Millennium Pharmaceuticals, Inc.

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Millennium Pharmaceuticals, Inc.

75 Sidney Street
Cambridge, Massachusetts 02139
U.S.A.
Telephone: (617) 679-7000
Fax: (617) 374-7788
Web site:http://www.mlnm.com

Public Company
Incorporated: 1993
Employees: 1,330
Sales: $196.3 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: MLNM
NAIC: 325412 Pharmaceutical Preparation Manufacturing

Millennium Pharmaceuticals, Inc. is a Cambridge, Massachusetts biotech company dedicated to the discovery and development of new drugs through the application of genomics, but what sets it apart from similar companies is its business model. Since its foundation in 1993, Millennium has been highly successful in landing lucrative research and development contracts with major pharmaceutical firms. Rather than signing blanket agreements, however, the company forms alliances that target specific diseases. This strategy allows it to forge lucrative relationships with a number of partners. Essentially Millennium leverages its advanced drug discovery technology platform to enable researchers to quickly identify genes that may be associated with a particular disease. Rather than being content to just collect royalties from pharmaceuticals, Millennium has designs on becoming a drug maker itself, although its few products are the result of acquisitions rather than internal development. Nevertheless, Millennium has built an organization that is now capable of discovering a new drug, taking it through clinical trials, and marketing it. The company concentrates on three fields: oncology, inflammation, and metabolic disease.

Business Background of Millennium’s Founder: 1970s-80s

The driving force behind the creation of Millennium was its chairman and chief executive officer, Mark J. Levin. He grew up in St. Louis, the son of a businessman who owned several small shoe stores. Levin was forced to take on a great deal of responsibility early in life, following the death of his mother from cancer when he was 16. While maintaining his studies he cared for his three younger sisters and sold shoes for his father, ultimately earning a master’s degree in chemical and biomedical engineering from an area school, Washington University. For a brief spell he stayed in St. Louis selling shoes, then in 1976 accepted an engineering position in Indianapolis with Eli Lilly. He next took a job in North Carolina, where his wife attended college, overseeing the setup of a new brewery for Miller Brewing Company, which provided him with exposure to a large production facility. A brief, unsuccessful stint owning a doughnut shop taught him the pitfalls of running a business. Levin and his wife moved to Massachusetts, where he took a job with the Foxboro Co. selling computers to biotech companies. He called on his former boss at Lilly, William Young, who now worked at Genentech, one of the pioneering biotechs, but instead of selling a process control system he found himself being offered a job.

In 1981 Levin relocated with his wife to San Francisco, where he gained experience managing a number of complex drug projects with Genentech. He then took a position in 1987 with the May field Fund, a San Francisco venture capital firm, where he served as the co-director of its Life Science Group. His job was to identify new scientific ideas, then help form companies to exploit them. Rather than wait for someone to approach him with an idea, Levin kept up on research journals and made contacts with scientists. In this way he was instrumental in the creation of Cell Genesys, Inc. in 1987, Cyto Therapeutics, Inc. in 1988, Tularik, Inc. in 1990, and Focal, Inc. in 1991. While starting these companies and spending time with scientists, Levin became aware of research on the human genome. He visited the major genome centers in both the United States and Europe, meeting many of the prominent people in the field. It became clear to him that they believed all human diseases had some connection to genetics and that within the next decade the human genome would be sequenced. Levin recognized that genomics offered a way to produce a myriad of new drugs to cure specific diseases, as well as a business opportunity with significant potential. He was not alone in this belief, with differing business models developing to exploit genomics. Levin described the situation in a 2001 Technology Review interview: “Some formed diagnostic companies by identifying mistakes or [diversity] in genes. Some built companies by compiling genomic information and selling the databases that arose from the information. Others realized that there were going to be important technologies to develop and you could sell these tools and form alliances around them. Millennium was focused from day one on building the biopharmaceu-tical company for the future by developing personalized therapeutic products.”

Founding of Millennium: 1993

From 1991 to 1992 Levin laid the groundwork for Millennium, recruiting a team of top scientific advisers with commercial appeal who would found the company in 1993: Eric Lander, with the Massachusetts Institute of Technology; Jeffrey Friedman, of Rockefeller University; Raju Kucherlapati, of the Albert Einstein College of Medicine; and Daniel Cohen, chief scientist at Genset, a French biotech. From the outset the advisers knew that in the beginning they would have to team up with a large pharmaceutical to provide major funding and to develop drugs out of Millennium’s research, then take them through trials and bring them to market. The founders also recognized that they would produce a great deal of intellectual property. David Stipp in a Fortune profile of the company outlined the potential of Millennium’s genomic research: “Not only would it reveal thousands of disease-related genes in humans and germs, but also every single one might become a little patent factory. For starters, a gene and the specific protein it helps produce might be patented, providing molecular targets for developing traditional drugs. A separate patent might be awarded for a bioengineered drug generated by splicing the gene into a microbe. Another patent might cover novel medicines that directly affect the gene to ameliorate the disease it’s involved with. Yet another might cover the gene’s use in new diagnostics for spotting individual patient’s predisposition to disease.” As a result of this thinking, Millennium was determined to form partnerships that were narrowly defined, retaining as many rights as possible to the intellectual property the company produced, as well as earning royalties on any drugs that made it to market. Teaming with a number of companies targeting different diseases also served to spread the risk. In addition, Millennium chose to portray itself as a technology company involved in drug research, rather than an aspiring drug company, a label that was likely to drive away many investors.

At first, Levin turned to Mayfield for $8.5 million in seed money, then raised additional money from other venture capital funds. His wife, who was an executive search professional, spent months looking for a suitable chief executive for the company before concluding that her husband was the only candidate with enough vision to run the business. Although Levin intended to head Millennium on a temporary basis, as he had with earlier start-ups funded by Mayfield, he ultimately decided to stay on as the permanent CEO. In December 1993 Millennium Pharmaceuticals was incorporated. Levin leased space close to MIT and within six months the company recruited a team of 30 scientists. It also began to establish its technology platform, in many ways a testament to Levin’s engineering background. A number of technologies, including robotics and computers, were combined with microbiology to create a complex, but efficient, production process. According to Stipp, Millennium began to “refine its platform. From major medical centers it obtained access to tissue samples from sick people— researchers extract DNA from such samples and scan it for genetic patterns correlated with diseases.” It was this platform that Millennium offered to potential partners.

By March 1994 the first cash-rich pharmaceutical signed on with Millennium. Hoffmann-La Roche agreed to pay $70 million over a five-year term to develop drugs to treat type II diabetes and obesity, two target areas with the potential to generate large revenues. In July, Levin named Steven H. Holtzman as chief business officer for the company. Holtzman would be instrumental in the structuring of future agreements with pharmaceuticals, reserving as many rights as possible. Millennium’s next major alliance, and Holtzman’s first deal, came in October 1995, a $50 million joint venture with Eli Lilly & Co. focusing on atherosclerosis, the blocking of arteries by fatty deposits. Two months later Millennium signed a five-year, $60 million collaboration with Swedish pharmaceutical Astra AB, targeting inflammatory diseases such as asthma, hay fever, and bronchitis.

Public Offering in 1996

Millennium went public in 1996, netting $58 million. During the year the company’s research efforts produced the first tangible results. A gene-based assay was produced for Roche to screen for obesity drug candidates. Millennium also identified a gene involved in the development of type II diabetes, triggering a milestone payment from Hoffman-LaRoche. Furthermore, a gene-based test developed for Eli Lilly and Company was used to identify atherosclerosis drug candidates.

Company Perspectives:

We believe that by understanding how specific changes in genes relate to disease, we can deliver precisely the right medicine to precisely the right patient at precisely the right time. The catalyst for this vision is genomics; the force behind it, a unique blend of science and business innovation; the promise, breakthrough therapeutic and predictive medicines that can transform healthcare.

Millennium was active on a number of fronts in 1997. In an $89 million stock transaction, it acquired Chemgenics Pharmaceuticals, which allowed Millennium to broaden its research into antibacterial drugs. The company also forged a new important alliance: a $218 million, five-year deal with Monsanto Inc. involving research into bioengineered crops. Unlike previous partnerships, the agreement with Monsanto was not as narrowly defined. Because it wanted to maintain its focus on drugs, Millennium essentially agreed to a technology transfer to a new Monsanto unit, Cereon Genomics, which was set up next door. Under this arrangement Millennium received a hefty payment from Monsanto yet was not saddled with the costs of adding personnel and equipment. Also in 1997 Millennium formed a pair of subsidiaries to enhance the value of the corporation. Millennium BioTherapeutics was established to develop therapeutic proteins, gene therapy, and antisense products. Lilly immediately signed a $70 million, five-year deal to develop medicines from proteins, in the process gaining an 18 percent stake in the subsidiary. Millennium next formed Millennium Predictive Medicine to produce diagnostic tests using bioinformatics and proteomics.

After gaining valuable experience in genomics, Millennium researchers developed a way to narrow down the number of target genes. Rather than conduct lengthy validation studies on each new gene, they concentrated on genes that reacted to known medicines. These so-called “druggable” genes were then studied, saving a considerable amount of time and effort. Needing a partner to put this new technique into use, Millennium turned to Bayer AG, which because it was late to embrace biotechnology was willing to assume some risk in order to catch up with its rivals. Bayer had been looking to team with a genomics company since late 1997 and by September 1998 agreed to a $465 million, five-year deal with Millennium. Under the terms of the agreement, Millennium was to deliver 225 genomics-based proteins targeting cardiovascular diseases, cancer, osteoporosis, pain, liver fibrosis, hematology, and viral infections. In addition, Bayer gained a 14 percent stake in Millennium. It would be allowed to cherry-pick the target proteins, but the rights of 90 percent of the proteins would revert to Millennium. Although it still had no products on the market, Millennium was able to post a $10.3 million profit for the year because of its pharmaceutical agreements.

More research deals would follow in 1999. Bristol-Myers Squibb agreed to a $32 million, five-year alliance with Millennium Predictive Medicine to develop diagnostic tests in oncology. The subsidiary also signed Becton Dickison to a $70 million, five-year strategic alliance. The parent company, meanwhile, moved closer to its goal of becoming a drug company capable of selling its own proprietary products when it agreed to a $750 million stock acquisition of LeukoSite Inc., providing latter-stage drug development capabilities as well as several possible drugs in clinical and late-stage preclinical development.

In June 2000 Millennium landed another major deal with a pharmaceutical company, which in the process forwarded its long-term aspirations. France’s Aventis SA, Europe’s fourth largest pharmaceutical, agreed to pay $450 million in a complex five-year deal that called for the two parties to create, develop, and market a new line of anti-inflammatory drugs to treat such diseases as rheumatoid arthritis, asthma, and certain allergies. The two companies would share profits equally in any drugs sold in the United States and Canada, and Millennium was to receive a royalty in all other markets. It was a highly advantageous deal for Millennium, but it was also of strategic importance to Aventis, which had been formed in a $25 million merger in 1999. A new management team conducted a thorough review of its operations to identify shortcomings. Establishing a relationship with Millennium was a quick and economical way for Aventis to fill its needs. Millennium then bolstered its ability to fulfill the Aventis agreement by paying $53 million to acquire Cambridge Discovery Chemistry, a British subsidiary with a large number of scientists experienced in pharmaceutical chemistry. Moreover, the addition of Cambridge Discovery extended Millennium’s presence overseas.

Millennium had its first drug on the market in 2001, Campath, used to treat chronic lymphocytic leukemia, which it picked up in the LeukoSite acquisition. Although Campath was only expected to reach revenues of no more than $150 million a year, and Millennium had to share profits with two other companies involved in its development, it was still a major step for the company. As other products made their way through clinical trials, Millennium continued to forge partnerships with pharmaceuticals that might one day become rivals. Hoffmann-LaRoche reached a three-year agreement to develop diagnostic products for rheumatoid arthritis. Because of the expiration of an earlier deal with Hoffmann-LaRoche, Millennium was able to strike a new partnership to develop drugs and diagnostic tests for diabetes and obesity, this time with Abbott Laboratories for $250 million over five years. By the end of 2001 Millennium also completed the largest acquisition in its brief history, a stock swap valued at $2 billion for San Francisco-based Cor Therapeutics. The transaction was a clear statement that Millennium intended to one day become a major player in the pharmaceutical business. The Cor purchase brought with it a cardiovascular drug expected to generate $225 million for the year, a sales and marketing staff was experienced in launching a new product, as well as researchers working in heart disease, the most lucrative therapeutic area. Although some observers were critical of the Cor acquisition, others thought that Millennium had put itself in a solid position to realize future growth. It had ten drugs in human clinical testing and several others on the verge of entering that stage, a large well trained staff, $400 million in estimated annual revenues, and $2 billion in cash to cover losses incurred from an annual commitment of $500 million for research and development. In a December 2001 interview with Technology Review, Levin was candid about his lofty plans for Millennium: “Over the next five to 10 years, our goal is to become a company that’s leading the world in personalized medicines, a company that is leading the world in productivity, a company with a value of over $100 billion, a company that has five to 10 products on the market that are making a big difference in people’s lives, a company with the strongest pipeline in the entire industry.”

Principal Subsidiaries

Millennium BioTherapeutics, Inc.; Millennium Predictive, Inc.; Cambridge Discovery Chemistry, Inc.

Key Dates:

1993:: Company is incorporated.
1994:: First strategic alliance signed with Hoffmann-La Roche.
1996:: Company goes public.
1997:: Subsidiaries Millennium BioTherapeutics and Millennium Predictive are formed.
1998:: Strategic alliance is signed with Bayer AG.
1999:: Strategic alliance is signed with Aventis SA.
2001:: Company acquires Cor Therapeutics.