposed to get his spleen removed at one point,
01:55:00but his mom, Dr. Robin Berman, worked at the NIH. She pleaded with Dr. Brady,
"Give my child one last chance before we do this operation and remove the
spleen." It worked dramatically. It was remarkable. Brian, who previously was
very anemic and didn't behave at all like a three-year-old, suddenly started to
run through the corridors of the NIH. It was a beautiful story. We kept running
out of enzyme--because we needed massive amounts of placentas--and he would get
sick again. His own control was pretty illustrative. But the NIH rushed to the
01:56:00next group of patients, had the wrong dose, and the effect couldn't be measured.
That was a major setback.
EVERSON: Did the NIH do any more trials?
TERMEER: That trial was completed and published. It was announced that enzyme
replacement therapy for Gaucher disease didn't work. But some of us didn't give
up. Dr. Brady didn't give up. Dr. Berman didn't give up. Before we made the
01:57:00plunge into the scientific work needed to understand the dosing issues, I pulled
eight scientists together from MIT. These were big names like Harvey Lodish and
George Whitesides. We met for a whole day and asked ourselves, "Should we push
this forward or should we move on to something else?" This was in 1985. They
decided that it was not right to go on because they thought that gene therapy
was just around the corner, and, in any case, we couldn't get enough placentas.
They said, "You need recombinant technology, and if you get that, you may as
01:58:00well go right on to gene therapy, because that's the next proper step." I didn't
take their advice. I respectfully continued to push forward, based on my
observations of the patient. There was such a clear effect. When we stopped, he
got worse. When we gave him product, he did well. It was not a little effect; it
was a miraculous recovery in a kid who couldn't fool you. It was very convincing
to everyone, especially Dr. Brady, who knew the scientific underpinnings of why
it should work. We started to engage in the scientific work to allow the
01:59:00treatment to be proven properly. By 1991, many years later, it was successful
and the product got approved.
EVERSON: You mentioned these eight scientists from MIT. Can you list their names?
TERMEER: Absolutely. Chris Walsh and George Whitesides, who are now at Harvard,
02:00:00Harvey Lodish, who's now at the Whitehead Institute, Charlie Cooney, Cho Kyun
Rha, Tony [Anthony J.] Sinskey, Graham Walker, and Bill [William] Roche, who is
now at Indiana University. They were
02:01:00multidisciplinary. Some were chemists, some were biologists, some were
biochemical engineers, and so on. They had a company that did public and private
advising, and they partnered with Genzyme. Harvey Lodish now teaches this case
to his class at MIT. When scientific advisory boards composed of noted people
recommend not doing something, they're not always right.
02:02:00EVERSON: How did you move forward once you got their input?
TERMEER: We had to raise money because the company had several other goals, like
developing diagnostic enzymes. We didn't follow the early biotechnology model of
doing research, being supported by larger companies, and then raising a lot of
equity. Instead, we funded the company independently, with small, incremental
02:03:00steps. During that period we were privately held. We would meet every Saturday
and Sunday to discuss what everyone else was doing in biotechnology and to
figure out what we could do that was unique. We decided to invest only in what
we could afford. We didn't want to support the company through research
contracts with major corporations. We wanted to own our technology. We
eventually built a hundred-million-dollar business out of diagnostic enzymes. I
always felt a great sense of pride when customers asked for repeat deliveries of
a product. I felt that was confirmation. Each year we learned more, used more
advanced technologies, increased efficiency, and found ways to compete. Today,
02:04:00we control a good piece of the global market. We did the same with research
reagents. We went to other companies and said, "We'll take your reagents and
we'll make them available to the research community around the world."
EVERSON: So you obtained these reagents from other companies and sold them?
TERMEER: Yes, and to academic institutions. We would often characterize the
products ourselves or we would use their characterization. The NIH was our
largest customer. We later sold that part of the company. Prior to my joining,
Genzyme was involved with a small chemistry operation in England called
02:05:00Koch-Light [Research Laboratories, Ltd]. It was a research reagent company that
focused mainly on chemistry. It had seventeen thousand products that were sold
primarily in UK research markets, and, to a lesser extent, in the rest of
Europe. The company was bought out of bankruptcy. We tried to make a go with it,
but it was stupid. We weren't a chemistry-based company. However, we did pick up
a beautiful piece of land outside of Cambridge in the United Kingdom, in
02:06:00Haverhill. While selling that business, we learned how to engineer and build a
pharmaceutical plant to produce a product called clindamycin phosphate, used for
nosocomial infections. It was an Upjohn product that was very tough to produce.
There were many, many steps. It had come off patent. We were able in an
efficient way to do it with the help of the MIT scientists. We entered the
generic market in a sense, although there were no other available entries, so we
didn't gain from it financially. We did get some funding from the Department of
Trade and Industry in the United Kingdom, and became FDA-approved, which gave us
02:07:00experience in the FDA approval process. It also gave us experience with quality
control and quality assurance. At this time we were shipping to AstraZeneca and
other major corporations, which gave us a lot of experience in meeting the
quality requirements of sophisticated pharmaceutical companies.
EVERSON: You scaled up products that you acquired elsewhere, and you got a lot
of experience prior to your major product launch?
TERMEER: Yes, and it allowed us to attract people who were quite different from
those you normally attract to a biotechnology firm. Aside from scientists, we
brought in business people, manufacturing people, and regulatory people on two
continents. It was very significant that we had an early UK starting point
02:08:00because Europe became a natural part of our business. My background, of course,
helped. The fact that we were a player in the emerging biotechnology scene in
the United Kingdom was very helpful as well.
EVERSON: Charlie Cooney told me to ask you about the importance of manufacturing
in biotech companies.
TERMEER: As I would tell Charlie, it's very important. We are vertically
integrated, and manufacturing is an extremely important component of our
competitive positioning and of our asset base. We think of manufacturing as a
02:09:00fundamental skill and asset on the regulatory side, the continuity side in terms
of quality, and forever-improving margins. Each year we learn to do things better.
EVERSON: With incremental improvements to your manufacturing capabilities?
TERMEER: Yes. It pays. The returns on our capital costs are extremely good
compared to taking equity capital and putting it into research where you have a
very low probability of success. I'm very much an opponent of just being
R&D-focused, particularly for companies like Genzyme. In companies where you
have an enormous critical mass, you can outsource pieces of it. If you've got
02:10:00nothing, you need something to rely on, and manufacturing capability is very reliable.
EVERSON: What kinds of enzymes were in the early diagnostic tests?
TERMEER: Cholesterol esterase, cholesterol oxidase, amylase, and the like. These
are enzymes used in clinical chemistry. They're very important commodities and
the amount of enzyme used today is relatively small. They were produced using
fermentation or extraction--sometimes from plants or beans, but mostly from
02:11:00animal tissues. Charlie Cooney and others were able to do this using recombinant
DNA, so we were able to bring the price down and compete effectively. We're
still about 50 or 60 percent of the global market for those kinds of enzymes.
They were sold to Abbott Laboratories, Roche, and others to make enzyme clinical
chemistry kits, and they were sold en masse in the diagnostics market. In the
02:12:00meantime, we were progressing with biological products, particularly with
glucocerebrosidase for Gaucher disease. That time period was very interesting
for the biotechnology industry. Companies like Amgen, Genentech, Genzyme, and
Genex were all searching for what to do. There was a major push to figure out
02:13:00what we could do with industrial enzymes. They were needed for the production of
wine, ink, or indigo for blue jeans, to curl your hair, or for Drain-O. Today
these things look like odd, funny approaches, but in those days companies didn't
know quite what to do. They didn't know much about mammalian cells or the
requirements to get a product approved. The logical targets were plasma
proteins--extracted proteins that you could produce through recombinant
technologies. We spent a lot of time pursuing options, particularly because we
02:14:00had a diverse technology platform due to the broad-based representation in our
science advisory group. For instance, we even worked on oil recovery, which
again feels like a totally silly activity in retrospect.
Other biotech companies have interesting stories of trial and error experiences
when they explored the possibilities of biological production beyond plasma
proteins, which were the obvious first targets. In 1983, when I first came here
02:15:00from California, I thought, "What can we do that's interesting?" I looked at
scientists' resumes--many of them twenty or fifty pages long--and found that
Professor Cho Rha had supervised a post-doc in the field of hyaluronic acid,
which is a polysaccharide. I knew something about it because, as part of my
earlier investigations of entrepreneurial opportunities, I had spoken with one
of the early pioneers in the field, Dr. Endre Balazs. He created a company
called Biomatrix, and wanted me to become the CEO. When I sat down with him, I
found that the world was too small for both of us in the same empire. He was a
marvelous man, but he really needed to be in charge and didn't need me. I knew a
lot about hyaluronic acid as a result of that and another visit. It had many
02:16:00different indications, so I met Cho. I asked about her hyaluronic acid project.
I subsequently hired Cho's postdoc, Dr. Betsy Robertson, a fabulous person, and
we introduced hyaluronic acid into the company in early 1984. Today, we have a
very large and interesting program in that field. Many of the things that we set
out to do then still carry on today. Being able to execute those things
02:17:00ourselves provided a significant sense of independence. In the midst of this, we
went public in 1986. The prospectus described a company that was good at a
number of different things. We had diagnostic enzymes, research reagents,
hyaluronic acid, and projects with the NIH to treat an awful genetic disease. As
we discussed earlier, for that to work, we needed to change the glycosylation of
02:18:00the enzyme and target it to macrophage cells.
EVERSON: The enzyme had been remodeled by 1984, right?
TERMEER: Right, we made that an aspect of our new technology. Attempts to
remodel t-PA [tissue plasminogen activator], a well-known protein that Genentech
and Genetics Institute were going after, showed that if you remodeled a protein
sequence you could get effects like a longer half-life and better targeting.
That was why we believed glucocerebrosidase worked. I hired some people out of
Cornell and MIT who were experimenting with it. Dr. James Rasmussen, a
02:19:00carbohydrate chemist who studied at MIT before going to Cornell, introduced us
to the field. The Genzyme IPO describes our platform technology for remodeling
proteins, but we framed it in the context of a company that sold things to
diagnostic companies, that had a plant, and had other things going on. We had
about nine million dollars in sales by 1985. We were just breaking even, but we
02:20:00had very big-name support. Nineteen eighty-six was a good year for IPOs in
biotechnology. We went public and were oversubscribed in June of 1986, raising
twenty-six million net. For the first time we could breathe. Prior to that, we
had been living hand to mouth. We were able to do more with that money, but I
insisted that we wouldn't spend all of it on research, and end up like everyone
else. We needed to finance the future, so we started using R&D limited
partnerships. We weren't the first company to use limited partnerships. I think
02:21:00Centocor and Genentech may have been the first.
EVERSON: Stephen Evans-Freke in particular was instrumental in pioneering R&D
limited partnerships. Did you work with him?
TERMEER: We did later on, but the first one wasn't with him. Stephen was at
Paine Webber. We only needed ten million dollars to do the glucocerebrosidase
experiment. That was too small for Paine Webber to get involved. They didn't
like the idea of Gaucher disease, either. They called around to check it out,
but nobody they talked to knew what it was. I went to the bankers who had taken
02:22:00us public and they were very happy because we had traded up, but they had no
experience in R&D limited partnerships. Stephen had cornered that market to some
extent. There was a firm called Cowen & Company that did very good basic
research, and entered investment banking through our offering. The chairman,
Joseph Cohen, was so intrigued by developments in biotechnology that he said,
02:23:00"I'm going to give you guys a chance." He was a marvelous man. We learned how to
do a limited partnership, and made a deal for ten million [dollars] starting in
1987. We needed to sell two hundred units at fifty thousand dollars each, so we
offered warrants, the normal R&D partnership structure. This was May or June
1987. We only had about four months to get it done. I went around the country to
02:24:00the usual places, but there was no interest in Gaucher disease. You could talk
about heart attacks, t-PA, sepsis, but not Gaucher disease. Cowen & Company had
no constituents and no track record, not even as a bank. We had a very hard
time. Mr. Cohen bought some units, and somebody else bought some, but we
couldn't sell ten million [dollars'] worth. I became frantic. I met with oil
companies in Houston and couldn't sell to them either. They said, "You're going
to buy this back, and when I finally get the oil going you're going to take it
02:25:00from me? It's a good thing to help these kids, but . . . ." By mid-September,
we were still doing poorly. By the end of the month, we would have to give up.
We still had a few weeks left, but not enough of a book to close the
transaction. We were selling this unit by unit to individuals. It was very painful.
We ended up in Albany, New York. We flew up the Hudson River from LaGuardia with
Dr. Robin Berman--the mother of the first patient, and Dr. F. Scott Furbish,
whom I had hired into Genzyme from the NIH. We went to a meeting with thirty or
02:26:00so brokers and wealthy individuals. It was a secondary city--Albany, New York.
What do you sell there? Nothing. Dr. Berman was eight and a half months
pregnant. She was this tall [gestures] with a big belly, but she's feisty and
can explain things beautifully. She was talking about her unborn child who could
also have Gaucher disease, and there's nothing more convincing than a mother
talking about her child. Suddenly, she grabbed my arm and said, "Henri, I think
I'm in labor." I took her outside and told Scott, "Keep talking." Then I told
her, "I'm a derailed economist. You're a doctor. I can't help you." She said,
02:27:00"It's OK. It's probably a false sign." It was, from flying on the little plane.
We put her on a train to go back, but at that moment these people in the room
got it. It was an absolutely amazing moment. They saw it, and they reacted
magnificently. The broker started taking orders, and the buyers called their
colleagues. Others bought in, and we finished the ten million [dollar]
transaction by the end of the month. Suddenly there was great momentum.
Two weeks later, was October 17, Black Monday. The marketplace fell apart. Had
we not been able to do that transaction, you and I would both be sitting
02:28:00somewhere else. We would have given up. The R&D partnership allowed us to move
forward with off-balance-sheet financing, which was the trick. It protected the
P&L [profit and loss] statement, and allowed us to negotiate to reacquire the
technology. We started with the biopsy-based trial to determine the dose, then
the final trial. We didn't have a lot of money or placentas. We needed
twenty-two thousand placentas to treat one patient in a year. We knew that once
02:29:00we started treatment, we could never stop, so we needed to secure approval if we
wanted to continue. Parexel told us that we would need 144 patients for the
trial to be reliable. I said, "We just can't do that." We went to the FDA and
told them we could only do twelve patients, so we did. It worked very well
twelve times. We followed twelve other patients who were untreated, and the
difference was powerful. We published the results in the New England Journal of
Medicine, and that became the underpinning for regulatory approval. We even got
permission to double the dose for two patients who were doing very badly. They
were dying and they recovered. They're now young women with families. There was
02:30:00another patient who flew over from Germany. The German government paid for this
patient to fly from Bonn and back for their infusion every two weeks. One family
moved here from South Africa and went back after successful treatment. It was an
extremely successful trial.
EVERSON: At what point did the FDA say your numbers were sufficient?
TERMEER: We never agreed on a number. We had one shot at it, and I took a
gamble. The FDA then was not the FDA that we know today. I don't know if it was
a massive difference, but it feels different now. Once we knew that we had a
dose response, I simply refused to consider that it might not work, so long as
02:31:00the patients were diagnosed correctly. That's the advantage of not being
burdened by knowledge. When you're an economist you can make that assumption. A
biologist could think of five million reasons why it might not work. I tend to
be right by pure luck. There were a lot of people who told me this was crazy and
tried to direct us differently. The great advantage of doing the R&D limited
partnership was there was nowhere else we could spend the money. We were forced
to try what we had described in the partnership prospectus. At the same time,
02:32:00the HIV crisis was unfolding, and the FDA realized that we had to pool 22,000
placentas per patient. If you suspected that HIV could cross-contaminate, then
pooling this many placentas was 100 percent likely to result in contamination.
Gaucher is chronic, so every two weeks you could expose people to HIV. The
plasma industry got into deep trouble as a result of this situation. Eventually
they were forced to use newer technologies to inactivate viruses like HIV and
02:33:00hepatitis C. Prior to this, many hemophiliacs died of HIV. Some people in Japan,
France, and other places who made decisions to let these products continue to be
sold were put in prison. There was an enormous sensitivity to HIV at that time,
particularly related to human, blood-based products. Ours was a tissue-based
product, not plasma-based, but we employed powerful technologies nonetheless to
02:34:00decrease the viral load. We never had a problem. Later, we processed the enzyme
for a thousand patients, which required millions of placentas.
EVERSON: The plasma crisis did not affect this clinical trial or your research?
TERMEER: It had no effect. Many people wanted to stay on the sidelines, but we
were able eventually to get them on board. When we tried to get approval in
Japan, they flatly said, "No. We will not approve a human product. We'll wait
for the recombinant product." They had put a number of well-known physicians and
officials in prison because of the HIV crisis. It was in the early 1990s.
Japanese patients had a very serious mutation. They were very sick, and needed
02:35:00treatment. We couldn't import the product, even to save the lives of these
patients, because we didn't have regulatory approval. I went to Walter Mondale,
the US ambassador to Japan, and showed him pictures of the patients. I told him
that this product was now available in Europe and approved in the United States.
The Europeans hadn't fully approved it--they allowed availability on a
case-by-case basis, and paid for it. Mondale was a real humanist. He was so
upset that he said, "Let's move these families to Hawaii and treat them. How
many patients are there?" I said, "Maybe twenty-five." He said, "At least we'll
02:36:00give these kids a chance." The Japanese got wind of this, and it forced them to
approve the product.
To get all the placentas for the clinical trial, we were going to hospitals in
New England. A little car would arrive and collect the placentas. They were
lugged up to the fifteenth floor in Chinatown where we purified them. In order
to make the product available to more patients than the twelve in the trial, we
02:37:00needed access to more placentas. It turned out that the French never allowed
plasmapheresis as a way to collect plasma for the production of albumin and
immunoglobulins. Here in the United States we used plasmapheresis, but in France
they used placentas. They put placentas through beautiful wine presses to
extract the liquid, which went to a plant for fractionation. The tissue was
discarded. We needed what they were throwing away. The extraction work in France
was done at the Pasteur Merieux Institute in Lyon. They collected placentas from
all around the world, particularly Western Europe, but also the United States. I
02:38:00went to Pasteur Merieux and said, "We want the tissue that you discard. We'll
give you money to build a plant." Five million dollars was tough money for us,
but I said, "We'll tell you what we need and build the plant next to yours, so
we can process the tissue." We would then send the enzyme to Cambridge for
purification, modify the glycosylation, and then send it to Albuquerque, New
Mexico where it was put into vials by an Italian company. The French thought we
were crazy, but they didn't want the tissue, and they knew it was for treating
kids. We said, "We'll take all the risk and give you some royalties."
02:39:00We didn't need this forever because we were working on recombinant methods. We
built the plant and it became a great success. We processed almost 70 percent of
placentas from all births in Western Europe, and 30 percent of placentas from
all births in the United States. They found their way, through mechanisms that
are a long, long story to explain, to our plant in this little town in France
02:40:00outside of Lyon. Then, after the vials were filled in New Mexico, the product
would go around the world. We saved the lives of a thousand kids. The HIV
concerns were all resolved because of the new technologies that we had put into
place. We developed our own, because we had a starting point that was completely
independent. The plasma industry had to come out of the past and adapt to new a
02:41:00technology. They came at it quite differently than we did. The facility in
France was operational by 1990.
EVERSON: Before FDA approval?
TERMEER: Yes. In fact, having the plant helped in obtaining approval. There was
a big discussion during the advisory committee meeting at the FDA about whether
the French knew enough about HIV to be trusted. Remember, this was many years
ago. There were a lot of people pointing fingers. Ours was the only
placenta-derived product allowed by the FDA. The difficulty with placentas is
you can't test unit by unit. With plasma, you can test unit by unit and so you
02:42:00can minimize cross-contamination. With placentas it was not practical, although
we had technologies for decreasing viral load.
EVERSON: Was the research around the recombinant product underway by 1990?
TERMEER: We started to work on it in 1986, but we were amateurs with recombinant
DNA technology. Despite the fact that we had a good scientific base, we didn't
have a critical mass in that area. We were looking for either a way to continue
developing it ourselves, buy access to the technology, or merge with a company
that had the technology. We looked at a company called ZymoGenetics, which is a
recombinant, protein-based company in Seattle. We negotiated to acquire them,
but we lost to Novo Nordisk, who already owned a significant share. ZymoGenetics
02:43:00became 100 percent Novo and then was spun out; now it is an independent company.
After we lost that deal, we looked at Integrated Genetics, which was a very
successful company in the Boston area. It came out of MIT and had an ex-Baxter
executive running it, Bob Carpenter. He's still on our board. They were 90
percent focused on mammalian cell technology and they were competing for t-PA.
They were in the clinic for t-PA in Japan and Europe, with Factor VIII for
hemophiliacs. They also worked on albumin and protein C, which was later
developed by Eli Lilly. They were working with erythropoietin as well, and were
02:44:00number two or three in all of these products, although the patents were held by
other companies. They knew a lot about mammalian proteins, and CHO [Chinese
hamster ovary] cell production, and glycosylation. All of these things had come
together at their pilot plant. They had all of that, but were having a hard
time. They were late to the party. Everybody was working on the same things in
those days, but Integrated Genetics was doing well among the latecomers.
02:45:00We talked with them for about a year and a half before consummating the merger.
It was an interesting financial equation. They had only research contracts with
large companies like BASF and others for the development of big proteins. They
were losing a million dollars a month and we were breaking even, even though we
had no contracts or fancy recombinant technology. The merger was very high risk.
People knew us to be very sound in the field, with one solid goal. They knew
02:46:00that Integrated Genetics was a tremendous technology player, but behind on
patents. We were afraid that if we merged, we'd have shareholders who didn't
understand each other, who owned shares for different reasons. We overcame all
of our fears and said, "It's better to do this than for us to reproduce years of experience."
We merged the two companies and it was a fantastic success. The combined
valuation was close to a one hundred million [dollars] and stock went from nine
dollars to sixty dollars in a three-year time frame. I forget the precise
02:47:00numbers, but it was a fantastic success. Generally, the marketplace said,
"Here's a good business model coming together with a good science model, and
they're local." They were absolutely right, because it worked. Today, there are
twenty-five hundred people employed at Integrated Genetics in Framingham.
Integrated Genetics' chief scientific officer became Genzyme's chief scientific
officer. The recombinant replacement for Ceredase became Genzyme's first
approved recombinant product. We were able to get rid of the placenta technology
by the mid-1990s. The recombinant process and the first recombinant product were
approved in 1994. Our big Allston plant, next door to the Harvard Business
02:48:00School, was built around the recombinant technology. That facility was approved
in 1996. We haven't used placentas for years. Many of the more traditional
biological science components at Genzyme were acquired through the merger, which
was enormously important from a value-creation point of view. We did the
02:49:00transaction in 1989. We agreed to it in April and closed it in August. The stock
price was positive. By September, I felt confident enough to do an R&D limited
partnership, this time through Evans-Freke, to finance our hyaluronic acid
program in biosurgery, an anti-adhesion product, which today is a very
successful program. In October, I decided to make an offer to buy back the first
R&D partnership, which had financed the Gaucher program, and we did a secondary
public offering in late November. That injected a significant amount of money
02:50:00into the company. It was an enabling merger, with tremendous leverage, and the
stock price kept rising. It built the corporation up materially and changed many
aspects of what we did. By 1991, the first product for Gaucher disease gave us
tremendous credibility. By that time, we became convinced that you could do
almost anything if you had something that worked. It provided a tremendous boost
to the culture. We embraced the value of persistence, not giving up on things
that are worthwhile, and taking big steps even if success is a long shot.
02:51:00EVERSON: Was the location of the manufacturing plant near the Harvard Business
School accidental or intentional?
TERMEER: In 1991, just before we decided to put it there, we had an annual
meeting, the first after the merger. We had decided to start building the plant
02:52:00ahead of having the technology ready. At the meeting, we said, "We will need to
build a recombinant plant and we've got to build it in North Carolina." We
thought about Berlin, Belgium, and Scotland. We never gave any thought to
Massachusetts. The next day, the governor of Massachusetts, Bill Weld, called
me. He said he'd read in the Boston Globe, "Genzyme will build in North
Carolina, not in Massachusetts." The journalists were upset about it, but we
felt that the culture in Massachusetts was not right for that kind of
02:53:00manufacturing. Weld showed up in my office the same morning, and said, "What's
the matter?" I said, "You don't build this kind of a plant in Massachusetts."
"Why not?' he asked. I said, "It's Taxachusetts"--taxes, unpredictability,
instability, abusive legislature, permitting, and all that kind of stuff. You
can't predict when you're going to get permitting. Every city makes its own
rules. You spend enormous capital with manufacturing. You'd like to do it
next-door when you're young and new, and you have few scientists, but
unfortunately we couldn't do that. North Carolina was the next best place,
02:54:00because they had experience in manufacturing. Bill said, "Henri, I want to
convince you that you can do it here. Why don't you advise me on what to do
differently?" I pulled together a group of about fourteen CEOs and advisors to
CEOs--lawyers, auditing firms, accounting firms and so on. We met, made a list,
and provided a report to the governor, saying, "If you do something about all of
these things then you may create an environment where we can consider
02:55:00manufacturing." He said he would, and I took him on his word. The following
year, all of the changes were implemented. Genzyme was given special treatment
in terms of getting permits. The city came up with the site along the river. The
neighborhood had rejected the John F. Kennedy Presidential Library and Fenway
Park. They didn't want those things, but they embraced biotechnology, and we
02:56:00received permits within four months. Becoming operational was fast, but the
engineering presented great risks. A young company that hasn't done this before
depends on advice. We had no one in-house who knew how to do this, but Charlie
Cooney, and Tony Sinskey, from MIT, and United Engineers from Philadelphia knew
how. We took some big gambles on perfusion technologies that weren't used by
02:57:00Genentech or anyone else.
EVERSON: Can you describe perfusion technology?
TERMEER: Perfusion technology is a fermentation process, similar to continuous
technology using micro carriers. We didn't use deep tanks. We used relatively
small 2,000-liter tanks that were continuously harvested. It was very high risk
and it happened fast. Much of the process was developed while the work was going
on. We knew that the plasma product worked, but we didn't know whether the
recombinant product did. The suspicion was that we would have a difference in
immunogenicity between the two products. It turned out that the recombinant
product worked very well. It was an improvement. The visibility of the effort
was enormous. Twenty-two million people drive along that road each year. They
saw the work going on and the papers were filled with news about it. Weld
thought this was the best thing that ever happened to him.
02:58:00EVERSON: Putting a manufacturing plant in the spotlight seems unusual.
TERMEER: It was a very unusual location, but the city's promises and its
willingness to expedite permits were very convincing. In addition, it was a very
visible statement. I liked that it was a manufacturing statement. It was Genzyme
saying, "Yes, we are here." I didn't like many of the sites that were offered in
other states on beautiful hills where you had to move loads of trees. You got a
nice view, but sent the cows home. It didn't feel appropriate for an industrial
site. The plant became an opportunity to put the company on the map in Boston in
02:59:00a significant way.
EVERSON: Was the building designed to showcase manufacturing?
TERMEER: It was built for transparency, so you can see the reactors and how it
all works. It's all a matter of taste whether you like the design. The
architectural critic of the Globe didn't like it. He felt it looked too much
like a cathedral and not enough like a plant. That was his view. We won numerous
03:00:00awards and people still comment that it's a great building. I have to admit, it
does look a bit like a cathedral. Looking at it with the architect was a lot of
fun. We worked on Saturdays. When you're on Memorial Drive, you can look to the
Boston side and see the Harvard Business School with all the red brick. Then you
see the parking lot, and it had to fit this picture. It did in the end, and it's
03:01:00now a very well-known unique landmark. Harvard's going to build a very large
science complex in Allston, which is what [Harvard President] Larry Summers
wanted as a great legacy, but couldn't execute. When I went to Washington--which
I did many times because Genzyme's orphan drugs became a lightning rod for cost
of treatment debates--people knew the building. [President William] Clinton
said, "Oh, you're from Genzyme--with that building. That's where your office
is?" I said, "No. That's the plant. My office is in some place you couldn't
find." Genzyme, like many others, was a young, unknown company and that was part
03:02:00of getting on the map. It's the best economic decision we ever made. Today,
there are three products manufactured there. The plant operates day and night
with fantastic output.
EVERSON: I'm curious about the general lessons that you might have learned from
03:03:00producing Ceredase and then Cerezyme, particularly involving patients and their families.
03:04:00TERMEER: There were numerous lessons. The first one we learned is that, even if
it seems impossible, you have to try. That's a big lesson, and we've applied it
a number of times since. If it is worthwhile, then you can get people onboard,
even the greatest cynics if you work hard enough and long enough. The power of
effectively treating a chronic disease, particularly when it involves children,
03:05:00is massive. We know that, in cases of chronic disease, not finding a product is
devastating for patients. Once you start and you have a positive effect, you can
never stop, which is a very big lesson that we've discussed at the board level.
We've done many of these products now, and we know we can't stop once we see
results, because the patient relies on it. We also cannot say, "I'll treat you,
but not you, because you can pay and you can't pay." It's like saying "We treat
people with HIV in the United States, but not people in Africa." In healthcare,
03:06:00you get very strong support from the public, but you have to be fair. That was
another very big lesson. You need to make these things available to all
patients, whether they are in Africa, Sri Lanka, or Vietnam. There are
healthcare system limitations around the world, but you can't rest until you get there.
We've made good progress. Treatment of Gaucher disease is more broadly
distributed today than for hemophilia or any other similar disease. We treat
03:07:00people in countries where we will never get paid for it, and at the same level
of therapeutic efficacy in terms of following the patients in registries and
training physicians. It's quite interesting that when you do this long enough,
you see that society will say, "OK you did your bit. We want to make a
contribution. We want to take responsibility." The Vietnamese health minister
came here recently. He heard that we were treating two siblings. It was very
difficult to import biological products to Vietnam, but we figured out a way to
do it. Those kids are doing very well. It had an effect on the hospital,
everyone's curiosity, and so on. He said, "This is fantastic. Why are you doing
03:08:00this?" He went to Washington and raved about what we were doing and how grateful
he was. It had a motivating effect on our employees and on the community of
Gaucher patients, who today can be in contact online. It's also motivating for
physicians, who can now talk about treating these patients. It affects
politicians, the people who make rules on pricing and payment. For example,
Canada doesn't like to pay for anything, but it likes this product. They say,
"OK, we have to do our bit." Creating an orphan drug policy that's sustainable
03:09:00and that's not discriminatory is key. We don't discriminate, we sell on one
price or it's for free.
Another lesson is that the world is as flat as you can imagine. That attitude
carried us to Japan in 1987. Today we have a very good company there. We're in
most European markets, Israel and many Latin American markets: Brazil, Colombia,
Chile, Argentina, Mexico. We have free drug programs in many countries, and
03:10:00recently made big breakthroughs in Russia, where they've started to pay for the
drug. In some places there's no infrastructure and nobody but maybe a patient or
a physician who may have heard about it. The internet makes it easier for people
to be in touch with us. Now we have four products in the same category. The last
one, approved this year, is Myozyme for Pompe disease, which is another
beautiful story for another time.
03:11:00EVERSON: Fabrazyme wasn't approved until 2003 in the US, but work on it began in
the 1980s at the Mount Sinai Medical Center, correct?
TERMEER: No, Mount Sinai produced a mouse model of the disease in 1995, but the
NIH did the early work on the enzyme, agalsidase beta. We were working with the
NIH in the early 1980s, extracting the enzyme from placentas, supplying Roscoe
Brady and his group at the same time we were working on glucocerebrosidase. It
wasn't until Mount Sinai established the knockout mouse model that we felt we
03:12:00had something therapeutically useful. That accelerated the project and product approval.
EVERSON: Was Brady's group doing clinical experiments?
TERMEER: They may have done some clinical experiments, but there was no
confidence that anything really worked. Nobody understood where it needed to go.
We knew that Gaucher disease affected the spleen, but we didn't have the same
kind of understanding for Fabry disease. It was much more in the vascular system.
EVERSON: Was the enzyme shown to be effective in the knockout mouse?
TERMEER: The recombinant enzyme showed efficacy in the mouse model. That's when
the project really accelerated. In the early 1990s we shifted from using the
placental enzyme to the recombinant enzyme. At that point, the NIH was no longer
03:13:00involved. They felt a little bit left behind in this process. Several of the
highly specialized labs had become fairly competitive. Mount Sinai had done a
lot of the early pioneering work. They licensed some patents to Genzyme, so our
work continued with Mount Sinai. Robert Desnick was the lead investigator behind
the program, which generated quite a few inventions, including this one.
03:14:00EVERSON: Let's talk a bit about BIO [Biotechnology Industry Organization]. What
was your early role and what involvement did you have in the merger between IBA
[Industrial Biotechnology Association] and ABC [Association of Biotechnology Companies]?
TERMEER: I was on the IBA board for a number of years. It became obvious that
having two trade associations was very silly and inefficient. People began
03:15:00asking, "How can we do this better? How can we merge?" There was resistance
until the chairman at IBA, a guy named Steve Duzan, who was the CEO of Immunex,
made things happen. Constructive discussions started, both boards approved
consolidation, and we merged to form BIO. Kirk Raab, the CEO of Genentech,
became the first chairman of the new group. Carl Feldbaum became the executive
director. The previous directors of both organizations left. I became vice
03:16:00chair, and then the second chairman two years later.
This was a busy time in Washington for biotech and pharma. Hillary Clinton was
building support for healthcare reform. The biotechnology industry was still
very vulnerable and decisions made in Washington had an impact on its financial
health. There was a lot of fighting about orphan drugs. There was a lot of
in-fighting among companies about patents, especially between Amgen and the
03:17:00Genetics Institute, and XOMA and Centocor. We weren't fighting with anybody,
which helped me become the chairman. Nobody else was focused on Gaucher disease.
Hillary Clinton thought that the price of Cerezyme was too high. People in
Washington began to call for a price control system for breakthrough drugs. One
very famous politician asked, "What if one of you guys comes up with a treatment
for HIV? You can charge any kind of price." I gave many speeches about this. I
said, "The problem is not that we have a treatment for HIV. The problem is that
03:18:00we don't have a treatment for HIV." The virus was killing millions of people all
over the world. Trying to control the pricing of a non-existent cure was a
little premature. I advocated that it was important to create incentives to look
for a cure.
That was the back and forth of those days. It was an interesting time. It was
very dangerous for the industry when Hillary Clinton was trying to create a
breakthrough pricing control system. Fortney Hillman "Pete" Stark, Jr., a US
03:19:00representative from California, was aggressively against the pharmaceutical
industry. His mantra was "price controls, price controls, price controls." It
was a difficult time. Wall Street dried up, the industry dried up, and many
companies had to let people go, slow programs down, and halt licensing
activities. Then, in 1994, it became clear that the Republicans would take over
the House and that healthcare reform would not progress.
EVERSON: Were the IBA and the ABC generating mixed messages?
TERMEER: Yes, because they represented different sectors of the industry. One
03:20:00represented mainly early stage, small companies while the other advocated for
the needs of large companies that were close to commercialization. Both groups
agreed on fundamental issues like supporting technological advancement through
education and NIH funding, but they differed on issues such as intellectual
property protection and orphan drug status. They also had different agendas in
terms of FDA regulation. When you have products awaiting approval at the FDA,
you have one set of concerns. When you don't know whether you'll ever get a
03:21:00product to the FDA, you have another set of concerns. Small differences of
opinion became big differences. Was it a disaster? No, but it was inefficient.
It was not one voice. Merging was a great success because the two groups were
meant to be together.
EVERSON: Who initiated the merger?
TERMEER: Informally, people on both boards talked to each other about it. Steve
03:22:00Duzan of the IBA and Thomas G. Wiggans of the ABC started the discussions. The
IBA board in particular told Steve and the executive director, "Get on with it
and try to accomplish this." Thinking back, I don't think there were great
uncertainties. It was a young industry, and even the larger companies were still
young companies. Eventually, they merged and renamed the organization.
03:23:00EVERSON: What role did G. Steven Burrill play?
TERMEER: Steve played a role at Ernst & Young. At the time, he was writing a
book. Steve was on the accounting and research side of the equation. He set up
the annual meeting in Laguna Beach, [California] that has become very important
03:24:00over the past twenty years. That was a tremendous contribution. He wasn't very
involved in BIO and or Washington; he wasn't very involved in policy formation,
then or now. He serviced the industry as a banker, but he didn't lobby for the
03:25:00industry. He was trying to understand the industry and he explained the
industry. He gave frequent speeches. People could learn a lot about the industry
by seeing it through his eyes. He wasn't involved in passing the orphan drug
law, getting PDUFA [the Prescription Drug User Fee Act] implemented, or thinking
through issues related to CMS [Centers for Medicare and Medicaid Services], but
he deserves a lot of credit for bringing people together through meetings.
03:26:00EVERSON: I'm interested in his Laguna Niguel conference.
TERMEER: I've been to all twenty meetings. It's a great place to observe the
evolution of the industry. Brook Byers and Fred Frank have also been at every
meeting, but it's very much Steve's meeting. It's his
03:27:00baby and we all acknowledge that. He's been a great friend to the industry.
EVERSON: You became chair of BIO in 1995, and were chair for two years. The FDA
Modernization Act [FDAMA] was passed in 1997. What
role did BIO play and what role did you play?
TERMEER: BIO played a big role. Senator Edward Kennedy played a very big role.
He was very powerful force.
EVERSON: Could you explain PDUFA?
TERMEER: PDUFA was about user fees. That marked the beginning of a campaign to
get better support for FDA review, which meant implementing benchmarks,
03:28:00establishing responsibilities, and organizing the review process. Kennedy
effectively forced David A. Kessler, the FDA Commissioner, to speed things up.
Kessler had been a very tumultuous commissioner, and is remembered for seizing
24,000 gallons of orange juice that was made from concentrate but labeled as
"fresh." In later years, he tried to create a legacy; FDAMA became that legacy.
At BIO, we developed a team of CEOs supported by staff. I was supported by a
03:29:00fantastic person, Lisa Raines, whose name you may have heard. She was at BIO
before me, in charge of legal and government affairs. She became my assistant in
Washington. She was brilliant. Everybody agreed that she was extremely talented
at getting legislation defined, stating how to do things, and writing them out.
Tragically, she was killed in 9/11. She had been very active. Kessler was trying
to support the indications he got from the Senate, and particularly, from
Senator Kennedy. Kessler would meet with me--in fact, he had my home phone
03:30:00number and my cell phone number--and we would talk. Eventually, FDAMA became a
reality. The fast track provision was created which was hugely important. The
fast track attitude was, "We can do things differently and more efficiently
without giving up on the standard of care and the gold standard of approvals."
Industry wants a strong FDA, but an FDA that has the courage to make decisions
03:31:00and to move forward, and is able to say, "Do this, but not that.' The industry
doesn't want an agency that equivocates, or says, "We don't dare." With FDAMA,
the FDA had a much better understanding of how it could serve society by being
more streamlined. BIO played a large role and I was lucky to be a part of it. It
EVERSON: Did you and BIO work with PhRMA [Pharmaceutical Research and
Manufacturers of America] on FDAMA?
TERMEER: Very little. Those were not the best days for PhRMA. We recognized each
03:32:00other and had a high degree of cross membership, but we didn't really work
together as much as we do today.
[END OF AUDIO, FILE 2.1]
[END OF INTERVIEW]
EVERSON: Last time we spoke, we ended by discussing your involvement with BIO. I
thought I'd pick up by talking about the Genzyme products launched in the
03:33:00mid-1990s, like Seprafilm, Renagel, Thymoglobulin, and Myozyme.
TERMEER: So, now we're into the 1990s. I'll talk about the Genzyme products
launched in the mid-1990s, including Seprafilm, Renagel, Thymoglobulin, and
Myozyme. I'll start with Seprafilm, which is a product for the surgical field.
It's hyaluronic acid, a biopolymer. When I joined the company in 1983, we had,
03:34:00as I said, the eight scientists from MIT. Shortly after I got to know them, I
asked for their resumes and publications. Each had about two hundred
publications. I found that one of them, Professor Cho Rha, was working on
hyaluronic acid and supervising a postdoc in the field. I was familiar with
hyaluronic acids from a company called Biomatrix. The owner of Biomatrix, Dr.
03:35:00Endre Balazs, is the grandfather of hyaluronic acid indications. He had tried to
recruit me to be the CEO of Biomatrix. I declined because he had a very strong
personality. I saw there little space for anybody else. That was probably a wise
decision, but in the process, I got to know a lot about hyaluronic acid.
03:36:00Biomatrix developed the first product for ophthalmic surgery, called Healon,
which was marketed by Pharmacia, and is still very successful in the marketplace
today. In any case, I was intrigued by Cho Rha's work. I asked Cho to tell me
about hyaluronic acid and she was very energetic about it, and, in particular, a
microbial method of producing it. We talked about all of the different clinical
indications the material could have, including surgical indications. Then I
said, "Tell me about your postdoc," and she told me a very energetic story. I
said, "Let me meet this person."
03:37:00In 1983, we were a tiny company, but when I met Rha's postdoc, she impressed me
as a very entrepreneurial young lady, and she had great ideas about hyaluronic
acid, so I hired her. We brought her in and started to work on hyaluronic acid.
We didn't copy what Biomatrix had done, but created a different way of
manufacturing it, and brought it to the marketplace for different purposes. We
were involved with hyaluronic acid research since the beginning of 1984. We
first worked on an indication using fermented HA [sodium hyaluronate] as a
viscoelastic surgical aid. That became a successful product called Provisc.
03:38:00Alcon marketed it. They're still selling it, and we still produce it. It's the
leading product in the ophthalmic surgical space. Then we started to work on
other indications. We found a way to produce anti-adhesions post-surgically, and
got the Seprafilm program. We raised money for it, and, in 1989, did an R&D
partnership specifically to develop hyaluronic acid for post-surgery
anti-adhesion purposes. We took it through clinical trials and received FDA
03:39:00approval. Today, it's the leading anti-adhesion product in the United States,
Japan, and France. It has many applications, particularly in abdominal and
gynecological surgery. We haven't developed other markets, but we're still
working on it. It's growing very rapidly in the US as a product used in
abdominal surgeries. A lot of adhesions occur during C-sections. If a woman
wants to have a second child after a C-section, Seprafilm reduces post-surgical
adhesions and significantly decreases the difficulty of delivering a second
03:40:00child. It is very broad-based and I'm very proud of it. We ended up buying
Biomatrix. They had the leading treatment for osteoarthritis pain in the
world--a modified form of hyaluronic acid injected into the knee joint. Today
it's a very large product for us with profits in the hundreds of millions of dollars.
03:41:00EVERSON: Synvisc, the drug for osteoarthritis pain, is quite a change of pace
from Cerezyme. Was that the first step you took in terms of diversification? Was
diversifying a conscious decision?
03:42:00TERMEER: It was very conscious. The decision to work on rare orphan drugs, and
the broad-based hyaluronic acid program, was made very early on. It was based on
the hedging effect that we could create, due to the availability of an early
market, and the uniqueness that we could bring in terms of going from rooster
combs to microbial fermentation via the MIT connection. In the case of Provisc
we had a market within reach. That went very well. I'm pleasantly surprised by
03:43:00Provisc's longevity. In 1991, enzyme replacement therapy was introduced for
Gaucher disease. Today, in 2007, the product is still growing each year. The
first product for hyaluronic acid was also approved in the early 1990s. We
started work on that in 1984, and it's still growing every year. Now we're the
lead program, from a market share point of view, in ophthalmic surgery through
Alcon, and in anti-adhesions and arthritis knee pain, through our own sales and
marketing organization. When we present our company to investors, we say, "Look
at the facts--we're spending to improve these programs." The longevity of our
03:44:00innovative products has been fantastic. I credit our success to fortunate
choices. Vertical integration was the key, along with manufacturing expertise
that enabled us to by cost-competitive, and to improve each year. We made
several fortunate choices, to tell you the truth. We chose good materials, and
EVERSON: It seems to me that vertical integration, and good communication across
R&D, manufacturing, and marketing must help once you find new indications.
03:45:00TERMEER: Absolutely, we need to stay ahead of the curve. We've been able to stay
ahead of the curve because we understood the importance of the big biotech
innovations and breakthroughs of the past twenty years and took action on them.
Many companies are too narrowly involved in one area. It's tough to see that
through. Genzyme has been lucky. For us, broad involvement has always worked
well. We recognized, for example, when the opportunity presented itself, that
03:46:00polymers were a promising technological field. When Renagel became a
possibility, we jumped on it.
EVERSON: Let's talk about Renagel.
TERMEER: Renagel is a polymer-based drug that was created in the mid-1990s
around technology that came out of George Whitesides' lab at Harvard. George was
one of our advisors, so we had a close relationship. We tried to bring the
03:47:00technology to Genzyme, but we couldn't find the right connection. Then I became
a board member of a new company called GelTex. Bob Carpenter was also a board
member at GelTex and Genzyme. Whitesides became a board member, and we hired a
good friend of ours, Mark Skaletsky, as well. He had been the chief operating
officer of Biogen, and then moved to Enzytech. He sold that company to Alkermes,
and became CEO of GelTex. Henry Blair was also on the Genzyme and GelTex boards.
03:48:00The company developed non-absorbed polymers--polymers designed to bind things:
iron, phosphate, or cholesterol, for example--and transport them through the gut
to be discarded naturally. It was a non-systemic approach.
Early on, GelTex developed a method to lower LDL [low-density lipoprotein]
cholesterol, and a method of phosphate management. The phosphate management
approach generated great interest at Genzyme because it had great clinical
potential. The cholesterol-lowering statins were doing well, so we made an
arrangement in the late 1990s, at arm's length. I excused myself from the board,
03:49:00and Genzyme made a fifty-fifty arrangement with GelTex-- they were the
developer, and we became the marketing arm. We successfully introduced products
in the United States. At first, we had to explain why our treatment was ten
times the cost of the current treatment, which was calcium. But Renagel had
great potential that has now been proven in clinical trials--it lowers the LDL,
doesn't involve calcium, is non-systemic, and effectively manages phosphate. We
03:50:00worked continually on clinical trials to improve our clinical knowledge. Once
the product started to take hold, I felt we should own it and the technology. I
went to the GelTex board and said, "We'd like to integrate these technologies
into Genzyme and take full possession." We did it. During the first step, we
03:51:00were the distributor and the marketer, and the deal cost about twenty-five
million dollars. We built our sales force, and split the profits evenly.
The second part of the deal cost well over a billion [dollars]. We created
tremendous value for GelTex by making Renagel look like a real commercial
product. It was a great success for GelTex's investors, and for Genzyme, as
well. The product is still very important for us. It's very successful around
the world, and generates close to six hundred million [dollars] in annual
revenues. GelTex was a more or less virtual operation. They didn't have
manufacturing. We bought the factories and brought costs down, which helped them
03:52:00create a successful enterprise. Every year, the margin improves because we
develop better manufacturing practices. We now have a second-generation form of
the product in front of the FDA. We're hoping it will be approved for dialysis
patients and CKD [chronic kidney disease] patients. The product brought the
non-systemic approach to Genzyme, and it's got a great future because it's much
safer. It led to the cholesterol-lowering program that we're now introducing in
Europe. The program is directed toward patients who don't benefit from statins
or Zetia. They're relatively small in number, but large enough by our terms.
03:53:00We're second in the marketplace with patients who are very sick and need help.
EVERSON: Is it marketed to those patients as Renagel?
TERMEER: No, the brand name is Cholestagel. In the US, it's marketed by Sankyo.
GelTex has made arrangements in which it's called WelChol. It generates about
two hundred million in annual revenues for Sankyo in the US--we started much
lower in Europe. We're completely vertically integrated. We do our own R&D, and
all the manufacturing, clinical development, and marketing, except when GelTex
03:54:00has already made other arrangements in the US.
EVERSON: Clearly, Genzyme still looks externally for promising research. Once
you make those agreements, is there a fairly conscious effort to become
vertically integrated around that technology?
TERMEER: Yes. For almost all the transactions we've done, we've integrated the
company. GelTex was located in Waltham, Massachusetts. They had about one
hundred and fifty people. We've doubled the size of the facility--they now
employ between three hundred and four hundred people, so that's a positive
03:55:00experience. The same is true of Biomatrix and ILEX Oncology, the company that
got us into cancer. We always hope to acquire talent and enthusiastic employees,
and to create an infrastructure that works. Only in the case of one product did
we close the doors because there was no critical mass. But in most cases we've persevered.
EVERSON: Do these companies remain independent entities within Genzyme?
03:56:00TERMEER: GelTex is no longer called GelTex--the name disappears over time. But the
entities exist as divisions. It takes a particular attitude and tolerance, and
that skill to permit and ensure it has developed within the company over many
years. Now, before we do a transaction, we can say, "Talk to this group or that
group. They became part of Genzyme." You don't persist in these things unless it
EVERSON: Johnson & Johnson employs a similar strategy. Do you see it as similar?
TERMEER: J&J has as a very similar model, but it's more mature. They benefit greatly.
03:57:00EVERSON: You mentioned that the technology involved non-absorptive drugs. Have
other new drugs been developed on the platform?
TERMEER: Yes. There was one drug that unfortunately didn't work in Phase III
called Tolevamer. It was developed to treat patients with C. [Clostridium]
difficile colitis. It absorbed the toxins A and B, which cause diarrhea. It's a
nosocomial infection. We took it to Phase II, and then did the largest Phase III
we've ever done. We spent a lot of money. When we opened up the first Phase III
trial, we were short. This happened very recently. We had other things succeed
03:58:00in this timeframe, but not this one. We measured Tolevamer against vancomycin
and metronidazole. It was a non-inferiority trial and a superiority trial in
terms of recurrence, but we couldn't prove non-inferiority in terms of
resolution. We were superior in terms of recurrence, but that doesn't matter.
You first have to solve the problem. It didn't solve the problem very well. It
simply wasn't good enough. That's a hard lesson. We've had very few experiences
where we've made deep, long-term investments and things didn't pan out. This was
one of the very few.
03:59:00EVERSON: What about Thymoglobulin?
TERMEER: Thymoglobulin is a typical Genzyme product used for the induction of
tolerance or to prevent acute rejection of solid organ transplantation. It was a
product marketed by a company called SangStat. They were headquartered in
California, but had a very large manufacturing operation in Lyon, France. Many
years earlier, we had built a factory on this same site to extract
04:00:00glucocerebrosidase. The SangStat product has done well. It's the leader in its
field for saving people's lives. The indication is very narrow, but it's very
important. It's difficult to produce. The process is the product, actually. The
opportunity appealed to us for many reasons. Many other indications become
possible when you influence the immune system in the way that this particular
product does. We're looking at a number of them, including type 1 diabetes. In
the meantime, the product is doing quite well in the area of transplantation. We
went to France and took over the manufacturing. We're building a new factory in
04:01:00Lyon. We're working on new indications, and we've taken over the sales force.
We're adopting a global pricing approach. Previously, there had been a big
disconnect between prices in country A and country B. Lining these things up can
be a painful process, but we're going through it in a systematic way. Last year,
we acquired a company called AnorMED, which is working on a stem cell
mobilization technique. We recently announced two Phase III trials. In one, we
announced--just yesterday--a successful result in increasing stem cell
04:02:00mobilization and harvesting for transplantations.
EVERSON: Was SangStat marketing the product for a while?
TERMEER: They were marketing in the US. They were marketing overseas through a
few different outfits, but it was very thin.
EVERSON: What about Synvisc?
TERMEER: Synvisc came out of Biomatrix. That's a hyaluronic acid product for
04:03:00osteoarthritis. We haven't discussed Campath and Clolar. A few years ago, we
acquired a company called ILEX, in San Antonio, Texas. We had been working on
R&D in oncology for a long time because we were naturally primed to appreciate
the narrowness of oncology markets. We were excited about what biotechnology
could do for them. We spent a lot on R&D in the area over five or six years, but
still didn't get to a product. Eventually, we took the plunge and acquired ILEX,
which had Campath, and was in the process of getting FDA approval for Clolar.
04:04:00Both had very narrow indications, but they were important for pediatric leukemia
and CLL [chronic lymphocytic leukemia]. ILEX had also started a clinical trial
of Campath for the treatment of multiple sclerosis. A year and a half ago, we
got the results from the first year of the trial, and then last year we got the
results from the second year. This year we'll get the third-year results. So far
it's highly successful. It has a 75 percent treatment effect against Rebif, both
04:05:00in progression and relapse. This result led us to enter into the Phase III
clinical program. It will take a long time and hundreds of millions of dollars,
but we're confident that it will completely change the way in which we think
about the treatment of MS. With Campath, you treat the patient once a year,
twice at most, since we don't know how long you can avoid relapse. It completely
04:06:00changes the way you treat this disease. It's not insignificant, because by the
time we get to the endpoint of the trial, probably sometime in 2011, the market
will have grown from five billion to seven or eight billion dollars.
EVERSON: What's the technology?
TERMEER: It's difficult for me to explain. It's a monoclonal antibody that
attacks and kills T-cells. It can also be used for induction in the case of
transplantation. In that realm, it competes with Thymoglobulin. It does pretty
04:07:00much the same thing as Thymoglobulin. It's a miracle antibody, but it's quite
toxic. You have to be careful. There's a risk management program that comes with
it because it can cause ITP [idiopathic thrombocytopenic purpura]. The risk
management program ensures the identification of platelet effects. Campath came
04:08:00originally from ILEX, a company that has a thriving facility in San Antonio. The
acquisition was truly additive. We're now in late stage oncology trials. If we
can show that Campath can be used safely, it will have the most transforming
effect that we've seen. It will become the largest single multiple sclerosis product.
EVERSON: Should we move on to Myozyme?
TERMEER: Yes. Myozyme is a very interesting story. It treats Pompe disease, a
04:09:00rare genetic condition, a lysosomal storage disorder. Glycogen accumulates in
muscle cells causing them to clog up. Patients with severe cases die within
twelve months after birth. Sometimes the heart gives in, and they die very
quickly. In cases where patients have some residual enzyme, there is a much
slower progression of the disease. Patients are affected as adults, and may end
up in wheelchairs with respirators. Eventually they become totally dependent on
04:10:00others. You need to start treatment within the first six months, but the disease
is progressive and most patients do not live long. Myozyme is the missing
enzyme. When we delivered it to patients, we saw an effect, but it followed an
incredibly convoluted route in the body. Two excellent biomedical researchers
were working on this--Arnold Reuser, in Rotterdam, and Y.T. Chen, at Duke
04:11:00University. The Rotterdam team developed a relationship with a company called
Pharming and started to produce the enzyme transgenically in rabbits. Chen
worked with a Chinese company called Synpac. They produced it in CHO cells. We
prefer to use CHO cells, but when we looked at both programs, we chose to work
with Pharming because they were about to go into the clinic and had access to a
very large clinical practice in Rotterdam.
A critical mass of people interested in Pompe disease had formed in the
04:12:00Netherlands. Patients came from all over the world to be infused with the
enzyme. They had some success but they needed massive amounts of enzyme to treat
patients, and couldn't get enough rabbits. They went so far as to plan a factory
in Belgium that would breed tens of thousands of rabbits, but it would have been
impossible. Eventually, the company couldn't uphold its part of the bargain with
us, which stipulated that it would pay half. We were paying half. They asked for
loans, but we said no. We bought the program from them. They still exist today,
but they've moved on to different things. They couldn't afford this program. It
04:13:00was very interesting. Holland is a small country and nine patients were being
treated. The company was going bankrupt, and the Dutch Parliament was discussing
how to save the company so that the patients could continue to receive
treatments. We were accused of being bad Americans who were not giving them the
money to survive. We were on the news and in the papers. My mom asked, "Why are
you not treating these patients?" I said, "Ma, it's OK that they complain. We'll
treat these patients. Trust me. We won't let them down."
04:14:00We made arrangements to treat the patients for two years. It was very costly. We
reserved seventy million [dollars] to support the patients. In the meantime, we
negotiated with Synpac. I went to Taiwan and made a deal because CHO cells were
a more predictable method of manufacturing the enzyme, and we knew a lot about
it. They were treating three patients at Duke, and at least two of them were
benefiting significantly, but they couldn't reliably produce the enzyme. The
04:15:00cell line was unstable. We couldn't start a clinical program serious enough to
prove that the replacement therapy worked. In the meantime, we started work on a
different cell line. Another candidate line came out of a company called
Novazyme. They had developed a way to target the enzyme so that, hypothetically,
it could be one hundred times more effective. We bought the company. The story
is actually in a book written by Geeta Anand from the Wall Street Journal. It's
called The Cure. We also tried our own enzyme, the
04:16:00transgenic enzyme, and Synpac's enzyme. We put them all through the "mother of
all experiments" and tested their effects. We said, "Whichever wins, we'll use
that one." It turned out that the Genzyme enzyme was the most effective, and
eventually it became an approved product.
04:17:00We ran a clinical trial for eighteen babies at five centers around the world,
including Duke, Tel Aviv, [Israel], Lyon, [France], and Manchester, [United
Kingdom]. We flew patients and their families to these locations for nine
months. As soon as we found a patient and the parents were prepared to go, we
would fly them to one of these centers. Without treatment seventeen of these
eighteen patients would have died within twelve months. Those were the odds. All
of them survived. That was a great success, and it became part of the filing
package in Europe and in the United States. The treatment was approved last year
04:18:00in Europe and the United States, and last month in Japan. The critical part is
that for this enzyme to work you need a very large dose--twenty times the
replacement dose for Fabry disease, and something like thirty times the dose for
Gaucher disease. You need large amounts of protein, and to make that work
commercially you need a really effective and high-yield process. We had learned
how to do it over the years because we had set up and operated protein
manufacturing factories. That skill figured into the way we thought about our
04:19:00future. Today [August 2007], we're able to support Pompe patients. We have seven
or eight hundred worldwide undergoing the treatment. The Allston plant has been
approved by twenty-eight countries, but not the FDA. They want to have proof
that the cell lines work on a large scale. That's a problem. We're currently
running out of product for the US market. It's interesting from a bio-generics
perspective. How will the FDA look at bio-generics? This is product that's being
04:20:00made by the same manufacturer with the same assays, and they're not prepared to
give approval without clinical proof that the product has the same clinical
effect as the product at a lower scale. It's extremely costly. What they do
allow is for us to make the product available for compassionate use. It's not a
safety question--it's a process question, a bureaucracy question. Even without
FDA approval, we generated forty-seven million dollars in sales last quarter. It
could grow to a billion dollars over time.
04:21:00EVERSON: Where do you see it going with the FDA? Are there any indications?
TERMEER: We have a trial going on now for adult patients that will finish up in
September . We will have the data in November. We know we're going to get
there. When we got approval in April of last year, we announced that we had
spent six hundred million [dollars] on this program through 2005. That is a
[END OF AUDIO, FILE 3.1]
[END OF INTERVIEW]
04:23:00THACKRAY: Henri, let's talk about Fabrazyme.
TERMEER: Fabrazyme, like Cerezyme, Aldurazyme, and Myozyme, is important for a
lysosomal storage disease. It's a product that we're very proud of--it's the
first treatment for a disease that had no treatment. It's important because
patients develop severe medical problems such as kidney failure. They have
shortened life spans. Fabrazyme is the missing enzyme like Cerezyme is for
Gaucher disease and Myozyme does for Pompe disease. We are now treating these
04:24:00patients. It's very much a part of our orphan drug program.
THACKRAY: Where are the natural limits of this strategy?
TERMEER: That's a great question, Arnold. I think we'll see many more orphan or
ultra-orphan treatments. We found that it's sometimes very difficult to find
treatments that work across diseases. Diseases are highly specific. Personalized
medicine, of course, will guide us to figure out what therapy is appropriate for
04:25:00individual patients. I think in the future we'll see a lot more of that. I would
say we are at the very beginning of recognizing the potential of personalized medicine.
THACKRAY: I have a daughter who is the vice president of clinical trials at a
biotech startup. I'm very aware of lab and clinical difficulties around any new
drug. What is it that Genzyme in particular brings to the table?
04:26:00TERMEER: We started our life with a highly specific therapy for Gaucher disease.
It took ten years to establish this program. Essentially, we developed a
personalized medicine. All of the products we currently have on the market or in
development have similar characteristics. These programs are highly specific.
The treatments are almost guaranteed to work, provided that the patient is
correctly diagnosed. We bring effective therapies to the table. In terms of
04:27:00finding these therapies, I don't think we can claim insights greater than anyone
else's, other than to say that this is what we focus on. We try to get beyond
trial elements in a very deliberate way. We keep looking until we find something
that will benefit patients. We developed a broad-based diagnostic division in
the company called Genetics/Diagnostics. We're currently the second largest
laboratory in the country, and the largest in oncology and prenatal genetic
testing. We've developed a genetic counseling capability. In fact, we're the
largest employer of genetic counselors in the country. We employ about 10
percent of all genetic counselors nationwide. They are dispersed around the
04:28:00country to advise patients and parents on the outcome of genetic testing. They
also sometimes advise physicians on how to communicate with patients. These
operations are partially aligned with treatments that we offer, but go far
beyond. We have only a handful of treatments. The counselors deal with
straightforward chromosomal abnormalities seen in Down syndrome babies and
amniocentesis, and more advanced derivatives of that kind of testing, like
highly specific testing for breast cancer. We do about a third of all breast
04:29:00cancer testing in the United States. We run all of our operations as
self-sustaining businesses. They're connected to each other, but they are run as
businesses. We want to be as good as possible at running them. In this case, it
means having very extensive IT and other capabilities because the work is
extremely labor intensive. It involves hundreds of thousands of tests.
04:30:00KOAY: What year did you start doing the genetic counseling?
TERMEER: We started in 1989, when we acquired Integrated Genetics, a company
that had a small genetic testing business. They were in the race to figure out
the gene for cystic fibrosis. They didn't win, but they participated. From that,
we developed broader capabilities, but our focus is still esoteric in comparison
04:31:00to Quest or LabCorp, which are both multi-billion-dollar corporations. Genzyme's
annual genetic testing revenues are maybe three hundred and fifty million dollars.
THACKRAY: Is Genetics/Diagnostics strongly or weakly connected to Genzyme's
TERMEER: It's strongly connected, but that's not the only connection. All the
work we do in terms of personalized medicine goes through that operation. For
instance, we are more advanced now in introducing routine newborn screening for
04:32:00the lysosomal storage diseases for which we now have therapies. That operation,
from a technology standpoint, helped to develop the tests. We qualified what we
had on a global basis. We're involved with the CDC because we don't want to
distribute reagents when we're the only suppliers of the therapeutics. We want
to have an arm's length distance. In that world, the CDC has a lot of
credibility. Screening is public policy, not medicine. For the most part, we
04:33:00screen healthy people. We supply the technology and we supply the reagent, free
of charge. The CDC then distributes them to countries and states. This is a work
in progress. In Taiwan, for instance, we test 100 percent of the newborn babies.
Taiwan is the first country to test for Pompe disease. Austria is well ahead, as
are Illinois and New York. It's happening a little bit more each year. Our task,
04:34:00our mission, is to do the best we can for these ultra-orphan diseases. Because
they are ultra-orphan, there is no critical mass of esoteric activities on the
outside. We take a very comprehensive approach. Because the diseases are
chronic, we've become a lifeline for these patients and their families. Because
of the morbidity associated with these diseases we try to do this early. Newborn
screening allows you to make decisions before it's too late. It's not a product
on a shelf, it's a therapy. We provide the service of carrier testing through
04:35:00our genetic testing operation. You need two carriers in order to have this
single gene disorder in some percentage of the offspring.
KOAY: Is it a co-development of the diagnostic test and a therapy?
TERMEER: It's not a co-development. We develop these diagnostics in a very
deliberate way, and we involve many other people in the outside world.
THACKRAY: But the therapy came first?
04:36:00TERMEER: Yes. Each of the therapies was very specific to a particular genetic
disorder and was highly efficacious. The products work every time, so long as
the patient is appropriately diagnosed.
THACKRAY: If I'm the Taiwanese Minister of Health, the good news is that you're
helping me to identify problems in my population. The bad news is that you're
helping to define a treatment expense that I might not have otherwise even known about.
TERMEER: The good news is overwhelmingly more important. Knowing something that
allows you to avoid morbidity and other problems is similar to prenatal testing
04:37:00for chromosomal abnormalities. Parents have a choice.
THACKRAY: Is there a sense that ultimately all diseases will be orphan diseases
because they'll be so specifically defined?
TERMEER: Many will be. Once you have a disease, it's likely to be highly
specific. Regarding wellness, if you have high cholesterol, you don't have a
disease, but you can get a disease. More philosophically, the world is likely to
04:38:00go two different directions. There will be programs that deal with defined and
acute chronic problems and others that deal with managing wellness and staying
healthy. They belong to completely different worlds. Education will play a large
part in wellness. Wellness is about avoiding problems. The statins fall into
that category because they prevent problems. In a healthcare sense, that's
almost un-financeable because every single human being is involved in managing
wellness and health. I think we should take personal responsibility for our
health. If you develop a chronic problem, like heart disease or cancer, we
04:39:00should, as a society, do our best to help you.
THACKRAY: At the BIO [Biotechnology Industry Organization] conference a couple
of years ago , former President Bill Clinton said, "We spend 15 percent on
healthcare. We're the only country that does that. It's too high." Steve Burrill
said, "We spend 15 percent on healthcare and it's going to 25 percent." Do you
agree with Steve?
TERMEER: I don't necessarily agree with Steve, although as an economist, I
cannot say that he's wrong. There is nothing more valuable than health. The
frustration is that we spend a great deal and still have a lot of health
04:40:00problems. We still have Alzheimer's and heart disease. It's an employment
problem. In Massachusetts, we employ four hundred sixty thousand people in the
healthcare field, which is by far our largest area of employment. We have good
healthcare in this state, but it is an expensive proposition. When it was
published that healthcare employment in Massachusetts was being surpassed by
04:41:00Pennsylvania, people started saying, "We're losing our position." We should
instead be saying, "How much health can we produce with three hundred fifty
thousand people, rather than four hundred sixty thousand?" Of course, in order
to improve efficiency, we need technological breakthroughs. But people have jobs
and they have unions. It's just as difficult as making a change in undergraduate
education. It's tough to do. People have jobs. That's why in India and China we
ought to do it differently. They're in an earlier stage of development. We can
build it up there in a much more critical way. We can look after the wellness
part, but as part of a different equation.
04:42:00THACKRAY: Are they receptive to that message in India and China? If you look at
Genzyme's business globally and compare the percentage here and the percentage
there, what's the trend?
TERMEER: The international market is larger than the US market. They're poised
to develop over time. India and China are still very much at the beginning, but
Genzyme is seriously developing its activities in those countries. In China,
we're building a big research center outside of Beijing. We have offices in
Shanghai and Beijing. The research center will do many interesting things, some
of it uniquely important. I spent a week in India just around the time of the
04:43:00explosions in Mumbai. I was in Bangalore, and met with many people there. Among
other things, we talked about what we can do to leapfrog treatments,
technologically. In India, you have a capacity shortage: you have more than a
billion people, and twenty-five million births a year versus four million here.
It's an incredible number of people, and a very young population compared to the
aging population in the United States. Of course, there's an enormous disparity
in terms of efforts, but the capacity problem is particularly problematic. It's
a democracy--you're not free to help one person and not another. People notice.
04:44:00You have to be fair. You have to be ethical, otherwise it's not sustainable.
We talked to some high-level people in the government, some academics, and a
number of companies. We asked what we have that suits India's market. In the
United States and Europe you work with a saturated wealth, but then in India you
work with a lot of capacity, poorly utilized capacity, and you work with
well-compensated capacity. We came up with a number of very interesting things.
We are currently doing some safety work here on gene therapy trials. We want to
have control over the safety side. But in terms of development they say, "If you
do that we'd be very interested because it allows us to leapfrog and we will
learn from it, too, and we will be first maybe." They said, "We're going to do
04:45:00that." We will guarantee that we treat all patients. For those who can't afford
it, it will be free of charge. For those who can afford it, we will charge. You
pay one-third, the Indian government pays one-third, and we pay one-third. We do
the clinical trials in India, and the whole deal is bracketed just for India. We
are at the beginning in India. They get something that they otherwise would only
have twenty-five years from now, and we get access to another environment that
04:46:00is not so saturated. The Indian companies don't have to try to develop a product
that competes in this very saturated world. Everybody looked at the terms and
said, "It's just too good to be true." It's very encouraging. But India and
China are particularly interested, more so than Brazil. We have large businesses
in Brazil and Russia that actually sustain themselves in a very good way.
THACKRAY: Are they equivalent to the American business?
TERMEER: Yes, very similar. The model in Brazil is quite different from what we
04:47:00would need in India and China. Taking a twenty-five-year view, India and China
will become larger economies than the United States. We hope to be real
participants in that.
THACKRAY: Henri, your own career has had three parts: shoes, Baxter, Genzyme.
TERMEER: Shoes first, assuredly.
THACKRAY: How many times has the mission and identity changed at Genzyme? You
04:48:00wouldn't use the same words today that you used on day one.
TERMEER: That's a very interesting question. Early on, we met with eight
professors from MIT every Saturday and Sunday of late-1983 to figure out what we
could do that would be new. We didn't want to just replicate what Genentech or
Biogen had already done. We decided to do original things, and if we couldn't
afford to do original things, we wouldn't do them. We do things that we can call
04:49:00ours. We work in a way that makes a real difference. We could never have
predicted our success with our Gaucher disease treatment. As we grew over time
and our experiments yielded successful results, we felt a responsibility to
continue our work. We try to pursue interesting opportunities and promising
therapies. Our ability to see and seize those opportunities developed over time.
04:50:00THACKRAY: Crucially between when and when? Was it clear in 1990?
TERMEER: In 1990, our best opportunity was the treatment for Gaucher disease,
which was approved in 1991. We saw an opportunity, but everybody else said,
"You're crazy." In the end, we were able to get it done. Eventually, our
treatment went global. That experience taught us many lessons, including the
responsibility to carry things through. It is not just an opportunity, or
04:51:00something of value -- it is a responsibility to go to the next stage. We went to
the recombinant form to manufacture more product, and make sure we reached all
patients. We give free treatment in areas where support isn't available. I spent
two hours today [18 December 2009] discussing a very complex set of dynamics in
China. China is now opening up for us. We've established a path into the
country, and people like what we do. However, we don't yet have an
infrastructure there, so it will take some time.
Our responsibility is to get the treatment to patients as soon as possible.
They're sick today. They need to get help today. China is so large that we need
04:52:00to make sure everything we do there is sustainable. It's a very complex equation
in terms of time and money investments. We learned during the development of
Ceredase and Cerezyme that it is our responsibility to recruit whatever kind of
help we need. One interesting example is when Japan didn't allow us to introduce
Ceredase because it was a tissue-derived product released at the height of the
HIV crisis. As I told you before, we knew about thirty-six kids in Japan who
were very sick so I went to the US ambassador, Walter Mondale, and he said,
04:53:00"Let's move these patients to Hawaii. We'll treat them there." Of course, when
the Japanese heard about that they decided to approve the product. The lesson
from that experience was that we were responsible. We had looked these patients
in the eye and knew we had to do something about their treatment. That sense of
responsibility is the backbone of everything we do at Genzyme. If you
interviewed eleven thousand people employed at Genzyme, that's what gets
repeated, because that is our purpose. It is bigger than any one of us
04:54:00individually. It is the current that drives us and it's stronger than stock
prices, stronger than this, that, and the other.
04:55:00THACKRAY: Genzyme has been positioned in these territories of orphan drugs and
personalized medicine in a very broad way. Have you seen a shift in that sense
TERMEER: Yes, although it has sometimes posed some challenges. Our therapies are
expensive. In the UK, there's a group called NICE [National Institute for
04:56:00Clinical Excellence] that studied our orphan drugs with our collaboration and
cooperation. They said, "Wow, this is very expensive and we can't afford to do
this. It's unfair. We leave too many things untreated if we invest so much in
one patient." We have had many philosophical discussions on this and I've given
a number of speeches in the UK on this point. I sometimes use the example of
animals, because animals are very popular in the UK. At one point, I was
speaking when a highly publicized story was circulating through the media. A
04:57:00circus was visiting York. A [giraffe] slipped in the streets and its legs went
in four different directions. People tried to lift it with a crane, but they
couldn't because it was too heavy and the crane would break its chest. It took
two days to save this giraffe. Traffic was diverted and they dug a hole and
saved him. It's the same as whales when they get caught in the ice. We send
04:58:00boats to save them. It's part of civilization. We don't say to a child, "You
have this genetic disorder, but we have to build that road. We can't help you."
When we can help, it is our obligation to do so.
THACKRAY: I'm interested in the UK example. Have you prevailed?
TERMEER: We do very well in the UK. We do very well in Holland and we even do
well in Canada despite their big bureaucracy. Our most successful market on a
04:59:00per person basis is in France. The French love these kinds of treatments. They
actually approved them well ahead of the EMEA [European Medicines Evaluation
Agency] approval through special mechanisms. Holland is the second most
successful market --and not because I came from there! Dutch people are very
careful spenders. They like the drugs' efficacy, but we explained to them that
we treat people free of charge in Africa and Sri Lanka--and even Russia for a
long time. The Russians started to pay once they started to have oil income, and
it's now a very important market for us. Many of the old Soviet countries are
also important markets. In China, we still treat patients free of charge. We are
05:00:00in the process of changing that now.
THACKRAY: If you go back in time and think of Biogen or Genentech, they were
both very science-driven companies. You came from a very different place. Were
other people coming from the same place?
TERMEER: Not so much at the time, but now there are other companies that are
using orphan drugs or personalized medicine as a starting point. Increasingly,
05:01:00big pharma is moving in that direction. It's such a fragmented field.
THACKRAY: Who is your direct competition today?
TERMEER: There's not one company that we think of as our direct competitor
because everyone diversifies. We are however, competing with Shire
Pharmaceuticals. Shire had some products in the attention deficit disorder
field. Then they purchased a company called TKT [Transkaryotic Therapies] here
in Boston which moved them into the genetics disease and renal arena, and we do
compete with some of their products. But it's a big world and it's not like
05:02:00pitting Zocor against Lipitor, for example. It's still early.
THACKRAY: How does the model connect to the business of the generics as opposed
to patent expiration?
TERMEER: Patent expirations, small molecules for research, and eventually
biosimilars, are very well established and do influence the market. They
encourage continuous innovation and have created a pretty remarkable market
situation. In 2002, 50 percent of all prescriptions in this country were
05:03:00generic. In 2007, 67 percent of all prescriptions were generic. In the second
quarter of this year, over 70 percent of prescriptions were generic. By 2012,
that number will be 85 percent. But generic drugs only support manufacturing and
distribution. Proprietary drugs support R&D and education. The generic drugs
better be good, because they need to be very high-priced and for them to be
high-priced, they need to be very valuable in the eyes of the purchasers. The
rise of generics is forcing us to create much higher-value pioneering drugs. At
05:04:00the moment, innovation investment is in danger because of bad capital markets.
In the biotechnology industry, 95 percent of companies are unprofitable. A while
ago, Europe faced a similar situation where the number of biotechnology
companies shrunk massively. It's happening here now and soon we will see many
companies go under or be put on the shelf. Luckily, President [Barack H.] Obama
is attuned to the importance of innovation and R&D. He will not deal with the
05:05:00cost of medicine, but instead with how we can encourage innovation. This new
cycle of generics will cause the average cost of medicine in this country to
decline in the coming years. There will also be some pioneering drugs that are
very expensive. The problem is that we don't have enough new drugs.
THACKRAY: At Genzyme, you just had some drugs go off-patent.
TERMEER: Yes, that happened just recently. Cerezyme is off-patent. Two are still
05:06:00on-patent. You can produce the patent that is specific to the cell line, CHO
cells. Our markets are a little cumbersome for generic competitors because there
are so few patients. That gives us some level of protection.
05:07:00THACKRAY: Is it true that Genzyme is more likely to be the pharma of the future
than, say, Pfizer? Is the industry going to be driven towards the models you use
because of these pressures?
TERMEER: Yes. It's happening right now. Regulators will figure out a way to
05:08:00approve more OTC [over the counter] products, because they're cheaper. You don't
have to insure them. If we had an FDA that had some courage, we would get there
faster. We can't afford to regulate every single thing. This risk-benefit
equation will move towards putting things on the shelf and creating a big
industry. The big companies like Pfizer have a choice--where will they go? I
have a sense that they will choose to be in this other part, because it's easier
to manage for a large company. There are companies that will go the other way,
05:09:00and they will become part of the world that Genentech, Genzyme, and Biogen inhabit.
THACKRAY: Are Genentech and Biogen similar to Genzyme, or are they still
TERMEER: Clearly, they are radically different. Genentech is a subsidiary of
Roche. They've done a fantastic job in oncology, and that's their niche. Biogen
05:10:00was formerly Biogen and Idec. They are involved in oncology through Rituxan,
which also belongs partly to Genentech. They also work with multiple sclerosis.
Biogen was basically a single disease company. They had the MS drugs Tysabri,
Zenapax, and Avonex. When somebody gets PML [progressive multifocal
leukoencephalopathy], the stock moves. Biogen does a fantastic job with MS. Can
they move away from it? They weren't successful when Idec did that. That's still
05:11:00THACKRAY: Do companies like Biogen wish they could become Genzyme or does
Genzyme wish it could become Biogen?
TERMEER: No. With all humility, we are happy where we are. Being diversified is
very important because it opens more opportunities. You get a very different
orientation, and it's much more sustainable than being singly focused. Pfizer's
Lipitor and Biogen's Avonex have proven very difficult.
05:12:00THACKRAY: Can you talk about developing your management team over time?
TERMEER: It is a process and you grow into it. Turnover in our senior management
groups is very small--it doesn't happen very often. There are many people who
05:13:00have been here for a long time and have kept up with the changing requirements
of running a small operation. There are some operations like manufacturing that
started out small and then grew. The person who now runs manufacturing has spent
seventeen or eighteen years with the company. I didn't put him in charge, but he
proved himself after a number of years and was the right person for the job. We
05:14:00do run quite horizontally. I like running the company. I like to know
everything. I don't sit in an ivory tower--that would drive me crazy. I am a
part of things. Fortunately, I have no need for control, but people think of me
as having a lot of control. I've learned to delegate because if I didn't, I
would drown in work. We have a great team, and we like and respect each other.
05:15:00THACKRAY: Have you started managing parts of the business from places other than Cambridge?
TERMEER: Yes. We now have a very large infrastructure in Europe. The people who
run that feel comfortable in Cambridge and in Europe. They are nationals for the
most part who have been given a lot of authority and a lot of power to run their
manufacturing, marketing, sales, or clinical operations. Sometimes there is a
05:16:00movement to centralize. We try to resist that. There is enormous need to know,
so the underlying systems for safety, for instance, have to benefit every single
system and be instantaneous everywhere. Finance has to be instantaneous
everywhere. We spend a lot of money on IT because we need good underlying
05:17:00systems. It drives me crazy sometimes. I can never keep up with it. There's a
booklet we published for our twentieth anniversary called "Vision." It's
actually quite nice and it talks about who we are. We are our acquisitions, and
our acquisitions are us.
05:18:00THACKRAY: If you look back to the very first acquisitions, why did you acquire them?
TERMEER: Our first really significant acquisition was Integrated Genetics [IG]
in 1989. It took two years to accomplish and IG went public before us. They were
very successful. They were competing with Genentech and Genetics Institute and
Biogen, but they were late on a few things. They were in the clinic with all the
well-known proteins, but they were late on the patent side. They had great
skills on the mammalian side, but they struggled financially. We acquired them
to expand our skillset and our ability to produce mammalian proteins. In the
05:19:00late 1980s, that was still an art. IG was located in Framingham, here in Boston.
There were one hundred fifty people in the company when we merged. Today there
are over two thousand people in Framingham in a different building. Our chief
scientific officer was from Integrated Genetics, and is still with the company
today. Our head of corporate development was with Integrated Genetics, and held
the same position at IG and Genzyme. Through our acquisitions, we've become more
sustainable in terms of technology, space, and people. Acquiring high-quality
elements is a great way to build a company.
05:20:00We've had the good fortune of growth, and our current programs continue to grow.
In 2011, we will be about seven billion [dollars] in top line, and about seven
05:21:00dollars a share, bottom line. We're factoring in all the staff that will cost us
money through 2011, so we have to earn these financial shares while building the
company for the next five to ten years. We worked very hard from that point
internally and externally and tried to execute deals that we could afford, and
that were late-stage enough for us to benefit from. This year we did three such
deals. One was for mipomersen [Kynamro], which is in Phase III trials. Another
05:22:00was acquiring PTC Therapeutics, which developed a way to read through nonsense
mutations to get highly specific treatments for a subset of Duchenne dystrophy
patients. That innovation is in late-stage Phase II B trials. We also did a
transaction with Osiris Therapeutics this last quarter. We liked their approach
to stem cell research. We've been investigating stem-cell therapies for a long
time, and Osiris has a highly specific therapy. It's supposed to work every
05:23:00time. We bring all of these things in knowing that not all are going to succeed.
We are also developing things internally that we hope will produce results like
the Campath MS program. The growth rate is relevant in a shareholder support sense.
THACKRAY: Do you have an internal group that's scanning for potential acquisitions?
TERMEER: Yes, a very competent group. The group has existed for at least a
decade, and has really grown. It's a great place to develop people, because they
get to look at the outside world while being quite critical to the inside world.
05:24:00THACKRAY: Do you remember the moment when this endeavor moved beyond just a hope
TERMEER: The critical moment must have been when Ceredase became a success. In
1989, two years before we got approval, we saw the results of the little
clinical trial that we could afford, and the treatment worked magnificently.
05:25:00That gave me and everyone in the company a boost of confidence. We can actually
do it. It can be successful.
THACKRAY: Suddenly, it's twenty years later.
TERMEER: Right, but there's nothing more exciting than working hard on something
and having it succeed. It changes a person's life. That's a rare moment.
05:26:00THACKRAY: Could you talk a bit about Boston and Cambridge as a place for
biotech? In 1989, this industry was still a curious diversion, what about now?
TERMEER: It was a defense and computer town at the time. Boston's environment is
heavily influenced by academic institutions, particularly MIT and Harvard.
05:27:00They're working on base-level discovery. I'm on MIT's board, so I am exposed to
their extraordinary research. Very smart young people are willing to work for
years off the adrenaline that comes from trying to figure something out. There
are quite a few competing technology groups here besides MIT and Harvard. Our
05:28:00academic hospitals are capturing a disproportionate amount of NIH funding.
They're closer to patients, so they're very efficient at discovering diagnostic
tools. Boston also has some great venture capital firms. They funded tech
companies before becoming interested in biotechnology in the 1980s. Students
05:29:00graduate from these institutions, and sometimes they want to stay. We know these
students. They're here for years. They are summer workers and then they become
postdocs. They're the best. We try to convince them to stay. When we were a very
tiny company, we had almost no employees. We employed quite a few postdocs at
MIT. We had them work on the weekends or overnight because we didn't have enough
labs. They would work in three-hour shifts, three times a day, in order to do
05:30:00the early discovery work that led to our patents. MIT loves us, especially the
entrepreneurial craziness that we brought to Boston. The area has a
Boston is extraordinary; it's different from San Francisco and San Diego. It's
so set up for this market there's a special intensity within this cluster. We've
changed forever how patients are treated. Boston is very friendly. All of its
large research institutions interact, but they also compete. I've been back two
05:31:00weeks from Holland, and four scientists have introduced me to fundamental
discoveries in areas in which they've been working for ten to fifteen years. All
of these large well-funded institutions helped feed people to Genzyme and other companies.
05:32:00The future of biotech lies in knowing patients. Highly personalized genomic
therapies are the future. Advances in diagnostics will lead to more and better
therapies, and that will lead to changes in Washington. The US has a pioneering
role to play in the future of biotech and healthcare.
05:33:00THACKRAY: Is this the youth or middle age of the whole venture?
TERMEER: This has to be its youth. We are in new era of prosperity, with complex
05:34:00dynamics. And it's not just the United States anymore. We'll change energy by
moving away from fossil fuels, and developing technologies and products for
capturing, storing, and transporting solar energy. Our planet is being killed by
over-development. If we had continued using the early manufacturing operations
of the Industrial Revolution we would not exist today. Similarly in China,
India, and all the other parts of the world, they need to find a way to develop
05:35:00what is best for their populations. We are beginning to make these developments
available for millions and billions of people who don't have access to them. We
feel guilty about our prosperous existence in comparison to less fortunate
places. Today, we strive to change that status quo.
05:36:00THACKRAY: What about the other side of that coin? Is Genzyme's most serious
competition going to come from China or India or even Japan?
TERMEER: Absolutely, there will be global competition. We started a company in
Japan in 1987 and it's highly profitable today. We will also be in China and
India. You can't sit and wait for them to come here.
05:37:00THACKRAY: It seems that biotech from 1968 to 2008 belonged to the United States.
How far in the future do you think we're going to be able to say that?
TERMEER: Not very far. Technology and science are now universal. However, some
of these biotech clusters are unique. It would be difficult, but not impossible,
05:38:00to reproduce the Boston cluster somewhere else. The discoveries made in this
country belong to the global community, and to the markets in India and China.
Our task will be to continue to support innovation. Europe has had a very hard
time with that and they're paying the price. That doesn't mean that Europe will
go out of business. It means that Europe is not as exacting. We want to say
05:39:00biotechnology is an American development, but it is becoming much more global,
which isn't so bad.
THACKRAY: Within Genzyme, how have you maintained that orientation towards innovation?
TERMEER: We preach it continually and we also remind ourselves of our purpose,
05:40:00which is to get innovative treatments to patients. We don't forget our purpose.
We speak about it at board meetings and when we see subsidiaries offsite. We've
had some very interesting, very expensive failures and if you don't have the
ability to foresee and avoid similar problems in the future, then it's a waste.
05:41:00Every failure is a fantastic lesson. We failed twice on Parkinson's disease.
Parkinson's might be the ugliest disease. You're a prisoner in your own body. It
couldn't be worse. We did two clinical trials, one with porcine fetal cells and
another with gene therapy all the way through Phase II. Neither succeeded. In
05:42:00both cases, the placebo worked very well. We injected the cells into the brain
surgically and apparently the surgery itself creates a reaction that we don't
know how to measure. We had internal discussions and said, "How are we going to
show that something is active, if we don't know how to deal with the placebo?"
05:43:00When something showed promise in animal trials, then we became interested. We
had to make sure we didn't become too risk-averse.
05:44:00[Material in the audio files for this section appears later in the transcript.]
05:55:00[There is audio content in this section that is not transcribed.]
[END OF AUDIO, FILE 4.1]
[END OF INTERVIEW]
06:06:00THACKRAY: How did the recent economic crises affect Genzyme?
TERMEER: Initially, in 2008, when the financial crisis began and the world
06:07:00started coming apart, Genzyme was well-positioned. The company was doing well.
We had worked through a number of integration issues. We had combined several
units and were operating as one entity. The company was strong and diverse.
06:08:00There was strong cash flow. The only problem was pressure on the manufacturing
side--it wasn't clear that we had enough manufacturing capacity for the products
in the pipeline.
06:09:00In late 2008, we encountered our first activist shareholder, Carl Icahn. He
06:10:00appealed to other investors who saw the high cash flow. In 2009, we took advice
from one of our investors, Ralph Whitworth, to guide us through the cash flow
06:11:00issue. Looking back, perhaps it was hubris; we were overconfident that we could
manage the activist investors. They're short termers with no real interest in
We might have been okay without the manufacturing issues. That situation really
06:13:00weakened our ability to manage. The company was growing at about 20 percent per
year. We weren't able to generate new manufacturing capacity at an adequate
06:14:00rate. Equipment and staff were strained, especially at Allston, and that created
06:15:00compliance issues. Our backup inventory was insufficient. We ordinarily kept
nine months of inventory, but during this growth phase, some of it was absorbed.
In June of 2009, a virus appeared at Allston, the virus that had previously been
06:16:00a problem at our Belgian plant. It was one of those incredible moments. The
scientists didn't believe it could be happening again. They said there was no
way the two incidences could be connected. I made the decision to close the
06:17:00plant. It was one of the most excruciating and sensitive decisions I've ever had
06:18:00to make. It was very tough. It involved a finished product that was in
distribution, but too much was unknown about the virus. In the end the whole
plant had to be taken apart--ceilings, pipes, reactors, all of it. It was an
06:19:00incredible effort. We received magnificent assistance from our vendors too.
06:20:00THACKRAY: How did it feel to be the person in charge?
TERMEER: The whole episode was highly visible, globally, and it often felt like
the FDA was in charge. I made the difficult decision to write off all the work
06:21:00in progress. In all, the impact was over one billion [dollars]. Even more
06:22:00important was the impact on patients--the interruption in their treatments.
Three diseases were involved. It affected about ten thousand patients. Most
06:23:00impacted were the fifty-six hundred Gaucher patients. We set up town hall
meetings to open up discussion with those affected around the world. We were all
learning. I wouldn't say the reputation of the company was destroyed, but it was
a significant shock to the patient community.
06:24:00The government agencies became very competitive. The European Medicines Agency
(EMEA) didn't necessarily trust the FDA. Interaction with regulators is always
06:25:00intense, but this was especially so. And all the while, the financial community
and shareholders were wondering how long it would take to sort it out. They're
focused narrowly on financial returns. I remember saying somewhere that closing
06:26:00the plant may have saved a thousand babies. Someone on the financial side told
me that I'd made a mistake: "Babies die," he said. With hindsight, of course, we
06:27:00should have had extra capacity earlier.
THACKRAY: How did the problems with manufacturing affect the patients with
TERMEER: The nature of the disease is such that without treatment you get a
re-accumulation of lipids. There is a range of severities. Some people have none
of the enzyme; others have a little. The most severely impacted were children.
06:29:00If their spleens no longer function, the build-up can affect the bone marrow. If
06:30:00the bone marrow stops growing, permanent damage can result. The psychology of
06:31:00managing patients through this time was tough. It wasn't easy, but everyone was
06:32:00still receiving treatment.
06:33:00[There is audio content in this section that is not transcribed.]
THACKRAY: How did the episode change Genzyme?
TERMEER: Surviving an episode like that makes an organization stronger. It
06:35:00builds backbone. We said to ourselves, "We will be strong." We had allowed
compliance issues to hijack us. We didn't pay sufficient attention. As an
organization, we were more focused on output. The FDA had already pointed out
some compliance issues in 2008.
06:36:00We decided that we needed greater concentration on quality control. We hired new
06:37:00people, let some go, and set up an enterprise risk management unit. These kinds
of issues are not resolved by simply saying "Do this better." You have to put in
06:38:00new skills--it's always people related. We hired people with experience in
06:39:00dealing with these issues. Scott Canute came from Eli Lilly. He had experience
06:41:00solving a similar problem at one of their insulin plants.
06:42:00The financial problems were caused by the lack of inventory when the bug hit,
06:43:00and because we also had to write-off the work in progress. We survived the
06:44:00challenge by Icahn because we had prior credit with investors. We didn't need a
06:45:00new board. Icahn couldn't get the votes he needed. Even so, the stock was still
depressed, so we had to dig ourselves out. We made a deal with Icahn a couple of
weeks prior to the proxy vote and accepted two of his nominations to the board.
Before that, in May, I had already had a call from Chris [Christopher A.]
06:46:00Viehbacher at Sanofi, offering help. We had a very comfortable conversation but
I still had to report it to the board.
THACKRAY: Is that when the prospect of a takeover arose?
06:47:00TERMEER: We were always concerned that outside interests might step in. Takeover
06:49:00is always in the air--we had made plenty of acquisitions ourselves. Many similar
biopharmaceutical companies had already been acquired by larger corporations.
The number of companies was dwindling and fewer new companies were being set up,
so we realized we would be attractive--even though some analysts did not believe
06:50:00it would happen because we were so specialized in the rare diseases field. They
06:51:00thought we would not be attractive to large companies.
06:52:00After the annual meeting, Sanofi called again. I reported that to the expanded
board in June. The board decided it was an inappropriate time to be discussing
anything. That's recorded in all the filings. However, the strategic fit of the
06:53:00two companies was obvious. Once it was clear that Viehbacher wasn't going away,
06:54:00it was really a matter of price. The discussions took over nine months.
As with the manufacturing problems, everything was conducted in the open, in
06:56:00broad daylight. Restarting the plant was not easy. None of it was
easy--interacting with the patient communities, meeting regulatory demands,
06:57:00hiring new people--all of it was hard. There was a lot of scrutiny from all
06:58:00sides, and we were in the middle, being evaluated. We did roadshows. Analysts
were trying to work out the right valuation for the company. We had new product
06:59:00in the pipeline. We decided to simplify the company, and to divest the
diagnostic services unit. I found that I had to do a fair amount of internal
07:00:00handholding, as it were. I told people they should stay with the company because
the Sanofi deal was far from certain.
The difficulties were considerable. Even so, I wouldn't call it a nightmare
07:01:00experience. I wouldn't call it a perfect storm either. It was a challenging
moment, but not all negative by any means. In many ways, the whole thing came
about for positive reasons. A massive corporation was prepared to pay more than
07:02:00twenty billion dollars for us. That's a huge compliment to the value that we
07:03:00created in Genzyme. I don't feel hurt in any way, and I have no regrets. A lot
07:04:00of good things came out of it. At least ten new biotech CEOs came out of
Genzyme, and there will be more. Shire also did well because of our
difficulties. To their credit, they were able to step up.
THACKRAY: How did you cope?
TERMEER: My coping mechanism is to confront things head on. Also, I was
07:05:00surrounded by really fine people at Genzyme and had great external advisors. I
could call Carl Icahn personally. I called Chris Viehbacher, even though Goldman
Sachs advised against it. I called him later on. He came to my home in Maine. We
07:06:00walked on the beach and shared a bottle of wine. It felt right. We shook hands
on the deal at the Davos economic forum. We cemented it with a glass of whisky.
At 6,000 feet up that hits you right away! It was emotional. We talked about the
07:07:00patients. I think he understood me very well. He accepted that responsibility.
07:08:00The context was different with their company, of course, but different is okay.
THACKRAY: Where are the compliance and patient issues at now?
07:09:00TERMEER: The compliance issues will stay around for a few years. The
availability of product for patients is still an issue, but I think it should be
07:10:00resolved very soon. We've built a new plant in Framingham, which is close to
07:11:00being approved. That will resolve any outstanding issues. We should look again
in six months.
THACKRAY: Where have Genzyme alumni gone in the industry?
TERMEER: Mark Enyedy, who ran our oncology efforts, has just accepted a CEO
07:12:00position. The person who ran the Cerezyme program is being courted by two
companies. We should really make that list. I think Genzyme may have more CEOs
coming out of it than any other company.
07:13:00THACKRAY: When was your last day?
TERMEER: The last day of June, 2011.
THACKRAY: Having lived through the sequence from 2008 to 2011, what do you know
as a result that you didn't know at the start?
07:14:00TERMEER: On the positive side, I know that a patient-centric approach is not
unique to Genzyme. It's central to the future innovation of health care, it will
have many consequences. Something I stress on boards I'm involved is the
importance of more sophisticated internal controls in the manufacturing and
07:15:00inventory side of the business. I wish I had learned the manufacturing lesson
less painfully. Of all the lessons I have learned, that experience will stay
07:16:00with me most vividly. Overall, I've been very impressed with how strong people
07:17:00are, how they can manage many conflicts and rise to the challenges.
THACKRAY: What do you think you brought to your career at Genzyme?
07:18:00TERMEER: I do think that in the first ten years I had the insight to focus on
one disease and not get distracted. I was fortunate. I had enough confidence to
trust my gut feeling and to stick with it. I learned there was power in looking
07:19:00after patients rather than simply the internal rate of return. I learned to
07:20:00allow people in the company to be individuals.
07:21:00[There is audio content in this section that is not transcribed.]
THACKRAY: Who else would you say is in your class?
07:25:00TERMEER: A person who comes close is Josh [Joshua S.] Boger, who built Vertex
[Pharmaceuticals]. Perhaps John Martin at Gilead [Sciences, Inc.], and Sol Barer
at Celgene [Corporation]. There are maybe four or five of us.
07:26:00[There is audio content in this section that is not transcribed.]
THACKRAY: Henri, how do you maintain your own sanity?
TERMEER: Fortunately, I am married to a very, very nice person. I have a son
from an earlier marriage, a very nice young boy who is in his twenties and lives
in England. I have a young daughter from my second marriage. We're a happy
family. We get along very well and travel together. We all like to be together.
That is the most important break. In terms of my daily life, I work long hours.
I start very early, and then come home to see my daughter before she goes to
bed. I spend time by myself with a good glass of wine. I go to bed sometimes
with a big smile on my face, thinking, "Wow, that was a great few hours." In the
summer, I sail in Maine. Years ago, we bought our first house there and have
upgraded it a few times over the years. We go up regardless of the weather, to
escape. It's on the ocean. We go there for Christmas, too. We ski first and then
head to the house. My son often visits, as do a lot of other people.
THACKRAY: Are you serious about the sailing?
TERMEER: I'm not overly serious, but I like to sail. I have an old
thirty-five-foot Hinckley Pilot that I've kept in good condition. For the most
part I sail by myself, which I enjoy, or sometimes with my son who lives in England.
THACKRAY: Do you compete?
TERMEER: Not very often. Sometimes I compete with myself. You need to be
careful. The winds and the rocks around here can surprise you. You need to make
sure you don't take any unnecessary risks.
THACKRAY: What does your son do in England?
TERMEER: He's learning to be a photographer. He lives in Norwich. His mom is
British, so all of his schooling was in the UK. He wants to be a photographer.
He doesn't want to do what I do. He has said, "There's nothing wrong with it,
but I'm going to make pictures."
THACKRAY: Do you have any specific plans for the future?
TERMEER: No. For a while, I thought I would do something very different. I
became a board member and chair of the Federal Reserve of Boston. That work
keeps me busy both here and in Washington, DC. I'm on the board of Partners,
which is the umbrella organization for Massachusetts General Hospital, the
Brigham and Women's Hospital, the Dana Farber Cancer Institute, and others. I
founded an organization locally in Boston called the New England Healthcare
Institute [NEHI], which works to break silos in healthcare. It's been involved
in healthcare reform issues. I get involved in that maybe a little more than I
should. There are lots of organizations to contribute to, and it doesn't take
that much effort. My wife is very active with the Boston Ballet. She has been on
the board forever. Ballet is a fantastic and beautiful art form. It has its own
fanatic supporters, though most of society does not know ballet except for The
Nutcracker. I'm trying to help them become a sustainable organization.
THACKRAY: To return to BIO and PhRMA for a moment, are those going to remain two
separate organizations, in your opinion?
TERMEER: Yes. PhRMA has a large budget and a membership of only fifty companies.
They deal with the commercial aspect of the pharmaceutical industry. For a time,
the industry grew every year, and they were prepared to spend more money to
defend themselves. I think that will change over time. BIO is a technology-based
group that represents many different industries. The two groups have IP
(intellectual property), in common. They're both dependent on IP. Without
investment, they will dry up. BIO and PhRMA need each other, but they're
probably better off separate. I think it's tough to manage BIO because it's very broad.
THACKRAY: Is Boston your long-term home?
TERMEER: We like Boston a lot. We have a lot of connections here, but I will
always be rooted in Holland. All of my brothers and sisters are in Europe. My
mother, who is ninety-six, is still alive so we travel back and forth. Boston is
really convenient for that. It's a non-stop flight to Amsterdam. I like it here.
Boston has great sports teams and museums. However, it is small compared to some cities.
THACKRAY: Any thoughts about future roles for you?
07:35:00TERMEER: I'm not disappearing. I'm going to be looking for places where I can
really make an impact. Large companies have limitations. I hope to share my
07:36:00advice, instincts, and experience with younger companies. I'll be doing my best
to continue to make things happen without trying to take control. I see myself
in informal kinds of roles that are more about the long term than short-term
07:37:00financial gains. The New England Healthcare Institute is becoming a very
credible source of advanced thinking about healthcare reform. I'd like to do
some things better in my personal life too, like spending time with my
07:38:00eleven-year-old daughter, and having a relationship that grows. That requires my
availability and time. And, of course, I look forward to spending time with my wife.
THACKRAY: Henri, you've done a fantastic job. You're clearly not about to sail
away! We should come back in ten years and check-in with you again.
TERMEER: Maybe ten years is too long, I have a sense the next five years will be
very interesting. I'll be laying the foundation for a new future.
THACKRAY: Henri, thank you.
TERMEER: Thank you.
[END OF AUDIO, FILE 5.1]
[END OF INTERVIEW]