Case Vertex

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GARY PISANO LEE FLEMING ELI PETER STRICK

I’ve never made a bad decision. I’ve just had bad data. — Joshua Boger, CEO and Founder of Vertex Pharmaceuticals Like many New Englanders on this bright October morning in 2003, Josh Boger, CEO of Vertex Pharmaceuticals, had been up until 2:00 a.m. the previous evening watching the Boston Red Sox playoff game. The game, predictably, ended in a heartbreaking loss for the Red Sox, but Boger’s lingering disappointment (and regret over staying up so late) quickly faded as he strode down the halls of the Cambridge, Massachusetts company he had founded 15 years earlier. Vertex had four promising drugs in various stages of clinical development, and Boger was excited by the possibilities: “The portfolio is playing out exactly as we hoped. We’ve got a stream of revenues from our partnered project that will help fund our development costs. There are multiple paths for us to become profitable. We’re in a position to choose.” While the company had revenue from various corporate partnerships and roughly $600 million in cash and short-term investments on its balance sheet, it was unlikely that the company could fund more than two of its four primary development projects.1 Therefore, Boger and Vicki Sato, Vertex’s president, had to decide which two projects should be funded. This was not an easy question, as each project had strong proponents in various parts of the organization. A second decision for the company was what to do with the two projects that did not receive funding. Again, opinions differed within Vertex, with some favoring licensing out the projects while others believed Vertex should hold the two projects as backups in case something happened to the others. The implications of these decisions were enormous, as the chosen candidates would be the first products Vertex attempted to bring through development, and hopefully onto the market, on its own.

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1 According to its third-quarter 2003 10-Q statement, Vertex had $77.5 million and $518.2 million in cash and marketable

securities on its balance sheet, respectively. ________________________________________________________________________________________________________________ Professors Gary Pisano and Lee Fleming and Research Associate Eli Peter Strick prepared this case. HBS cases are developed solely as the basis for class discussion. Certain details have been disguised. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2004 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617-783-7860.

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Vertex Pharmaceuticals: R&D Portfolio Management (A)

The Pharmaceutical Industry2

Vertex Pharmaceuticals

Founded in 1989, Vertex’s age and size caused many to categorize it as a biotechnology firm.7 However, because the company focused on chemically synthesized molecules rather than biologics, Vertex generally viewed itself as a classical pharmaceutical company. In fact, many of the company’s 2 For a more extensive overview of the pharmaceutical industry, see Stephen Bradley and James Weber, “The Pharmaceutical

Industry: Challenges in the New Century,” HBS Case No. 703-489 (Boston: Harvard Business School Publishing, 2003).

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3 Herman Saftlas, “Healthcare: Pharmaceuticals,” Standard &...
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