It wasn’t until he was twenty-two years out of college that Michael Jaharis finally became his own boss, with the purchase of his first company in 1972. It actually took less time than that for him to amass a fortune in his new career as an entrepreneur.
How exactly does the son of a Greek immigrant who landed penniless in Boston in 1908, make it all the way from Korean War vet, night school student, sales rep, and corporate lawyer — to successful pharmaceutical entrepreneur on the Forbes 400 list?
Mr. Jaharis often said that he found his way into the drug industry by sheer luck.
Born and raised in Evanston, Illinois, the son of Michael and Katerina Jaharis — immigrants from the village of Aghia Paraskevi on the Greek island of Lesbos — the young Jaharis was drafted into the Army shortly after graduating from Carroll College in 1950, and soon found himself in a medical unit in Austria where he helped run medical and pharmaceutical supply during the Korean War.
Upon his discharge Jaharis decided to obtain his law degree, but he needed a job to cover tuition. Based on his Army experience, Jaharis was hired as a sales representative for Miles Laboratories in its prescription drug division.
“My territory extended from the north of Chicago’s Loop to the Wisconsin border. At the same time I began law school at DePaul University as a night student. I’d planned on opening a law practice after graduation.”
Instead, after earning his law degree, and a short stint in private practice, Jaharis joined Miles Laboratories’ legal department. His mentor there, writes Dan Schell for Life Science Leader, was John Buckley, who managed food and drug law for the Miles prescription and over-the-counter divisions. Jaharis credits Buckley with teaching him what was possible within the legal framework of a growing, dynamic industry. Jaharis eventually rose to become top legal executive counsel for food and drug law at Miles, and became involved in marketing as well. “We had a lot of good lawyers at Miles, but not many considered using the law to expand a drug portfolio,” he said.
His path through the corporate ranks also taught him valuable lessons about the limits corporate culture can impose on innovation.
As a sales rep for Miles, Jaharis had recognized that acetaminophen was as effective as aspirin without what he calls “unpleasant side effects.” He recommended to the executives above him that Miles explore the potential for acetaminophen as a standard tablet, not just in the “fizzy tablets” in the company’s Alka-Seltzer line. The company ignored Jaharis’ advice.
In the meantime, competitor Johnson & Johnson bought a small company that was promoting an acetaminophen formulation known as Apamide, and ultimately introduced the drug as an over-the-counter tablet that later became Tylenol — a brand that is arguably the most successful OTC medicine ever.
By 1972, Jaharis was ready to strike out on his own. From the very beginning, though, writes Schell, Jaharis experienced “plenty of the trials and tribulations that go hand in hand with being an entrepreneur in any field.”
Leaving his post as vice president of Miles, Jaharis launched his entrepreneurial career by buying a small firm that made cold and cough medicines, Key Pharmaceuticals, with partner Phil Frost. At the time, Key had less than $2 million in sales.
In an interview in 2013, Jaharis told John Sviokla and Mitch Cohen, authors of The Self-made Billionaire Effect: How Extreme Producers Create Massive Value, that he and his partners thought they were buying a healthy enterprise with some modest products — a hope that vanished a few weeks later when Jaharis went to Washington, DC for a meeting at the FDA.
One of the cardiovascular experts he met there surprised Jaharis with the news that his studies had showed that the basis of one of Key Pharmaceuticals’ main products at the time — a nitroglycerin pill whose sole market distinction was its purported ability to be long-acting — just didn’t work.
“At that point I knew I was in trouble. And, it was around the same time that we found out the previous managers of Key hadn’t given me an accurate financial picture, so that instead of being profitable, the company had really lost $700,000 in the previous year with annual sales of $1.5 million. So we were in terrible shape starting off, to say the least.”
Having purchased a company that was essentially bankrupt, Jaharis knew it could not compete with larger companies on multihundred-million-dollar discovery and development projects.
“I realized the only way to create value for this small, bankrupt company was to examine its existing strengths. I saw Key’s expertise in sustained-action formulations as a way to improve the effectiveness, and in some instances, the potency, of drugs that were already available at the time. So,” said Jaharis, “we were able to cost-effectively commercialize a succession of products that addressed deficiencies in the original product while dramatically improving patient compliance. This was the kind of innovation that Key could afford, which is why I called this approach ‘affordable innovation.’”
One of Key’s existing products was an asthma drug which patients self-administered multiple times a day. Following Jaharis’s lead, Key scientists developped a sustained-release delivery mechanism that allowed oncedaily dosing that was safer and just as effective. Jaharis also directed the development of the first transdermal, sustained-delivery nitroglycerine patch.
Turning the tiny producer of cough and cold remedies into a powerhouse with these new products, Jaharis saw Key’s sales increase 100-fold under his leadership, before the company’s $836 million merger with Schering-Plough in 1986.
Two years later, in 1988, Jaharis founded Kos Pharmaceuticals, naming it after the Greek island where Hippocrates founded the science of medicine and where Da Vinci did his medical drawings.
With his undeniable record of success, Jaharis was able to build an organization from scratch, with a company culture founded on his views of innovation and product development.
“When you run a company, you are always concerned about things such as raising capital, making payroll, or just how you’re going to make everything work,” Jaharis said. “We also asked ourselves, ‘What do we do, or what can we do, to make people aware of at least one of our drugs?’”
Through those struggles and by answering those tough questions, writes Schell, he was able to forge some best practices that stayed with him with each subsequent investment and challenge.
Together with his reputation as a pharmaceutical maverick — and a knack for reformulating something familiar into something profitable, a gift comparable to spinning straw into gold — Jaharis was able to recruit talent from big pharmaceutical firms who liked the idea of working in a people-centric firm. At Kos, “we center all our activities and strategies around people. We don’t have a lot of levels, everybody is a shareholder,” Kos CEO Adrian Adams was quoted as saying at the time. “We all work very hard. we are all pretty good at what we do… As we grow we want to not lose sight of where we come from.”
Jaharis considered his proudest achievement at Kos to be the creation of a market for Niaspan, a prescription drug that increased HDL (good cholesterol) and lowered LDL (bad cholesterol). At the time, it was a unique strategy — and a differentiator for Kos — as most Big Pharma companies were focused strictly on LDL therapies.
Because Niaspan was a reformulation of a vitamin of the B complex, Kos did not spend money inventing the molecule, but instead, created a more patient-friendly formulation, which made it affordable for the small company to develop and bring the drug to market.
“I once again applied the concept of affordable innovation and utilized drug delivery technology to develop and bring to market a high-performing cardiovascular product.”
Jaharis invested $200 million of his own money to promote Niaspan and, in time, Kos became the fastest growing pharmaceutical company in the United States, in terms of revenue growth.
In 2006 Abbott Labs purchased Kos Pharmaceuticals for $4.2 billion.
After the sale of Kos Pharmaceuticals, Mr. Jaharis formed an investment firm, Vatera Healthcare Partners, which focused on making big bets on health care companies working on drug treatments in areas like pulmonary and infectious disease.
One of the venture capital firm’s investments was in Pearl Therapeutics, an innovator with respiratory products for COPD. Vatera funded Pearl’s clinical, regulatory, and business development efforts as well as provided financing to support new product development, paving the way for its sale to AstraZeneca for $1.15 billion in 2013. “Our experience with Pearl reinforced our belief in the value of having a strong scientific team and supporting innovative research,” commented Jaharis.
Vatera continues to work with innovator companies working on treatments for serious, prevalent conditions for which existing treatments are ineffective or nonexistent. “I am excited about the projects we are involved in, not only from the investment side, but also because of the potential to fulfill an unmet need,” said Jaharis last May.
Bringing a therapy to market is more difficult today than when he acquired Key. Evermore watchful regulators and the ballooning costs of drug development have been significant factors. The time and cost of discovery through development has been estimated at 10 years and $2 billion.
“I would say that the targets for pharmaceutical entrepreneurship have changed. Yes, conditions such as hypertension, cholesterol, asthma, and so on that affect large numbers of patients are now very well served through multiple pharmacological options. But, that doesn’t mean there isn’t room for improvements and enhancements,” he said.
According to Jaharis, good business prospects begin with a passionate, knowledgeable management team with proven track records. From there, entrepreneurs should create a vision for their business that will attract funding as a start-up.
“I lean toward branded pharmaceutical products. While generics have a role in the pharmaceutical armamentarium, innovation creates more exciting opportunities because introducing new products directly improves people’s lives,” he said.
Despite pricing, regulatory, and scientific challenges, Jaharis believed innovation in pharmaceuticals will continue, writes Life Science Leader. He stressed that keeping an entrepreneurial pharmaceutical company on the right path is a matter of making consistent progress toward goals.
“Top managers should ask themselves if they are continuing to innovate, if their therapies are still relevant to patients, and if they are expending precious resources thoughtfully. And while it’s important to stay focused on your original goals, you also need to be flexible enough to adapt to changing environments.”
His last bit of advice is one echoed by top executives in all forms of business, but, considering his track record, it comes off less as a cliché and more like a dictum.
“My strongest belief is that all success in business depends on a manager’s ability to recruit good people who can work without significant monitoring. This becomes especially important when selecting people who work in areas in which a manager is not an expert.”
Twenty-two years after graduating from college, Michael Jaharis purchased his first pharmaceutical company. That was in 1972. Four decades later he had amassed a career — and a fortune — in the pharmaceutical industry. Read the full article at: lifescienceleader.com