March 29, 2024

A Biotech King, Dethroned

Mr. Blech was the initial financial force behind the industry giant Celgene, the rare disease specialist Alexion Pharmaceuticals, and the cancer drug developer Ariad Pharmaceuticals, not to mention Icos, which developed the impotence pill Cialis.

In the early 1990s, Mr. Blech was worth about $300 million and made the Forbes list of 400 wealthiest Americans.

Now, however, he is about to begin a four-year prison term, about $11 million in debt and mainly an afterthought to the industry he helped foster.

He squandered his fortune with reckless borrowing and stock trading in a quest for even greater riches. His Wall Street firm, D. Blech Company, collapsed — dragging biotech share prices down with it — in 1994, on a day some called “Blech Thursday.” Comeback attempts have only gotten him deeper into trouble.

“There’s no question that if I had been in a coma for the last 20 years, I would wake up a billionaire today,” Mr. Blech, 57, said.

Besides what his downfall means for his personal life, it reflects the maturation of the biotechnology industry from its get-rich-quick days, when someone like Mr. Blech, a music major with no scientific training, could make a difference with a few million dollars. Now billions are invested by funds managed by teams of doctors and scientists with Ph.D.’s.

Mr. Blech (pronounced bleck) is to report on Sept. 18 to federal prison in Fort Dix, N.J., having pleaded guilty to manipulating the stock of two biotech companies as part of his latest comeback attempt. He also pleaded guilty to securities fraud in 1998, but avoided prison.

In an interview at his Manhattan apartment, Mr. Blech said he hoped to be remembered for helping to create an industry that has saved lives.

He said his reckless behavior stemmed in part from bipolar disorder, which left him at times feeling invincible and unable to restrain himself.

“I didn’t know how to say no to a deal,” he said.

Critics over the years have said Mr. Blech was merely an aggressive stock promoter who got lucky. They note that Celgene and Alexion did not become successful until long after Mr. Blech was associated with them.

But Mr. Blech still has supporters. Nick Arvanitidis recalled that in 1990, his company, Liposome Technology, was desperate for cash. Other investors spurned him, he said. But “David just wrote me a check for $3 million the same day I went to see him.” That allowed Liposome to survive and develop Doxil, an important cancer drug.

Jeffrey J. Collinson, a venture capitalist, said Mr. Blech saved several companies. “It’s painful to hear what happened and how he got into this position,” Mr. Collinson said. “It’s a sad story.”

It is also an unlikely story. In 1980, Mr. Blech was working as a stockbroker while trying to become a songwriter. That fall, biotechnology pioneer Genentech went public and its share price doubled the first day.

“I can do that,” Mr. Blech, then only 24, told his father, a rabbi who was also a stockbroker. Mr. Blech then called his brother, Isaac, who was working in advertising, and said, “Quit your job, we’re starting a genetics company.”

Sitting around the kitchen table, the three came up with a name — Genetic Systems. Then they had to figure out what the company would actually do.

An article in a science magazine led them to Robert Nowinski at the Fred Hutchinson Cancer Research Center in Seattle, who was doing research on a new technology involving something called monoclonal antibodies.

The Blechs promised Dr. Nowinski $200,000 and then raised $1 million from others. Half a year later, Genetic Systems went public and the Blechs’ stake was worth $10 million. In 1986, Bristol-Myers Squibb acquired Genetic Systems for nearly $300 million, and the Blechs were richer still.

David and Isaac Blech went on to form several other companies, some of which ultimately failed. They attracted top scientists, directors and advisers by offering them stock and a chance to get rich. The companies were often taken public quickly, so the Blechs and other early shareholders could realize a return.

Things began going wrong around 1990, when Mr. Blech wanted to expand while his more cautious brother wanted to take a hiatus. The brothers had a rancorous split and have essentially not talked since.

Mr. Blech started D. Blech Company, which underwrote stock offerings. When biotechnology stocks he was involved with weakened, he tried to prop them up by buying more shares, using $65 million in borrowed money. When creditors started calling in the loans, a desperate Mr. Blech started engaging in sham trades to make it look as if he was getting his house in order.

Article source: http://www.nytimes.com/2013/09/06/business/david-blech-a-biotech-king-dethroned.html?partner=rss&emc=rss

The Boss: Minding the Mattresses

That part of my life has come full circle: three years ago, I joined another rock band whose members are in the mattress industry. We call ourselves the Insomniaczzz and play at industry functions.

I graduated from Rutgers with a business degree and a minor in journalism. I had been editor in chief of the college newspaper, which got me an interview with The Evening Bulletin in Philadelphia. The editor told me I’d be meeting the pope and doing all sorts of interesting things. Then he got to the salary, which was a letdown. I turned down the job and looked for a position in business.

It took me six months to find a job. I ended up moving to West Bend, Wis., to work for the Rolfs division of Amity Leather. After executive training, I returned to New Jersey. My sales territory was the northern part of the state.

I wanted to control my own destiny, so, four years later, in 1981, I left to join my father’s mattress business, 40 Winks, in Westmont, N.J. We opened a second store, which I managed, and a third, which my brother managed. My sister became manager of the fourth store. We grew to 23 stores in the New Jersey and Philadelphia area.

Every day was an adventure in the retail bedding field. In 2000, we were struggling when Fort Dix, the Army base, ordered 100 mattresses for refugees fleeing Kosovo. A few days later, the base wanted another 100. We hustled and delivered those as well. They ended up ordering a total of 6,600.

We were grateful for the orders but had a terrible time filling them. I asked my contact at the base how it planned to pay; when he said by government Visa, I worried. I thought he was talking about the document needed to travel to Kosovo. I asked him to explain and he said, “You know — cash, check, credit card. Visa.” I never felt so dumb.

In 2001, another mattress company moved into our market, followed by a second. Both were national chains, and larger. The area was a mature market and we couldn’t compete. When we downsized to four stores, my sister took over daily operations and sold the stores a few years later.

I left in 2003 to join Therapedic, a mattress maker started more than 50 years ago in Garfield, N.J. I began as vice president and became C.E.O. in 2004. The dynamics are very different than at 40 Winks. In a family business, you work with relatives daily, but you’re also with them a lot in your free time. It can be good for some families, and it was good for us for a long time. But family members respond differently to competitive pressures, and there was some tension among us.

When I arrived at Therapedic, I thought that we had more factories than we needed. We contract with manufacturing plants; we don’t own any outright. It wasn’t easy to tell board members that we were going to trim the company’s size until I could make it stronger. Some were not comfortable with the plan but went along with it. From 2006 to 2009, I cut the number of factories from 14 to 8. We were like a tree with too many limbs, and we needed to prune back to grow better. We’ve added factories back and now have 13 producing our mattresses.

We’re not a top-tier company. Research shows that that a majority of customers buy from the top four brands. But in difficult times, customers look for alternatives, so we midtier companies pick up market share.

As told to Patricia R. Olsen.

Article source: http://feeds.nytimes.com/click.phdo?i=42bb4c93ca269243ddde7cb1efdf1c25