Matthew Herper

Matthew Herper, Forbes Staff

I cover science and medicine, and believe this is biology's century.

8/14/2013 @ 9:00AM |100,087 views

How Two Guys From Queens Are Changing Drug Discovery

This story appears in the September 2, 2013 issue of Forbes.

George Yancopoulos (front) and Regeneron CEO Leonard Schleifer

There is a 40-something aerobics instructor in a Dallas suburb whose cholesterol level is so low–a sixth that of a normal person–that scientists think she is nearly certain to be spared heart disease, no matter what she eats. In Berlin, Germany a small child arrived at the hospital with amazingly well-developed muscles. At the age of 4 he could hold a 7-pound dumbbell in each of his outstretched hands.

These people–genetic mutants seemingly out of an X-Men story–are more than just blessed by nature. They are leads to the future of human health, as pursued by one of the most prolific drug hunters of his generation: George Yancopoulos, 53, the chief scientific officer of Regeneron Pharmaceuticals. An experimental treatment he created based on the heart mutation is among the hottest in the industry. A second based on the buff toddler might help cancer patients whose muscles are wasting. Other Yancopoulos medicines–for asthma, rheumatoid arthritis and cancer–are in testing, too. All are based on a unique method his team has developed of putting large swaths of human DNA in mice and using the rodents to quickly generate human drugs.

“This is why you get into this business,” says Yancopoulos. “You think you understand biology. You think you have an insight. And you think it might cure disease.”

Three of his medicines are already on the market, an amazing feat in an industry where researchers toil a lifetime to develop a single drug and get treated as superstars if they manage two. Alas, of the three, two were commercial duds: a treatment for a rare genetic disorder, and a cancer drug similar to Genentech’s Avastin. But his big hit came in late 2011 with a medicine called Eylea that treats the leading cause of adult blindness. At a time when Wall Street was convinced that the pharmaceutical industry had run out of blockbuster products, it generated $838 million in its first full year, and sales are expected to jump 55% this year to $1.3 billion.

But it isn’t just smart science that’s turned Regeneron into one of the world’s most innovative companies (it ranks No. 4 on FORBES’ annual list this year). It’s also smart business. One key reason Yancopoulos has been able to succeed has been the support of his boss, founder and Chief Executive Leonard Schleifer, 61, an M.D.-Ph.D. who has turned out to be one of biotech’s shrewdest dealmakers and who, for two decades, has protected Yancopoulos from investor demands for results as failures piled up. “George was too talented,” says Schleifer. “The people around him were too talented. It wasn’t a matter of whether we can do this. It was a matter of when we can do this. Would we survive long enough to have a hit?”

They have, and then some. Against the grain of industry trends, the company has found ways to create effective new treatments on bargain budgets. According to a FORBES analysis of 220 drugs approved over the past decade for publicly traded companies, the companies that invented 3 or more medicines spent an average $4.3 billion in R&D per drug. The big boys spend still more: $5.5 billion for Merck, $7.8 billion for Pfizer and $10 billion for Sanofi, Regeneron’s partner on many of its projects. Regeneron’s cost per drug? Only $736 million. “He’s been successful beyond anything I could imagine,” says Fred Alt, the Harvard Medical School geneticist who first told Schleifer about Yancopoulos.

Accordingly, Schleifer is approaching billionaire status. He’s worth $800 million, largely in Regeneron stock, according to FORBES estimates. Meanwhile, Yancopoulos has made more money than almost any research biologist in history. Last year he received an $82 million pay package, also mostly stock, which bettered every chief executive in America except Larry Ellison. His estimated total net worth: $400 million.

But for all his success, medicinally and financially, Yancopoulos has yet to create a drug that has really changed the world. His new projects–the heart medicine, the asthma drug–might just be the kind that save thousands of lives or become household names. At a recent visit to Regeneron’s brand-new headquarters in Tarrytown, N.Y., he looked like a man who lives in the lab. Gray stubble encroached on his Vandyke beard, the tabs of his oxford were undone, and the shirt had a hole by the belt. The whiteboard in his office was covered with messages from his teenaged kids, who visit him at work.

“Everything that we’ve been doing for 25 years, it interconnects,” says Yancopoulos. “It’s not like we changed direction in the middle, or we did a new trick. It’s all building on the foundation of those early ideas, and we’re just taking them to the next level.”

REGENERON’S ROOTS LIE in a Chinese restaurant. On the Upper East Side of Manhattan, in 1988, Schleifer, an assistant professor of neurology at Weill Cornell Medical College, scrawled a deal on a napkin with a Merrill Lynch venture capitalist and walked out with $1 million in funding, a chief executive job and a new company aimed at healing nerves. He then recruited top scientists to serve as advisors, including three Nobel Prize winners who joined Regeneron’s board of directors.

One of the advisors told Schleifer that Yancopoulos, then a 28-year-old professor at Columbia, was “the young superstar of his generation.” Yancopoulos also had a unique reason to listen to Schleifer’s overtures. His dad, a Greek immigrant who had come to America hoping to rebuild the fortune his father (kept in slavery in Turkey before escaping to build some of Greece’s first electric power plants) had lost to the Nazis. He hated that his brilliant son had chosen a career that paid as poorly as academia. Yancopoulos had $2 million in grants that would fund him for eight years, but only $35,000 made it into his pocket. America, his father told him, should pay him a lot more.

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  • Excellent article. Regeneron’s story is definitely inspiring since it really shows the value of persevering and thinking about the long haul even if Wall Street might be screaming about the next quarter. It’s very encouraging to see Regeneron offer a shining counterpoint to the dismal state of Big Pharma; as a drug discovery scientist I can say that this is one of the most positive stories about the pharmaceutical industry that I have come across in years. All good luck to them.

  • Great read!

  • Lynn Sugayan Lynn Sugayan 7 months ago

    Let’s hope this amazing team can find a cure for Lyme and related co-infections. So many autoimmune syndromes are related to tick bites. Symptoms persist for decades and a cure would eliminate many high medical bills for treating symptoms.

  • Jane Burnett Jane Burnett 5 months ago

    Lynn, you are right on! We need more truth and openness (and less greed!) in the medical and pharmaceutical industries, so that people can be correctly diagnosed before they go to tremendous expense for unnecessary procedures and can go directly to the medications and procedures that will benefit them most.

  • Debra Slagle Debra Slagle 7 months ago

    This is an amazing story. We are so lucky there are scientists and forward looking thinkers as mentioned in this article. I never was aware of some of these men and what they have accomplished. I now am looking forward to reading up on this fascinating research and scientists. Maybe they will someday come up with cures for my sarcoidosis, asthma, and pulmonary hypertension before I die. Thanks for bringing such great eye opening information to the masses.

  • Jake Schaible Jake Schaible 7 months ago

    Great Read. A long long of $REGN even as technicals (double top) starting to get very ugly.

    But would love more details on the “german baby”. This is an area I know well, having long followed the work of Acceleron and their recently suspended partnership on ACE-031 w/ Shire.

    For me, as seductive as pics of strong man babies and Belgian Blue bulls are, the myosin / activin approach has been a disappointment. The big hope in cachexia (think the gaunt Steve Jobs in his last years) is GTx Inc (GTXI) SARM enobosarm, which should read out its Phase 3s in NSCLC cachexia any day.

    Tweeting @JJSchaible

  • Jimmy Feterman Jimmy Feterman 7 months ago

    What is it that makes Regeneron so efficient in their spending. How are they able to engineer medicines, at such a relatively low cost? Do you believe there is any connection to Regeneron’s market strategy’s compared to other big pharma who spend more on M&A.

  • Spencer Lodge Spencer Lodge 7 months ago

    Whatever is the business the thing is that we are getting new life savings drugs. though we hope that will be of reasonable price.

  • User_afh User_afh 7 months ago

    Science can never live on earth in a way that most people can know it’s nature, & advance us to far beyond where we are today, until the thing that has made it unable to live & breathe among us is gone. Science, aught to be the highest achievement, the designer of our every happiness & wealth, it aught to be humankind’s highest esteem. We live in an age where the advance of science literally surrounds us, & yet we still linger in morbid demise. The promise of science holds nothing less than pure liberty, human perfection, & a very serene, peaceful happiness that travels through each & every one individually, & yet we still are in collective awareness that each other is a part of our great, free family.

    Nothing less than super abounding human advance & perfection, does science hold. & yet she is kept inside the morbid cage. Let us evolve, I say. Let us approach the scientific discovery that in fact allows for the promise of science itself to be unleashed upon us. Let us know that the bible is sheer evil, so manipulative, so damning unto us, that we live as slaves in misery because of it.

    Science, I say, is yet to be free. Humankind will decline until we tell the truth about that which holds humankind down. Only lower & lower we will sink until some brave soul frees us all.

  • Mad_Scientist Mad_Scientist 6 months ago

    You’re too religious.

  • Melanie Haiken Melanie Haiken, Contributor 7 months ago

    First-rate reporting on Regeneron and Yancopoulos and the distinctiveness and ingenuity of their approach. Thanks.

  • Dennis Costakos Dennis Costakos 6 months ago

    This is a terrific article, but where it ends may be another beginning. I can recall my days at Columbia, as a student, when Dr. George Yancopoulos (Columbia nickname “the Yank”) and I took biochemistry instruction from then Columbia professor and alumnus Dr. Charles R. Cantor.
    Today, Dr. Charles Cantor is chief Scientific officer of Sequenom, a company that has laboratory-developed genetic test that evaluates the risk of a patient with early or intermediate AMD progressing to advanced choroidal neovascular disease within 2, 5, and 10 years, and George is one of the founders of Regeneron that has the cure, Eylea , used to treat age-related macular degeneration, the leading cause of vision loss in people aged 50 and older. Sequenoms ability to cheaply code DNA will help Regeneron launch a whole new set of experiments.Perhaps George and Charles would do humanity (and investors) a favor if they revisited each their mutual interests.Thanksful to forbes for letting me get on board to Regeneron stock early.
    Forbes reader and subscriber,
    Dennis T. Costakos, M.D., F.A.A.P.
    La Crosse Wisconsin 54601