It wasn't easy. Says Bell, "During that time frame—1986, '87—there was a stock market crash. The Democrats started talking
about not allowing the interest expense on leveraged buyouts to be tax deductible. It became difficult to buy anything, and
once it eased up, prices got out of sight. I remember Mike and I saying, 'This doesn't make any sense. Why don't we just do
it again ourselves?'"
In the summer of 1988, Jaharis, Bell, and another Key vet, Dave Bova, launched Kos Pharmaceuticals. Perhaps in tribute to
Jaharis' Greek heritage, it was named for the Greek island where Hippocrates founded the science of medicine. From the start,
it built on the lessons Jaharis had learned at Key.
"We wanted to do proprietary drugs, not generics, because proprietary drugs have much higher gross margins," says Bell. "We
decided to do reformulations of existing products, exactly the same formula we used at Key. It's difficult to develop distinct,
patentable proprietary advantage when you're working with drugs that are off patent—but that risk is still less than starting
at the basic bench-science level.
"And we wanted to develop our own drugs, manufacture them, and have our own sales force. In short, we wanted to be a fully
integrated specialty pharmaceutical company."
At the time, most of the companies that had been Key's peers, including Alza and Marion Laboratories, pursued less integrated
strategies and either worked on formulation and delivery (like Alza) or marketed products that had been developed by others
(like Marion). In going with a bolder business model, Kos had two big advantages: The management team was experienced in development,
delivery, and sales and marketing. And in Jaharis it had a patient, committed investor.
"A venture capitalist who doesn't have the kind of faith in the industry that Mike had would never have stuck with this model
as long as Mike was willing to," says Bell. "Mike kept saying to himself, 'People think I'm an idiot for putting so much money
But Jaharis had his sense of the market. And he thought Big Pharma was making a mistake by forgetting about an old, old drug
that some people called God's gift to cholesterol.
The Secret WeaponBefore Mark McGovern became Kos' executive vice president and chief medical officer, he spent 11 years at Bristol-Myers Squibb,
where he was executive director of heart-failure atherosclerosis clinical research and was responsible for clinical development
of Pravachol (pravastatin). He knows cholesterol, and he came to Kos partly for the chance to work on the neglected piece
of the puzzle: HDL.
Interestingly, an effective HDL drug had long been known. "In the1960s," says McGovern, "niacin was being investigated as
an experimental treatment for schizophrenia, and it was being administered in doses far beyond the 10 to 20 milligrams you
need as a vitamin. By serendipity, it was discovered that patients treated with niacin had very low cholesterol levels. It
was later discovered that niacin raises HDL and lowers triglycerides. Niacin was what John Guyton at Duke calls the secret
weapon of the endocrinologist, something only highly skilled people would use, given its side effect profile and the need
The most familiar side effect of high doses of niacin was a flush. "If you take regular, immediate-release niacin, which you
can buy at a grocery store, you will turn beet red and start itching," explains McGovern. "Pharmaceutical companies as early
as the 1970s figured out that if you slowed the absorption and made a controlled, slow-release product, you could cut down
on the flushing. But if you did that, you created liver toxicity. For a lot of years it was recommended that nobody be treated
with controlled-release niacins."
When Jaharis was casting about for products for his new company, niacin seemed like a natural. "At that time the NIH had stated
that the only way you could treat cholesterol was diet, exercise, and niacin," he says. "I could never understand why someone
had not formulated something that would take away some of the problems related to niacin.