Supplement: Many Happy Returns

Many Happy Returns By Charles Q. Choi Cephalon marks its 20th year RELATED ARTICLES Successful Strategies Margaret Foti: Devoted to cancer research The Launch and the Exit Entrepreneurs Boldly Break New Ground Mark Tykocinski: Open doors lead a scientist to his calling Shire Pharmaceuticals: A Study in Exponential Growth Creative Collaboration Cephalon, the leading independent biotechnology firm in Pennsylvania and the Greater Philadelphia region, has seen its fair share of rocky times in the last two decades. However, as the $5 billion market cap company celebrates its 20th anniversary, it stands in a far better position than it has ever been. "Over the last 20 years we have used our keen eye for identifying opportunities, our research ingenuity, and sheer perseverance to grow from a startup biotech company to one of the top ten biotech companies in the world," says Frank Baldino, Jr., chairperson and CEO of Cephalon. Baldino grew up in the Greater Philadelphia area; he graduated from a high school in Fairless Hills, Pa., and earned his PhD at Temple University in Philadelphia. "Pennsylvania's also been very supportive of our growth in terms of grants, and of course the region is ideal for life sciences, with the pharma corridor, the financial community in New York, and the regulatory community in [Washington,] DC, nearby," says Sheryl Williams, Cephalon's vice president of public affairs. "Over the last 20 years we have used our keen eye for identifying opportunities, our research ingenuity, and sheer perseverance to grow from a startup biotech company to one of the top ten biotech companies in the world." --Frank Baldino, Jr. In Cephalon's early days, "Frank used to take out the trash," recalls Jeffry Vaught, Cephalon's executive vice president of research and development. "I'm serious. It felt as if everyone had 15 to 20 jobs." The company was initially funded by venture capital and research partnerships with Big Pharma, along with some support from the Ben Franklin Technology Partners, a nonprofit economic development organization. Since then, Cephalon has seen remarkable growth. After reaching profitability in 2001, with year-end revenue of $226.6 million and some 1,120 employees, the company saw year-end revenue of $1.76 billion with 3,000 employees in 2006. In 2007 Cephalon was added to both the Fortune 1000 list and the NASDAQ-100 Index. "Frank likes walking down the hallway and talking with new employees. One day he said to someone, 'Hi, I'm Frank Baldino,' and the individual said, 'Hi, say, what do you do here?'" Vaught says. "He loves telling that story, about how Cephalon's grown." Rebounding from rocky times Cephalon, located in Frazer, Pa., has faced stumbling blocks during its rise. One pivotal and very public ordeal the company faced concerned Myotrophin, a drug for treating amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease). Ultimately, troubles getting FDA approval for Myotrophin meant discontinuing manufacture of the drug, which eventually brought Cephalon to its knees. "The stock tanked," Williams says. "It went from $45 per share to an all-time low of $4. The trouble we faced could have been the end of Cephalon." (The National Institutes of Health and the ALS Association are continuing clinical trials for Myotrophin, with Cephalon donating the drug. Results were expected near the end of 2007.) That dark period "was about as low as we could get. We were right on the verge there," Vaught says, but it was also "when the company as an organization really came together. Those who were really committed stepped up, and those less risk-taking left." Since then, Cephalon's drug Provigil, a wakefulness-promoting treatment for excessive daytime sleepiness associated with narcolepsy, proved very successful. "It was just a steady ride up once we had Provigil," Williams says. Growth strategies One of Cephalon's distinguishing features is its commitment to research. Since its inception it has reinvested about 25% of its sales revenue, more than $2 billion, into R&D. Another key feature driving Cephalon's growth is its collaborations with other companies. Williams says, "We did a lot of partnering in the early days and built infrastructure that way," says Williams. "We learned how to develop world-class clinical trial capabilities by partnering, and we partnered with others for marketing to develop that knowledge." Cephalon's original focus on neuroscience has led to a number of first-in-class drugs: Provigil, the first drug therapy for serious sleep disorders; Fentora, the first drug for treatment of "breakthrough" or sudden flares of pain in opioid-tolerant cancer patients; and Gabitril, the first and only FDA-approved selective GABA-reuptake inhibitor for treating seizures. Nonetheless, neuroscience has proven to be a difficult target. Besides the Myotrophin challenge, Cephalon's CEP-1347 compound failed to favorably modify the progression of early Parkinson disease during clinical trials, so the company discontinued the trials in May 2005. Oncology has serendipitously emerged as an important new focus for Cephalon. "As we were working on how to keep cells alive in the nervous system, we were also understanding the core mechanisms for how cells died, and it turned out that if you could block those, you could kill cells very selectively," Vaught says. So far this research has led to Trisenox, a product to treat acute myeloid leukemia, and other drugs are in development for targeting solid tumors, lymphoma, and myeloma. "That was the genesis of our jumping into oncology - not at the expense of neuroscience, but as a complement to it," Vaught adds. "The addition of oncology to Cephalon's portfolio represented another core principle of Frank's: seizing opportunities when you can." Baldino sees oncology drugs fast becoming an important part of Cephalon's growing global business. He says, "The next 20 years will see our homegrown oncology compounds enter the market and offer new ways to attack cancer." Giving back As Cephalon has grown, it has given back to the community and the nation. The company has an expanding patient-assistance program to ensure those who need its medications can get them, spending $19 million in 2006 in that endeavor. During the same year, it invested $1.7 million in community organizations, patient groups, cultural institutions, and other charitable organizations across the country. "Cephalon is playing an increasingly important and visible role in supporting science and math education in southeastern Pennsylvania," Williams says. "Through our sponsorship of the Chester County Youth Leadership program and the life science career day, we work with local school districts to elevate students' interest in science." The company also has established an annual scholarship award of $25,000 - the Horst Witzel Prize in Organic Chemistry - presented to a graduate student in organic chemistry from among programs at five eligible universities in the region. Also, the company has a technology transfer agreement with the University of Utah, it has endowed a chair in Harvard Medical School's division of sleep medicine, and it has developed numerous preclinical and clinical research relationships with the University of Pennsylvania, Drexel University, Thomas Jefferson University, the Children's Hospital of Philadelphia, and Temple University, where Baldino is a member of the board of trustees. When it comes to helping start-up companies in the Greater Philadelphia region, Baldino notably helped to develop BioAdvance, which was awarded $33.8 million from the state of Pennsylvania's share of tobacco settlement monies to grow the life sciences industry in southeastern Pennsylvania. He is also a member of the CEO Council for Growth, a group that aids the success of life science companies in the region. Despite the company's growth, "we still care about the same things that drove us to get into this business 20 years ago," Baldino says. "We want to remain entrepreneurial, we want to build an enduring business, we want to create a company of the highest integrity, and above all, we want to continue caring about the patients whose lives we positively impact every day."

Supplement: Many Happy Returns

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