German-American Christoph Westphal has founded a string of biotech companies in Boston. He finds good businesses ideas in professional journals.
By Sascha Karberg
A red and white hat, long felt coat, long white fake beard – every year since the company was founded in 2004, Santa Claus visits the small lobby of Boston's biotech company Sirtris and gives gifts to the families of the company's employees. In the costume hides none other than Christoph Westphal, the owner and founder himself – who regularly plays something akin to a Santa Claus to the entire region; the German-American with a double Harvard degree has conjured up five biotech companies in four years as well as a number of other high-tech companies.
It is not just the sheer number that is unusual; ever since the bursting of the tech-bubble at the start of this millennium, investors are extremely reluctant to deal with biotech companies that do not have any products in the pipeline that are close to market-ready. Companies founded by Westphal, however, are mostly based on ideas that are fresh from basic research and the conversion of the ideas into products is still further out. While the majority of biotech start-ups otherwise have to give up, all of Westphal's companies are still in business. Three of them – Alnylam, Momenta and recently Sirtris – have already gone public and have achieved a combined value of approximately two billion dollars. "Christoph has a nose for promising technologies", says Peter Gruss, president of the German Max-Planck-Gesellschaft, who has known Westphal since childhood. Thomas Tuschl, a German-born biochemist at New York's Rockefeller University describes Westphal as a "whirlwind", who after having finished his work leaves the opposite of chaos. But what does Westphal do to make his start-ups bloom while the majority of supposedly secure start-up attempts end up in the biotech mass grave?
One of the reasons would be his tirelessness. At eight a.m., the 39-year-old regularly walks the two kilometers from Boston's borough Brookline via the Boston University Bridge to his work in Cambridge. His day, however, already started three hours earlier – and this is not just because of his three kids, aged 7, 5 and 1. When the Sirtris management traveled through dozens of cities in the U.S. and Europe in preparation for the public offering, Westphal stubbornly used to get up every morning at half past five to run a few kilometers – while his colleagues still dozed exhausted in their beds, says Michelle Dipp, Director for Strategic Development at Sirtris. Sirtris' tight labs and small offices do not provide the expensive view onto Boston's Charles River that Westphal crosses every morning. The boss sits in an untidy four square meter office – together with co-founder David Sinclair, who is mostly however at his main job as a researcher in aging science at Harvard University. Westphal spent years working in huge offices with marble lobbies during his time at the Boston venture capital company Polaris, but according to him these things are "completely unimportant." What is important for Westphal is the realization of good ideas.
It is not the science of averages and optimization that interests him; his trademark is "true innovation", says comrade-in-arms Dipp. Westphal estimates that he works 55 hours per week - "but my wife would say that I work 80 hours." His two Blackberries keep him "always in touch." "I must get about 50 emails per day from him", says hedge fund manager Richard Aldrich, one of
the founding investors of Sirtris. “When you get involved with Christoph, it’s all action, all the time.” At least in the decisive fifteen minutes when the medical doctor helped his wife to deliver their youngest son, Westphal was for once really unavailable.
Westphal appears to fight against biotech business' unpredictability with an excess of work mania, structure and discipline. "Biotech is a terrible business", the serial business founder readily admits. Sirtris will likely burn 400 to 600 million dollars before a product hits the market that will generate a return. Then – in ten or fifteen years – the investors could get yields that go into the billions. But it has become more and more difficult to make this rather late income palatable. On one hand, more and more is demanded of medications, on the other hand consumers and politicians are not very willing to pay more money for new drugs. According to Westphal, this leads to a decrease in willingness to invest into innovative drug developments. It is like in Hollywood; "the small, independent producers make creative movies, but they lack Disney's or MGM's marketing machine."
Heated high risk market
Those who were courageous enough to follow Westphal five years ago, are already booking profits. This is because now, the few really innovative biotech companies are being wooed with large amounts of money. To get access to RNA interference technology that can switch off illness-causing genes, the pharmaceutical company Roche spent one billion dollars and entered into a joint venture with Alnylam, a company that Westphal founded shortly after the tech- bubble burst. But things did not always go so well. When Alnylam and Momenta went public in 2004, investors were not willing to pay more than 60 percent of the IPO-pricing. Nanosys, Westphal's nano-technology company, even had to postpone its initial public offering. Vinod Khosla, an important name in American venture capital circles, even criticized "the lack of a foreseeable business" in Westphal's companies and said that that there was a serious probability that the market had been “deceived”. Khosla later apologized for his comment, but the gaffe shows how heated it can get in the high risk market of biotech. Westphal, however, seems to be able to negotiate his way like nobody else.
His parents – his father was one of the first molecular biologists, his mother a medical doctor – moved from Germany to the U.S. in 1968. Christoph was born in San Diego in the same year. In 1974, the family moved to Washington, D.C. The father did research and taught at the National Institutes of Health. The son went to the German school and German church, had German friends and speaks accent-free German even today. At times, however, a switch seems to click in his brain and in the middle of the sentence he continues in fluent Bostonian English. At the age of seventeen Westphal's entrepreneurial spirit became noticeable; the adolescent used regular visits to the family in Germany to buy Hugo Boss suits, and sold them in Washington, D.C. at a profit. During his college years at New York's Columbia University he bolstered his pocket money giving cello concerts – and graduated "summa cum laude". In spite of the entrepreneurial ambitions of their son, his parents did not allow any doubt that he would have to go to medical school. As he was not sure whether it should be a practical discipline (MD) or a scientific career (PhD), the 22-year-old took two years off. He tested a research career at the Max-Planck-Institute in Göttingen in Peter Gruss' team, and he went to Africa where he worked, among other places, at the Albert-Schweitzer-Hospital in Gabon and assisted with delivering babies. Still undecided and in an attempt to avoid having to make a decision, he enrolled in the elite MD-PhD track at Harvard University. In record-breaking six years
Westphal completed the double course and wrote his doctoral thesis with geneticist Phil Leder – a bright scientific career was starting. But the outlook that he would not get to lead his first laboratory until his mid-forties put him off: "I do not like it when others tell me what to do." Research fascinates him, "but if research is reduced to theory, then it is much less important for mankind than when it is used to develop new types of drugs." The entrepreneur broke through. Westphal set himself the goal to transform science into products and looked for a way into the biotech business. In 1998 he began working at the McKinsey consulting company. "I thought, after three years at McKinsey I will know how to start companies", says Westphal, "but that was silly, of course." Instead he was busy working on "efficiency and effectiveness reviews" – a nicer phrase for cost cutting. Westphal does not say it, but his facial expression screams the word "boredom". The excursion into the consulting world was not completely useless, however: "I learned to understand how business people think", says Westphal. For instance, that venture capital companies need to earn money quickly on one hand, but that there is an equally large pressure for them to find ways to invest the money. "If I go to a venture capital company today, I do not beg. I know very well that they have difficulties finding good people that they can give their money to." And he also learned that there are certain situations when it is good to wear a suit to be taken seriously. But he rids himself equally quickly of that suit – if need be, on the back seat of a cab to the airport, as Sirtris co-head Garen Bohlin tells with a smile.
Researchers meeting in favorite Restaurant
At the beginning of the new millennium, Westphal chucked in his job at McKinsey and switched to Polaris, a venture capital company that also finances the first steps of biotech start-ups – but it does not actively found them, as he soon found out. But at Polaris, the now 32-year-old got the freedom that made him bloom. Within four years Westphal initiated the formation of Alnylam, Momenta, Acceleron, Nanosys and Sirtris and also participated in the creation of a number of other companies. Polaris invested between 175,000 and 1 million dollars into the companies; the remaining money Westphal raised from a variety of other investors. A network formed that by now functions so efficiently and puts so much trust into Westphal that he managed to raise 82 million dollars for his current company Sirtris in only two years.
Of course, success is preceded by the convincing idea. Westphal's inspiration-trick is simple reading. Every day he reads the relevant professional journals such as "Cell", "Nature" or "Science". And he constantly comes across research results that trigger his imagination: "I got the idea for Sirtris in 2003 when I read David Sinclair's work." In his article, the Harvard- researcher described the life-prolonging effects of resveratrol, a component in red wine, on yeast cells. The company Magen, on the other hand, is based on research that explains why strongly pigmented skin types are less prone to develop skin cancer and how an artificial boost to skin pigmentation could be used as skin cancer prevention. The initial idea for Alnylam was a study by the German biochemist Thomas Tuschl, who had proved that with the application of RNA-interference technology it was also possible to switch off human genes. "Alnylam could also have been founded in Germany", says Westphal. But he only makes "Boston companies." Not just because the biotech elite of the East Coast resides here at Harvard and MIT, but also because the father does not want to neglect his family. Every evening he comes home at promptly at 6:30 p.m. to eat dinner and then reads a bed story in German. His wife, Sylvia Pagán Westphal, a born Puerto Rican with a Harvard degree in applied sciences, works as a science journalist for the "Wall Street Journal". The couple organizes their family life and work with a large amount of organizational talent and discipline – the secure basis for Westphal's high risk
When Westphal's brain develops an idea for a company from the basic research he studies, "then you only have to send an email to people", says the medical doctor easily. In a short note he invites the researchers to a meeting. This is an important test; most do not even answer his email at first, others enthusiastically meet with Westphal and are excited by his interest, but do not want to invest too much of their own time. The first meeting is followed by the second, third and fourth, mostly in Westphal's favorite place, the "Busy Bee Diner" in Brookline. "Some dating before you get married" is what Westphal calls this process – after all, if they agree to found a company, all participants are tied to each other for three to seven years. Of about 300 ideas and first emails maybe 30 to 40 projects lead to serious talks.
Stay healthy through fasting
"As a researcher I always thought that the most important part of discovery is the idea", says Westphal. By now he knows that it largely depends on managers and developers whether a discovery leads to a product. Therefore, Westphal describes his knowledge of human nature as turnkey for entrepreneurship, because this knowledge is necessary to put together a team that blends well and can master the difficult first years. "I learned this in Africa", says the globetrotter, who has visited two thirds of the world's countries, "when I had to make a split- second evaluation as to whether the cabdriver would transport me, rob me or kill me." Knowing the limits of his own knowledge, Westphal finds the right experts for every company he founds. Everybody does that – but "Christoph is equipped with so much medical and molecular-biological knowledge that he does not have to depend on advisors", emphasizes Max- Planck-boss Peter Gruss Westphal's advantage.
His youngest start-up, Sirtris, has captured Westphal's attention to such an extent that he even left Polaris to work as the CEO on the implementation of this idea – "this is a once in a lifetime opportunity." After decades of unsuccessful research into the causes of aging, biologists have made important progress in the last few years. Since the thirties it has been well-known that healthy mice live longer if the calorie-supply is reduced to a minimum. Only in the last ten years have researchers started to decipher the reasons for the functioning of the so-called calorie- restriction; apparently it activates certain proteins that are especially good at packaging the genetic material: sirtuins.
David Sinclair, professor at Harvard, started looking for substances that could increase the activities of sirtuin proteins, specifically Sirtuin 1 (Sirt-1), one of the seven human sirtuin variants. He came across resveratrol, a substance that can also be found in red wine. The life expectancy of yeast cells increases by 70 percent if one adds a healthy dose of resveratrol – and similarly it increases the life-expectancy of flies, worms, fish and mice. The study electrified Westphal. Then Sinclair published results that showed that resveratrol was capable of giving mice with diabetes the same life expectancy as in normally fed rodents. Westphal immediately saw the potential for developing a pill against the increased incidence of diabetes worldwide that has reached epidemic dimensions – and for an option to increase the human life span. At this point Sirtris' president makes a serious face: "It is not our goal to extend the life span. It is our goal to develop a new, secure drug against adult onset diabetes." Even if he did not want to exclude a life-span increasing effect, not even Christoph Westphal would be able to raise enough money to finance the incredibly long clinical study that could prove it. Thinking out aloud about it he switches into English; antibiotics have extended life expectancy by two to
three years, hygienic measures such as hand washing and sewer canalization improved it by five to ten years, cancer drugs by an estimated one to two years. The activation of sirtuins has improved life expectancy in all tested lab animals by thirty to seventy percent. "That can change the world", says Westphal, "the first time I read this, I immediately thought that this could be bigger than Google."
In time and with an open door policy
While the Sirtris drug is supposed to delay aging, CEO Westphal is doing everything to grow the company as fast as possible. At times maybe even a little too fast, thinks co-head Bohlin, who once himself developed a company of Sirtris' size into an individual pharmaceutical company with 1,600 employees, The Genetics Institute. "Christoph is fast, but sometimes it is better to take more time making decisions and to think them over." Are there any typical German characteristics? Michelle Dipp can only think of the notorious punctuality of her boss. Thinking in hierarchies is alien to him; his office door is always open. Distance to management can be lethal especially in young biotech start-ups, says Westphal, and his Santa Claus role suddenly appears in a completely different light. "This is the only way to get people to tell me what really goes on, when there is a serious problem or when a mistake has been made." The "beer hour" which brings together all employees every Friday afternoon for beer, wine and a light buffet is not just a nice idea, it is the cement that makes a team out of colleagues – and binds smart brains to a high risk company like Sirtris in spite of the hard work, even though secure jobs are available a few blocks away at Novartis, Genzyme and co.
Such security-minded thinking is not Westphal's thing, but neither is recklessness. Whether on his travels through Africa or in the office of a biotech company: "I constantly think about the fact that everything could crash." This "healthy paranoia" is absolutely necessary to be successful as an entrepreneur. "Of course, you have to believe that something could work out, but you also have to understand that most business ventures fail." Therefore it is necessary to constantly search for solutions, so that at least something works. "I still do not know whether Alnylam will be able to develop RNA interference into a drug", says Westphal, "but somebody has to try!" Up until now Westphal has always helped his companies find their feet, then passed them on to an experienced manager and moved on to new projects. This time it could be different for an extended period of time: Sirtris is "a once in a lifetime" thing; at least that's how it feels now and probably will for the next three, four years. And so, Westphal will probably don his red Santa Claus coat, glue on the beard and give out presents at Sirtris again this year. Nonetheless, he could soon present the biotech sector with new ideas and companies; despite his full-time engagement at Sirtris, Westphal's former Polaris colleague Michael Greely asked him to act at least in an advisory capacity for the newly formed venture capital company IDG Ventures.
Westphal could not resist.