The co-founder and Chief Executive of Europe’s largest biotech company, which has pioneered a series of innovative drugs, says that Switzerland is to pharmaceuticals what Paris and Milan are to the fashion industry.
When Roche, the Swiss pharmaceutical giant, decided in the mid-1990s not to proceed with a new compound discovered by its cardiovascular researchers, four of them made a momentous decision. They left the company to set up Switzerland’s first biotech company so they could develop bosentan, thought to be of use to just 5,000 people suffering from a rare and life-threatening heart and lung disorder. Today, the compound, marketed as Tracleer, treats almost 50,000 patients around the world, including some with a different disease. And with a string of other treatments on sale or in the pipeline, Actelion is now a company with a market value of more than CHF7 billion.
According to Dr Jean-Paul Clozel, the French cardiologist and researcher who is now the Chief Executive of Actelion, the move was about more than just the new compound: it was to create another way of doing research, and it would focus on specialised or rare diseases that were not of interest to the large pharmaceutical companies. In addition, the four co-founders had a total of 47 years of working for Roche between them, giving them the experience of bringing scientific discoveries to market through the regulatory process which is often lacking in biotech start-ups.
‘Roche didn’t have the same view as us, and was shifting its focus from cardiovascular research to concentrate on oncology,’ says Jean-Paul. ‘But they licensed bosentan to us, which we initially paid for with our own money. Indeed we founded the company in late 1997 from our own resources— a frightening moment using a lot of money. We had given up well-paid jobs at Roche, spent our personal savings and we were still without investors.’
The company started on a lean basis, renting a room in a former hospital building which had become an enterprise centre at Allschwil, just outside the Basel city boundary on the French border. ‘It wasn’t quite starting in a garage,’ Jean-Paul says, ‘but we brought old furniture from our homes and used crates as desks and tables. We chose Allschwil because one of our co-founders lived here and there was a lot of empty space where land was cheap in comparison with the centre of Basel.’
The funding break-through came with the addition of a fifth co-founder: André Mueller, who as Chief Financial Officer of a biotech company had been through an IPO and had also been a founding partner of the first Swiss venture capital firm. He became CFO and raised CHF18 million of venture capital—though not before being turned down for a bridging loan by a large bank. He recalls that at first the company lacked the funds to buy laboratory equipment.
Altogether, venture capital of CHF60 million was raised from French, Swiss, Dutch and US firms. Then in March 2000, less than two and a half years after its foundation, Actelion raised net proceeds of CHF249 million through a placement of its shares on the Swiss New Market Stock Exchange (SIX). The majority of shares were bought by American funds, which—unlike European investors—were familiar with the biotech industry in the US. Today, Actelion has grown to be Europe’s largest biotech company, with 100 per cent of its shares listed.
Entrepreneurs are often reluctant to lose control of their companies, but Jean-Paul says there was a very simple choice: ‘Either we stayed small and retained control; or we ceded control and grew rapidly. We chose the second option very quickly, because our aim was to find as many good drugs as possible and bring them to the market as quickly as possible.’
Switzerland is a natural home for pharmaceutical businesses, according to Jean-Paul. ‘It has the highest concentration of researchers in the world, with two world-class institutions in Zurich and Lausanne producing excellent research and human capital. And it is home to innovative pharma companies such as Novartis and Roche. Switzerland is to pharma what Paris and Milan are to fashion.’
Jean-Paul says that he would not have contemplated making the leap into the unknown without the support of all four of his co-founders, whose roles were complementary. In addition to André Mueller, there was Walter Fischli, a Swiss biochemist who built up the biology department, and Thomas Widmann, a German cardiologist who was Actelion’s first Chief Executive. The fifth member of the team was Martine Clozel, Jean-Paul’s wife who had been behind the discovery of bosentan at Roche. She created Actelion’s pharmacology department, and in 2009 was given the additional role of Chief Scientific Officer.
Some of the co-founders have retired or stepped back from executive roles, but all are still involved in the company. The five never had issues between them, says Jean-Paul, and are all still very good friends. ‘And I am still married to Martine,’ he adds with a smile.
Jean-Paul Clozel’s tips for entrepreneurs
• Work for the long term—don’t expect to make money in the short term
• Formulate a vision related to the nature of the business. Making money should not be part of it
• Employ the best people, and look for people who are better than you
• Work on developing the right culture—it is your most valuable business asset
• Invest in infrastructure such as buildings and distribution as the business grows. Without it, a company becomes like a body without a skeleton, and cannot grow sustainably
The company which was founded with just four employees now employs 2,350 staff worldwide, with around 1,000 in Switzerland. It has moved into elegant purpose-built facilities next door to where it all started, creating a working environment reminiscent of leading higher education institutions, with plenty of spaces where staff can interact with each other. The surrounding area, meanwhile, has grown into a substantial business park, which has attracted other large pharma companies.
Unlike many of its competitors, Actelion spans the full pharma value chain, from research and development on which it spends 21 per cent of net sales, through production via partnerships and licensing, to marketing and distribution. It has established 30 wholly-owned marketing affiliates worldwide and has a distribution network which extends its reach to 70 territories worldwide.
‘Investors did not at first understand our model,’ Jean-Paul says. ‘But innovation is more than discovering new compounds. As Tracleer has shown, our breakthroughs can reach a much greater number of patients if they are explained to the medical profession so that they can be exploited fully. That is why our focus on rare and orphan drugs produces results: if you know exactly what the market is, that is not innovation.’
Tracleer is still Actelion’s blockbuster drug, with sales of CHF1.5 billion a year. It was the first oral treatment approved for pulmonary arterial hypertension, a serious disease that restricts the flow of blood through the arteries connecting the lungs to the heart. However, the company has several other drugs on the market, including the first oral medication for treatment of two rare genetic conditions, and a treatment for a type of skin cancer.
‘We are constantly looking to develop new products,’ says Jean-Paul. ‘In pharma, we have 10-15 years protection for new drugs before they face cheaper generic products. Tracleer, for example, was approved first in 2001 and will soon face generic competition, but we now have a new treatment which offers even better results and has recently been approved for use in the US. We will market it as Opsumit.
‘The two drugs are based on 25 years of research by my wife, which shows how long it takes to create new products. Although there are limited numbers of patients with some of the conditions our drugs treat, people are prepared to pay the high prices required to recoup costs—especially when there is currently no other treatment.’
There are challenges in operating a global company from Switzerland, he says—especially the high exchange rate of the Swiss franc which reduces the value of foreign sales revenues. It must also operate under Swiss company law, which does not offer the protection against hostile takeovers enjoyed by competitors in the US and elsewhere. And despite the availability of qualified researchers, there is intense competition for the best.
But the solution for these challenges is to continue to innovate and be successful, Jean-Paul adds. ‘Nobody wants the second-best staff, and it is success that attracts the very best people. Our independence has been central to our success—helping us to develop a culture that takes risks, works differently from other companies and produces drugs of great benefit to patients. But we cannot become complacent: only by consistently delivering those results can we justify our independence.’