Managing multinational business from New Zealand poses its challenges, especially when you’re dealing with the ultra-competitive US pharmaceutical market, but company director John Villiger believes it can be done.
He’s New Zealand partner of an international pharmaceutical business called The Medicines Company, publicly listed enterprise with current market valuation of around US$500 million. An expatriate Kiwi who lived overseas for number of years, John Villiger managed to convince his business partner and board of directors to base part of the company in New Zealand, move that has brought slice of that business, into the local market.
Just how advantageous it will be from his company’s perspective is, however, yet to be seen. “I’ve convinced myself that it’s possible to build something on global scale out of New Zealand, but whether it’s an advantage is another question,” says Villiger.
There are definite cost advantages in New Zealand. Can he physically do it from down here? “Definitely yes.” But, is that better than being in Boston or Switzerland? “Probably no,” says Villiger.
The vision for The Medicines Company is an ambitious one. American founder Clive Meanwell was former pharmaceutical executive who spotted gap in the market for marketing what are called “late stage development drugs”. Villiger left top job in Switzerland to join Meanwell in his venture. Today he’s the head of product development worldwide, and the managing director in New Zealand. Villiger holds shareholding of less than one percent, but with the company’s current market valuation, that’s still significant sum.
From the outset the pair set out to identify, acquire and market pharmaceuticals developed by the pharmaceutical giants, but which never make it to the market because the drug may not generate “enough revenue”. Enough revenue, in the parlance of international drug companies, means upwards of US$300 million. Drugs that look unlikely to generate this level of return may be ethically sound, but they are not the prescription for financial return the multinational companies look for.
The parent company retains ownership of the drug and its patent, but The Medicines Company picks up the worldwide development and commercialisation rights. The company markets the drug, collects the revenues for an agreed period and pays royalty to the original owner.
Developing and marketing pharmaceuticals is expensive. Villiger says it takes about US$50 million to launch single drug – to start up the pair needed to raise four times that amount. They managed to raise US$100 million privately and further US$140 million when they took the company public.
Villiger should, he says, be operating out of the US. However, three-week return trip home to New Zealand in 1996, taken shortly before moving to his new base in Boston, set him and his family on different course.
“It was the middle of August, raining and cold, so we were under no illusions. But the Kiwi lifestyle has something of value, and we didn’t want our children growing up as Swiss Americans,” explains Villiger. He thinks the option is dilemma for many expatriate New Zealanders who wonder when or if they’ll ever return. Villiger and family decided to take the plunge.
He then had to sell the idea of locating part of the company in New Zealand to his partner. At that stage, the company was two-man operation, with the prospect of them working on opposite sides of the world. But Villiger saw positives in the situation.
“Firstly, I had lot of experience working in this area and of getting experienced people on board. And with the first drug we identified, I found local clinical expert who had already done development work on the drug. Subsequently, we’ve continued to do high quality, cost effective clinical development,” he says. “Basically, we decided to ‘give it go’, despite some skepticism from the board over whether it would work.”
The first drug the company identified as having potential, Angiomax, was launched onto the American market this year. All the clinical development and trials have been conducted from Auckland, under the auspices of cardiologist and project leader Dr Harvey White. The drug has been trialed with 17,000 patients in 40 different countries and the results assessed by the Green Lane Hospital team.
Angiomax is an anticoagulant used during heart procedures. Only one other drug, heparin, is the standard treatment and it has been constantly prescribed since 1921. In fact heparin is commonly used hospital drug so Villiger believes the potential for Angiomax is huge.
After six months on the US market it is still too early to say how well the drug will sell. There is, according to Villiger, complex agenda for getting the drug onto hospital “formularies”, so that doctors routinely prescribe it.
The launch of Angiomax has enabled the company to post positive results for the first financial quarter – revenues of US$1.9 million – this year. This is drop in the ocean given that the company has invested around US$150 million in development costs but, says Villiger “this was expected”. At the time of going to print, the company share price was trading at US$21 which is up on their launch price last year of US$16.
The company’s administration and sales, marketing and manufacturing is done in North America and another office in Britain and Villiger spends around 40 percent of his year travelling.
“The issues are obvious. New Zealand is isolated geographically, and there is lot of travel and time spent overseas in the start-up phase. The key issues for company like ours are common to many businesses. The days of having your own internal workforce and pyramid management structure are thing of the past. What’s needed is flexible leadership, the ability to communicate well with people from different backgrounds and in our case, technical competency.”
In the New Zealand office boardroom the centre of attention is large video-conferencing screen. Every day Villiger and his team sit down in front of it to connect with their offices across the world. Despite juggling time zones, the offices can maintain daily face-to-face contact. This is an asset for man who is managing people at great distance.
Villiger reflects that growing number of biotech companies are tapping into the talents of New Zealand scientists. Like The Medicines Company, these enterprises are grappling with the issues of New Zealand’s relatively remote location. “From cost-effectiveness point of view there are advantages. There are good people, technology and ideas here at an affordable price, which means you can build viable, international business.”
Villiger’s office overlooks Auckland’s viaduct harbour. Beneath his window the only traffic jams are those of water taxis and super yachts. The day is brilliantly sunny, and Villiger reflects that his decision to base himself here has, personally speaking, been the right one. “I travel lot, but I’ve never regretted coming back here. It feels great.”