A Receptive Leader

Some executives would have left a company after being demoted. Graham Allaway didn't do that at the HIV therapeutics company Panacos, and it's better because of it.

Keith O'Brien
Sep 1, 2007
<figcaption> Credit: © 2007 Cade Martin Photography</figcaption>
Credit: © 2007 Cade Martin Photography

On June 14, 2006, Graham Allaway received a shocking call in his office. His boss, Samuel "Skip" Ackerman, had just walked off the stage at an investors' conference in New York City and suffered an apparent heart attack. Within hours, Ackerman, the energetic chief executive officer of Panacos Pharmaceuticals, would be dead. Allaway, the company's chief operating officer, found himself staring down a crisis.

For Allaway and Panacos - a Watertown, Mass.-based drug development company focused on bringing a novel HIV compound to market - adversity was hardly anything new. In recent years at Panacos, Allaway had been forced to abandon a promising drug candidate, much to the surprise of his board. He had been demoted from CEO to make room for Ackerman.

Now, with Ackerman dead, Allaway watched the company's stock prices fall, but colleagues say the thoughtful, deliberate Englishman never panicked, and now, with Panacos looking to begin Phase III testing next year for its lead compound, an HIV-maturation inhibitor called PA-457 or bevirimat, Allaway believes the future is bright. "We've shown proof of concept," he says. "In many ways that was probably the most exciting thing of all: to show that bevirimat worked in patients." The next step, he says, is making a commercial product that, when used in combination with other drugs, "might provide a whole new paradigm for treating resistant patients for long periods, and maintaining their viral load productions, so that they have a really better quality of life." (For more on promising directions in HIV research, see "5 HIV - treatment strategies".)

From Cement to Startup

Allaway, 52, grew up in North Kent, just east of London, the son, and grandson of cement industry laborers. Like many people he knew, he spent his summers as a kid toiling away for cement makers. "It was dirty work," he recalls. When he had to work inside the cement kilns, it was also "borderline deadly hot." It was here that Allaway first wore a white coat, working in the labs, testing cement. He was hooked on science.

Allaway went on to study zoology, entomology, and ultimately, in 1982, he earned a doctorate in virology at Imperial College London. He was specifically interested in insect viruses. "What I realized," he says, "is that people did not understand very much about virus receptors - how the viruses get into the cells - whether it's an insect cell or a human cell." His research expanded into human viruses while working as a visiting fellow at the National Institutes of Health from 1984 to 1990. He then moved into the private sector in 1990, joining Tarrytown, N.Y.-based Progenics Pharmaceuticals, where he led a team that helped discover the role of the chemokine receptor, CCR5, in HIV infection.

Based in part on this experience, Ric Schumacher, then the CEO of Boston Biomedica, decided to hire Allaway in 1998. The company was looking to spin out a company, later called Panacos, to develop some promising compounds that University of North Carolina medicinal chemistry professor Kuo-Hsiung Lee had identified in a partnership with Schumacher's diagnostics company. "Allaway had that FDA experience," Schumacher recalls. "He had the clinical trial experience. He had the research experience of working for a company, and also a startup type company, an early-stage type company. So he wouldn't be afraid of us as a small, early stage company."

Panacos officially spun out of Boston Biomedica in November 2000 with just four employees. By 2002, it had more than doubled in size, Allaway says, and it had raised roughly $3.5 million in an initial round of fundraising to develop its lead drug candidate, a compound known as PA-344B. Investors were expecting the company to file an investigational new drug application within months and to begin human trials by the end of 2002.

<figcaption>Allaway with Jill Smith, director of corporate communications. Credit: © 2007 Cade Martin Photography</figcaption>
Allaway with Jill Smith, director of corporate communications. Credit: © 2007 Cade Martin Photography

There were problems, though. Preclinical studies of 344B showed that it didn't stay in the blood as long as scientists had expected, and it also had the potential to interact with other drugs, says David E. Martin, Panacos' senior vice president of drug development. The shortcomings left Allaway with a difficult decision to make: Move forward with 344B to please investors, knowing that it could possibly fail down the line, or, change course by dropping 344B and focusing instead on another compound, PA-457.

"That wasn't an easy decision. There was a lot of waffling," says Martin. Allaway went about it, Martin recalls, in his typically deliberate and thoughtful manner, making sure to build consensus among his top scientists before taking their decision to the board. Allaway says he saw no other way to do it. "We don't agree 100% on everything," Allaway says of his team. "But in general I like throwing ideas up in the air, asking hard questions, and questioning what we're doing."

In this case, the questioning had led Allaway and the others to the decision that they had no other choice: If they were going to make it to the next milestone, they needed to drop 344B. Allaway went to the board and delivered the disappointing news. "It was a tense board meeting," Martin says. But Allaway, with his top scientists behind him, stood his ground. Sometimes, Allaway says, the hardest thing to do in a small, startup company with limited financing is to admit when you're wrong and try something else. "That's really what sometimes distinguishes the 'men from the boys' - the ability to make a difficult decision at the right time and marshal your resources to enable you to survive and move forward."

Getting the Job Done

For Panacos, abandoning PA-344B for PA-457 turned out to be the right decision. Though Allaway and his team didn't know exactly how this other compound worked at that time, they soon learned that it had a novel mechanism of action: targeting a different step in the HIV replication process than protease or reverse transcriptase inhibitors.

Protease inhibitors attack the protease enzyme, which slices the large viral protein, called gag, into several smaller proteins. One of those proteins - the capsid protein - forms a conical core that, along with nucleocapsid, helps protect the viral genetic material and allows the virus to infect other cells. PA-457 - also known as bevirimat - attacks the gag substrate itself and binds to the capsid protein, where it joins another protein called SP1, and prevents it from being cleaved off with the others. As a result, the capsid protein cannot perform its typical duties, the viral core breaks down, and infection cannot spread. "And as a result of that," Allaway says, "the virus can't mature and it can't become infectious. It can't spread the infection to new cells around the body."

These properties surprised many, including Allaway himself. Early on, he says, he even had trouble convincing investors that the drug worked in this way. The investors ultimately came around, but Panacos, like many small startups, still struggled to remain viable. By late 2003 the company was short on cash, and the board of directors decided to replace Allaway with Ackerman, an entrepreneur with more Wall Street experience than Allaway.

"Graham's ego isn't tied up in a title. It's not about [that]. It's about the job. It's about getting the job done." --David E. Martin

Another person, demoted from CEO to COO, might have decided to leave at that point, says Martin, Allaway's colleague since 2001. But Allaway understood the move and decided to stay. "I think what it says is Graham's ego isn't tied up in a title," says Martin. "It's not about the title. It's about the job. It's about getting the job done."

"That certainly wasn't the easiest of times," says Allaway, "and if it had been someone other than Skip it might not have worked out." Ackerman, he says, was a consensus builder just like himself. So, in the end, Allaway decided that the good of the company was more important than the title on his business card. "My goal," he says, "is devoted to trying to do what's best for the company."

Novelty Overcomes Adversity

In the months that followed, Allaway and Ackerman, working together, ushered in a new era at Panacos. The company agreed to merge in June 2004 with publicly traded V.I. Technologies, a biotech that had been developing anti-infective technologies until it was forced to suspend Phase III testing of its leading compound, Inactine, in late 2004. The reverse merger, in which Panacos kept its name and slipped into the public infrastructure of V.I. Technologies, made the little startup a publicly traded company. News in August 2005 that bevirimat had performed well in a small, 10-day human trial tripled Panacos' stock price, lifting it over $10 a share.

More adversity was to come, and when Ackerman suddenly died, many were thankful that Allaway had stayed. Operationally, the company mourned and then moved on. Peyton Marshall, the chief financial officer, became the acting CEO, and Allaway added president to his COO title. Now, along with the company's new CEO, Alan Dunton, hired earlier this year, they are continuing with Phase IIb studies of bevirimat, slowly increasing the dosage to determine the optimum amount. They are working to create a commercially viable liquid and tablet form of the drug, and moving toward Phase III studies next year. The hope is that bevirimat - along with other new-generation HIV drugs such as Pfizer's maraviroc, which blocks the CCR5 receptor, and Merck's integrase inhibitor, raltegravir - can help prolong the lives of HIV patients who have built up resistance to the drugs already on the market.

"My greatest hope is that it will join the currently very effective antiretroviral compounds - the protease inhibitors, the RT inhibitors - and will be useful in combating HIV-1 and delaying, or possibly even preventing, the possibility of resistance to this group of currently available antiretrovirals," says Eric Freed, chief of the virus-cell interaction section of the HIV Drug Resistance Program of the National Cancer Institute. "The bottom line is, the more effectively we can limit virus replication in patients ... the more effective the therapy will be."

That's Allaway's goal, too. After almost a decade at Panacos, he has watched the company grow to more than 40 employees, move from private to public, and develop a compound that some estimate could be the next blockbuster in HIV treatment. Allaway says he won't be happy until it actually happens. "The major unmet medical need in HIV treatment is patients failing therapy due to resistance," he says. "That's where you need a novel-mechanism drug like bevirimat. In fact, you need more than one, ideally."

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