Exceptional, July - December 2014
Science at its heart
Regeneron isn’t your typical biotech giant. From the very beginning, it has been fueled by scientific research and its charismatic co-founders, Leonard Schleifer and George Yancopoulos.
The magic of the 25-year collaboration between Leonard Schleifer and George Yancopoulos is not obvious at first glance. Yes, it’s a classic entrepreneurial success story: two guys from Queens, New York, build Regeneron Pharmaceuticals into one of the most profitable biotech companies in the world, accumulating business and science accolades — not to mention personal fortunes — along the way.
Look closer, though, and you see that Regeneron operates differently than other biotech giants. For one thing, there is the sparky working relationship between Schleifer and Yancopoulos. It sets the tone for the company’s informal, ideas-driven culture.
But perhaps the key difference is the partners’ shared and strict dedication to scientific innovation. Science comes first. Products and profit follow.
“When we started out, we were doing amazing, innovative science,” says Yancopoulos, who joined Regeneron as Founding Scientist in 1989, a year after Schleifer launched it. “And from the very beginning, we had a shared vision that we weren’t going to be like any other company.”
“Most companies are under the misimpression that what is right is the highest-ranking system. We’re in the science and truth businesses, which are governed by the laws of the universe.” Leonard Schleifer
Regeneron’s financial statement looks similar to that of any other biotech giant: it posted US$2.1b in revenue in 2013. However, it took more than two decades to get there.
“Nearly every other biotech company starts with the idea to create one drug or cure one disease. And nearly all of them fail,” says Yancopoulos, now Chief Scientific Officer. “We set out to build a company based on broad technology and a huge pipeline of research. The world thought we were the stupidest guys in the world — such a pipe dream was so far outside anyone’s perception of reality.”
Not everyone thought they were stupid. Back in 1988, Schleifer, then an assistant professor of neurology at Weill Cornell Medical College, convinced Merrill Lynch to invest US$1m in his fledgling company.
At the time, Regeneron was focused on regenerating nerve cells — and showing promise of finding a treatment for Lou Gehrig’s disease. And while Schleifer wasn’t a traditional MBA type, he was brimming with scientific knowledge and ideas, which Merrill Lynch clearly recognized.
“Business can be learned, while science is a far rarer commodity,” Schleifer, now CEO, says. “Smart people got that.
The scientific community was an easier sell. Regeneron’s first board included three respected scientists: Joseph Goldstein and Michael Brown, who shared a Nobel prize in 1985, and Alfred Gilman, who became a Nobel laureate in 1994.
A year after getting funded, Schleifer boosted Regeneron’s scientific credentials further by hiring Yancopoulos, then a 28-year-old superstar professor earning US$35,000 a year at Columbia University. Yancopoulos accepted the position only after his father, a Greek immigrant who lost his fortune to the Nazis, interviewed Schleifer at an Italian restaurant.
Building a reputation
Regeneron made its scientific mark immediately. The company’s first paper was published in 1990 in the journal Science (topic: cloning of a novel neurotrophic factor) and became the most cited neurobiology paper of the year. The clinical development of the Lou Gehrig’s disease treatment a year later.
But that drug failed in trials. In a moment of dejection, Yancopoulos called Roy Vagelos — a longtime, celebrated Merck executive who happened to have recently left the pharma giant.
He also happened to be the personal hero of both Yancopoulos and Schleifer. Yancopoulos remembers his father holding up a Greek-language newspaper to show his scientifically gifted 15-year-old son an article about Vagelos.
Schleifer admired the executive’s success as both a scientist and a business mind. “When I was starting out as a physician scientist, early investors would say to me: ‘You can be CEO for a while, but doctors don’t make great CEOs,’” he recounts. “I held Vagelos out as a model for what I aspired to do.”
In 1995, Vagelos signed on with Regeneron as Chairman, a position he still holds today, at age 84. While Vagelos has helped guide the company to profitability, Yancopoulos and Schleifer never lost sight of their commitment to science above all else.
But the pair’s rapport can’t be overlooked when evaluating the company’s success. To spend time with these two PhD-MDs is less like being in a board meeting than hanging out with a couple of childhood friends.
In fact, they grew up just a few miles from each other, both from raucous immigrant families that thrived on spirited debates and the exchange of ideas. “George and I fight all the time about ideas,” says Schleifer.
“‘Fight’ isn’t a good word. We debate,” Yancopoulos counters. “When we start out with an idea, we may not be aligned, but we are both committed to what is fair and the truth — whether it’s scientific truth or business truth.
‘‘Eventually, through argument, the truth comes out. That is what this business is all about. If you are wrong in science and medicine, it comes out in the end.”
In the early days of the business, Regeneron researchers would hang out in Yancopoulos’ living room, eating, drinking and discussing science. But it also took some innovative business deals on Schleifer’s part to afford the failures and long timeline of their vision.
One of the most important is Regeneron’s partnership with pharmaceutical company Sanofi to develop and market a number of potential therapies, including a cholesterol-fighting agent that is being pegged as the company’s most promising next product.
This and other contracts afforded Yancopoulos years of innovative scientific research — and failures. His office sports a framed poster of an Albert Einstein quote: “If we knew the answer, it wouldn’t be called research.”
Eventually, the lessons gleaned from this research led to Arcalyst, a treatment for inflammatory disorders, which came to market in 2008, and Zaltrap, for cancer, in 2012.
But every pharmaceutical company aims for a blockbuster drug, and Regeneron’s big hit came along in November 2011: Eylea, a medicine that treats macular degeneration — the leading cause of adult blindness. It currently brings in US$1.8b in annual global sales.
Blockbuster drug achieved — yet Regeneron isn’t resting on its laurels. “If your mission in life is just financial success, we’re there and should close up shop and be done. But that’s not our mission,” Schleifer says.
The company has long had a generous stock options program, which has made many of the founding employees very wealthy. Yancopoulos is quick to point out he drives an 8-year-old Honda Pilot, while Schleifer admits to owning a “2013 car.”
“Financial success was part of our exaggerated sense of fairness, and that the employees who are doing all this stuff should reap rewards. But that’s not why we do it,” Yancopoulos says.
This culture of fairness is recognized across the industry. For two years in a row, based on reader response, Science has ranked Regeneron as the No. 1 employer in the global biopharmaceutical industry in its annual Top Employers Survey.
It’s therefore not surprising to learn that most of Regeneron’s 20-member senior leadership team has been with the company for between 15 and 25 years.
When asked what makes it such a special place, both Schleifer and Yancopoulos insist it is their devotion to science that trickles down into the culture of the company.
The company offers many benefits: bike-to-work and lunchtime walking programs; an annual “cheesy Hawaiian shirt” party, poking fun at one of Regeneron’s leading scientist’s affinity for the garment; and the B&B series, open to all employees.
This open forum to discuss current events — usually, but not always, science — is an outgrowth of the gatherings at Yancopoulos’ home and stands for “beer and bullshit.”
This kind of unpretentious policy is clearly an offshoot of the palpable affection between Schleifer and Yancopoulos. The former says he has three heroes: Roy Vagelos; Al Gilman; and Yancopoulos, whom he calls “the greatest scientific mind of his time.”
Yancopoulos is just as complimentary about his friend and business partner: “Anyone who knows Len knows that business is in his DNA.”