Henri Termeer, Biotech Grandmaster
“When a chess player looks at the board, he does not see a static mosaic, a ‘still life,’ but a magnetic field of forces, charged with energy – as Faraday saw the stresses surrounding magnets and currents as curves in space; or as Van Gogh saw vortices in the skies of Provence.”
In the early days of commercial biotechnology, a disproportionate number of young CEOs came to the field from Baxter Travenol Laboratories, a Fortune 500 medical products corporation headquartered in Deerfield, Illinois. The group became known as the ‘Baxter Boys.’ In recent issues, LSF News has profiled three of them: Ted Greene of Hybritech, Gabe Schmergel of Genetics Institute, and Bob Carpenter of Integrated Genetics.
This month, in the final installment of the series, the spotlight falls on the longest-tenured CEO in the history of the biotech industry – Baxter alumnus Henri Termeer. Termeer was appointed to the top position at Genzyme in 1985. He held onto it for twenty-six years, until the company was acquired by Sanofi in February 2011. None of his peers have come close to matching this record for longevity.
Henri Termeer’s experience at Baxter was certainly important. He was in his mid-twenties when he joined, and the company gave him his first exposure to the production and marketing of biomedical goods and services. But he had already displayed the attributes of an entrepreneur and an effective chief executive in his youth.
Termeer was born in Tilburg, a small town in the Netherlands near the Belgian border, the fourth of six children in a devout Catholic family. The year was 1946. His father operated the family’s shoe manufacturing business. Henri describes his home life as loving and supportive. That much is unexceptional, but his biography begins to take unusual turns during his teenage years.
In high school, Termeer played chess fanatically for three years. The essence of chess is strategic thinking – evaluating positions on a complicated field, and planning ahead for a range of possible outcomes, while maintaining concerted attention to detail. It is superb mental training for a prospective CEO. Young Henri Termeer took to it naturally. He played and studied constantly. Texts on the game lined his bookshelves, and he excelled in competition.
So consuming became his devotion to chess that he began missing school to attend tournaments. His formerly high marks declined precipitously. Eventually, his mother put an end to it and disposed of his pieces. Termeer accepted the restriction, and has since played the game only rarely, but the episode revealed drive and discipline, along with a competitive thirst for achievement and a talent for tactics and generalship. All of that would resurface along Genzyme’s idiosyncratic path to success.
After high school, Termeer enlisted in the Air Force to serve his mandatory one-year term of military service. Almost immediately, he was selected to attend Officer’s School. As a nineteen-year-old officer, he was assigned to an airbase to manage operations and personnel. “I was in charge,” he says, “and I was a kid.” Being an officer/manager suited his personality, so he stayed on an extra year. By the end of his service, he knew, “I wanted to run something. I wanted to be in charge.”
Termeer subsequently enrolled in the School of Economics at Erasmus University in Rotterdam. While preparing a thesis on the early computerization of retail operations, he went to London to work and study at a shoe company call Norvic. Norvic ran retail stores throughout the British Commonwealth. Company executives were impressed by Mr. Termeer’s analysis, and requested a proposal for computerizing the firm’s inventory systems. They also solicited proposals from IBM [International Business Machines], ICL [International Computers, Ltd.], and CCS [Cambridge Computer Services]. After a review, the Norvic leadership selected the Dutch student’s plan and asked him to implement it.
Henri spent several months in London, before being sent to Norwich in East Anglia to computerize the company’s shoe factories. He was with Norvic from 1968 to 1971, with the title of Group Systems Manager. It was his real first job and his first substantial salary. While in Norwich, Termeer met English recruiters for American business schools – Harvard, Cornell, and the University of Virginia – and was gradually persuaded that earning an MBA from a top American university would be a good career move. He ultimately selected the Darden School because Virginia offered the best financial package.
Termeer went to America and studied business school cases with the same passion he had earlier exhibited as a chess master. On graduation in 1973, he possessed a two-year work visa and intended to acquire experience in the States before returning to Europe. He was recruited by Baxter Travenol. Baxter was searching for new MBAs fluent in European languages and familiar with European cultures, highly-skilled young executives who could be groomed for general management positions at the corporation’s foreign subsidiaries. Henri Termeer fit the bill perfectly. His first assignment was to assist Baxter’s Vice-President of International Marketing, Phil Henderson, in Chicago.
The job was a way station on Baxter’s fast track, but Termeer was soon dissatisfied with it. He lobbied for more responsibility, and after just three months with the corporation, was named International Product Planning Manager of the Hyland division located in Costa Mesa, California. Hyland manufactured blood protein products (including albumin, the principal constituent of blood plasma; Factor VIII, a clotting protein used to treat hemophilia; and antibodies used to detect antigenic substances of interest in immunodiagnostic assays). Mr. Termeer’s job was to oversee the marketing of these products by Baxter subsidiaries in countries around the world.
Henri Termeer was twenty-eight years-old when he arrived in California, a young man carrying “a big title.” His progress in the job, however, was interrupted by fallout from the oil shortage of 1973. The pinch convinced the Baxter leadership that it needed to reduce and maximize the efficiency of the corporation’s overseas operations. Termeer became Hyland’s representative to a reengineering team that reported directly to Baxter CEO William Graham. He traveled extensively and was given apartments in Brussels and Costa Mesa, in addition to his home in Chicago. Termeer recalls being awed by the frenetic pace: “Wow. American business.”
That project lasted only three months. Afterwards, Mr. Termeer was recalled to Chicago to serve as the International Marketing Manager for Baxter’s Artificial Organs Division. Great technological leaps forward were being made at the time in kidney dialysis, open heart surgery, and artificial hearts and lungs. Termeer learned valuable lessons on how to maneuver nimbly in rapidly-expanding, innovation-driven fields.
A year later, in 1975, he was offered two general management positions, one in South Africa, one in Brazil. He passed on both. Finally, in 1976, he accepted an offer to manage the subsidiary in Baxter’s largest foreign market – Germany. He was offered the position on a Monday morning, and that evening boarded a flight to Munich. He was twenty-nine years old, and remembers thinking, “‘I can do this.’” He enjoyed “three very good years” in the job. In addition to the general management experience he garnered, Termeer says that his involvement with hemophilia and the Factor VIII business “taught me a lot about the ethics of rare diseases.” Germany maintained a world-class clinical research and treatment program for hemophilia, part of a sturdy national commitment to the health of all citizens. He witnessed the economic and social value of supplying the medical needs of an underserved population in a supportive political culture. The experience would later guide his approach to Genzyme’s orphan drug projects.
In 1979, Mr. Termeer was invited back to California as Vice-President of the Hyland division in charge of global research and development, marketing, and regulatory affairs. He was later promoted to Executive Vice-President with manufacturing added to his responsibilities. By this time, biotech companies such as Genentech, Genetics Institute, Genex, and Hybritech had gotten started, and others were being organized. Termeer knew of them, cultivated contacts with them, and observed fellow rising stars at Baxter, including Greene, Schmergel, and Carpenter, leaving to join them. He also reckoned that Baxter would not soon integrate molecular biology or immunology into its R&D programs – the corporation’s size and bureaucratic trappings, he saw, “overwhelmed its ability to go into the unknown.” Henri began thinking about following his adventurous colleagues into the emerging world of biotech startups: “It was a very intriguing prospect for me. I always felt that at some point in my career, I would become involved in building my own enterprise.”
At the same time, a changing of the managerial guard was underway at Baxter. Graham, the old CEO, was replaced by the new, Vernon Loucks, Jr., and the focus of the business shifted. The corporation became more device-oriented, less science-oriented, and less biologics-oriented. “I noticed that Baxter was going through a change,” says Termeer, “so I became more receptive to taking calls.”
In 1983, he took a call from a group of venture capitalists led by Ed Glassmeyer of Oak Ventures and John Littlechild and David Cooksey of Advent Ventures. Some eighteen months earlier, the group had seeded a small biologics company in Boston, called Genzyme. The founders were Henry Blair, an enzymologist at Tufts University, and Sheridan Snyder, an entrepreneur with experience in business machines and packaging. The firm was working to supply the NIH with an enzyme under investigation as a therapy for Gaucher disease, a rare lysosomal storage disorder, and to engineer diagnostic enzymes, research reagents, and specialty chemicals. The venture capitalists were searching for a medical products professional to direct the operation. Termeer was impressed by the quality of the venture syndicate, and the magnitude of the backing investment. He decided to make the leap.
Leaving the security of Baxter for a tiny company in its infancy was a bold move. When Termeer arrived on the scene as the President of the company, Genzyme was housed on the 15th floor of a dilapidated building in Boston’s ‘Combat Zone,’ the city’s seedy underbelly. It was little more than a small group “prepared to think together to make something work.” Many of his friends in the world of established healthcare corporations didn’t understand what he was doing: “People would visit me in these modest digs and say, ‘What happened to you? Where is your sense?’”
Genzyme’s business strategy was unorthodox from the beginning. The company did not observe the prevailing conventions of biostartup fundraising and operations, which called for the accumulation of large cash reserves, partnerships with large corporations, and the licensing of technologies and products derived from narrowly-focused research programs. Termeer intended to go it alone, to establish sustainable businesses with revenues generated by product acquisitions and a diversified approach to research and development. Wherever possible, Genzyme sought to retain full rights to its products and intellectual properties.
The company eventually became a global leader in the production of diagnostic enzymes. For nearly a decade, it also ran a profitable research reagents business, which was later sold. By the mid-1990s, Genzyme had leveraged revenues from these initial sources, along with proceeds from two R&D limited partnerships (a financing vehicle since eliminated by tax reforms) and a 1986 IPO, into the development or purchase of products in various therapeutic areas, including infectious disease, cardiovascular disease, cancers, metabolic and genetic disorders, and tissue repair, and utilizing diverse technology platforms – small molecules, therapeutic proteins, biopolymers, monoclonal antibodies, and gene therapies. The company also picked up a genetic testing business in the 1989 acquisition of Integrated Genetics. In the history of the biotechnology industry, Genzyme’s diversified path to success has been singular and unique.
Even more so than these wide-ranging accomplishments, Henri Termeer’s legacy will always be closely associated with the development of orphan drugs. In 1983, the passage of the U.S. Orphan Drug Act provided incentives (special tax breaks and a seven-year market monopoly) to pharmaceutical companies developing new drugs for rare diseases and underserved patient populations of less than 200,000.
When Genzyme was founded, one of its initial projects was the production of the enzyme glucocerebrosidase for NIH researchers who were investigating its potential as an enzyme replacement therapy for Gaucher disease. Gaucher disease is a rare genetic disorder in which lipids accumulate in the liver, spleen, bones, and other organs and tissues due to a deficiency of the enzyme, which ordinarily breaks them down. With the Orphan Drug Act in place, the commercial development of glucocerebrosidase became an economically viable proposition. Termeer decided that Genzyme would make it a high priority goal. He began devising a flexible and innovative development plan in which blockbuster products played no part.
Two major obstacles had to be overcome. First, early clinical trials of glucocerebrosidase at NIH did not yield promising results. It was determined that in order to be effective, the glycosylation of the enzyme had to be modified. Genzyme developed a process for manufacturing an effective enzyme. The new drug, called Ceredase® delivered miraculous cures in the clinic, and the FDA granted it orphan drug status. Secondly, discarded placentas were the original source of glucocerebrosidase. Twenty-two thousand placentas were required to collect enough of the enzyme to treat one patient for one year. The problem was solved by a massive collection effort and the construction of new plant in France. By 1991, when Ceredase® was approved for sale in the U.S. as a therapeutic product, the plant was processing 70% of all placentas from births in Western Europe and 30% of all placentas from births in the U.S.
In 1994, Genzyme received FDA approval to sell a recombinant version of modified glucocerebrosidase, called Cerezyme®, which enabled the company to dispense with placentas. Using placenta-sourced glucocerebrosidase was not only time-consuming, it also posed risks of infection. Clinical studies demonstrated that the recombinant product was slightly less immunogenic, and free of infectious contaminants emanating from tissue or blood.
Despite its demonstrated safety and efficacy, sales of Cerezyme® generated controversy and criticism. Priced at $200,000 per patient, per year, it ranks among the world’s most expensive drugs. Critics argued that it cost too much. In response, Mr. Termeer cited the massive costs and risks of drug development, but also pointed out that Genzyme’s practical philosophy is compassion. The company has worked to ensure that all who need the drug will receive it. Of the 4,500 patients around the world who take Cerezyme®, one-tenth pay nothing: “There are essentially two prices,” Termeer has said. “There is X and there is free.” The company has established a program called the Gaucher Initiative, which supplies Cerezyme® to patients in countries lacking reimbursement programs. In 2010, charitable product donations totaled $75 million.
Ceredase® and Cerezyme® were just the first of Genzyme’s medicines for neglected diseases. Today, Termeer’s company is the world’s leading developer and manufacturer of orphan drugs.
Genzyme’s thirty-year run as an independent company ended in February 2011 when it was acquired by the Paris-based pharmaceutical company, Sanofi. The transaction was the second largest sale of a company in industry history, following only Roche’s acquisition of Genentech in 2009. Genzyme’s final price was $74 per share, plus additional contingency payments (up to $14 per share) based on the future performance of the company’s products in the marketplace.
When Henri Termeer joined the company in 1983, it was a tiny startup. Its potential was great, but its actual value was negligible. By the time Termeer left Genzyme in 2011, it had become a global pharmaceutical company with life-saving drugs available in over 100 countries. It was worth $20.1 billion. From beginning to end, the company’s strategies were devised by a grandmaster.