Wyeth's comeback kid: Robert Essner guides the pharma giant back from the fen-phen brink

Chief Executive, The, Oct, 2005 by Fran Hawthorne

Robert Essner, chief executive officer of drug company Wyeth, doesn't want to talk about the F-word.

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That's F as in fen-phen, the diet drug combination that caused severe and sometimes fatal heart and lung malfunctions in tens of thousands of people in the 1990s. Wyeth marketed the dangerous "fen" half of it--the drugs fenfluramine and dexfenfluramine, sold under the brand names Pondimin and Redux. To date, Wyeth has set aside more than $21 billion to pay the claims from some 100,000 lawsuits, a sizable bite for a company with a market capitalization of less than $60 billion, yet still not enough to cover the liability, according to most experts. To put that in perspective, Merck, with a slightly larger market cap, faces a potential liability of $18 billion to $30 billion from lawsuits over its painkiller Vioxx, the biggest pharmaceutical recall since fen-phen.

And fen-phen isn't Wyeth's only problem. Scientists have also challenged the safety of two other flagship products--its Premarin line of hormone therapy for postmenopausal women and the antidepressant drug, Effexor. Moreover, as a small player in an industry of behemoths, Wyeth is vastly outgunned in marketing and research firepower.

What Essner does want to talk about is how surviving these woes has strengthened his company. He insists that Wyeth has largely pushed its fen-phen and hormone therapy troubles into boxes that it can measure, wrap up and put aside. As for Effexor, Essner claims it's been more of a success than a problem. "We are a little battle-hardened," the CEO says. "These are likely to be very tumultuous times [for the entire industry]. We are better able to cope than companies that may have had easier paths than we've had."

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Given the trouble plaguing many large pharmaceutical companies these days, including Merck, it would be easy to discount Essner's confidence as hopeful speculation, but outsiders, too, are cautiously optimistic about Wyeth. That is largely a tribute to Essner, an unlikely CEO who originally set out in the early 1970s to become a history professor. But while he pursued a Ph.D. in history, specializing in the classics, Essner soon realized there were no attractive academic positions available, and with career redirection as his goal, he landed in the market research department at drug company Sandoz, which was known for seeking out people with nontraditional backgrounds.

Over the next 13 years Essner's unrelated academic resume and uncanny research skills filled the company's prescription for success, and he rose through the corporate ranks to become COO. In 1989, Essner joined Wyeth-Ayerst Laboratories (a division of what was then American Home Products) as senior vice president, sales and marketing, and climbed through the C-suite, eventually being elected CEO in May 2001 and chairman in January 2003.

Before the Storm

Wyeth's story began nearly 150 years ago, in 1860, when two brothers, John and Frank Wyeth, opened a retail drug store in Philadelphia. Two years later they branched out into manufacturing medicines, and that original Wyeth company was acquired by American Home Products in 1931. AHP continued along the acquisition trail over the years, including one deal that brought in the obesity drug Pondimin.

In the mid-1980s, Pondimin was a minor product because most people felt that the severe fatigue it caused wasn't worth the few pounds they shed. But in 1983, a University of Rochester researcher, Dr. Michael Weintraub, discovered that if patients combined Pondimin with another obesity drug, phentermine, they could lose many more pounds without the fatigue because phentermine's tendency to be a stimulant countered the side effects of Pondimin. The combination, dubbed "fen-phen," swept a diet-crazed nation. Often prescribed after scant medical exams at diet centers, each drug had already been approved individually by the Food & Drug Administration, so no further regulatory approval was needed. Some 6 million Americans ultimately took the combo between 1992 and 1997. At the height of the craze in 1996, AHP was raking in sales of over $300 million a year. With its patent on Pondimin about to run out, the Wyeth-Ayerst Laboratories division of AHP came up with a revised version named Redux to extend its monopoly.

At that point, Wyeth officials insist, they had no reason to think there were serious safety issues with either drug. Critics, however, note that published studies linked the drugs to a rare, incurable heart condition called primary pulmonary hypertension (PPH) that interferes with blood flow to the lungs. "Wyeth had reports coming in, yet they continued to sell the drug month after month to make the money," charges George Fleming, a Houston attorney who is pursuing more than 8,600 fen-phen lawsuits.

It was in the summer of 1997 that scientists from the prestigious Mayo Clinic warned that they were seeing an unusually high rate of two serious conditions among fen-phen patients--not just PPH, but even more instances of abnormalities in the heart valves that require extensive surgery. Soon more cases flooded in to the FDA. With mounting proof of safety problems, Pondimin and Redux were pulled in September 1997.