A sick CEO's full disclosureOctober 7, 2010: 3:00 AM ET
When Hugh Martin learned he had cancer, he did the unimaginable. He revealed everything.
Everyone at Pacific Biosciences knew something was up when CEO Hugh Martin called for an all-hands meeting on a Thursday. The company always held its big meetings on Friday, and it was rare that the staff didn't know the agenda in advance. So it was with some anticipation that all 300 employees of the fast-growing medical technology company squeezed into an auditorium at PacBio's offices on this day in January.
Martin, 56, could guess what the room was buzzing about. In Silicon Valley (PacBio is based in Menlo Park, Calif.) an unscheduled all-employee meeting usually means one thing: a merger announcement. "I know what you are all thinking," Martin told the crowd, with a dramatic pause. "We're getting bought. But that is not it. What I want to tell you is that I have a form of cancer called multiple myeloma, and before I continue, I want you to put down your iPhones and your BlackBerrys."
Then, in exquisite detail, Martin described his disease, how it was discovered, and what the future probably held for him and the company he was leading. "Don't grab for your wallets yet," he joked. "All that the investors care about is that I have at least five years left so they can get their return, and I can guarantee you I am not dying in five years." Employees were stunned, both by the shocking news and by their boss's candor.
When a CEO becomes seriously ill, a common impulse is to keep it a secret as long as possible without running afoul of public-disclosure laws. In the highest-profile recent instance of CEO illness -- Steve Jobs and what he called a hormonal imbalance -- the public and investors were kept guessing for months what Jobs' mysterious weight loss meant and why he was avoiding appearances.
Jobs' liver transplant in April 2009 was made public initially by the media -- not Apple. Keeping investors in the dark did not sit well with many people, including Apple board member Jerry York. According to an interview in the Wall Street Journal before his death this March, York said he was "disgusted" by the way Apple concealed the seriousness of Jobs' illness, and felt that it should have been disclosed much earlier. York confessed that he wished he had resigned from the Apple board over the matter, the Journal reported. An Apple (AAPL) spokesman declined to comment, adding that the company stands by the disclosures and statements it has made regarding Jobs' health.
Because Pacific Biosciences is a private company (it develops tools for gene sequencing), Martin is under almost no obligation to reveal his health troubles to anyone except his board. Yet he has disclosed virtually everything to investors, employees, and partners -- not in some frantic rush, but in a measured approach that has not only benefited Martin's personal health but also kept PacBio on the business trajectory the 56-year-old Martin and his team have set for it.
Keeping his cancer in check
For more than a decade Martin knew there was a chance he could develop multiple myeloma, a blood cancer that, left unchecked, first destroys the bones and then everything else. A biological marker was detected in Martin's blood, and if the levels of that marker spiked, there was a good chance he would develop the cancer. So every year Martin would get his blood checked, fearing the 1% to 2% chance that the marker had spiked.
It never did, and Martin slipped into a routine that included juggling long hours at the office, raising three teenage boys, racing cars, skiing, and cycling. Handsome, whip-smart, and funny, with several successful companies he either founded or led under his belt and a stint as CEO coach for storied venture capital firm Kleiner Perkins Caufield & Byers, Martin was -- and is -- the archetype of a star Silicon Valley executive.
Then, in the summer of 2009, his back gave out, and his world came crashing down.
PacBio was in the midst of fund-raising, and Martin's back would not stop hurting. On the road away from PacBio's headquarters in late August, Martin popped dozens of Advil to get him through the day as he jetted from London to New York and back to California, talking to potential investors. He scheduled an appointment with an orthopedist to finally get an answer about his back.
"That's when all hell broke loose," Martin says. "My orthopedist came in with the MRI and told me that essentially my T9 vertebra was gone, and it looked like there were tumors on three other vertebrae." During the seven-hour surgery to replace his destroyed vertebra with a titanium cage and a subsequent bone marrow biopsy, doctors discovered that the cancer was spreading to his pelvis, ribs, and sternum. The multiple myeloma Martin had dodged for 12 years had finally and ferociously shown itself.
When Martin first learned he had a chance of developing multiple myeloma in the late '90s, diagnosis of the cancer was like getting a 12-month death sentence. In the face of uncertainty, he did what CEOs do: He prioritized. Martin took care of stabilizing his back first. Then, as he lay in bed recovering from the back surgery in early September 2009, he began to plan his treatment, and how he should manage his disease as the CEO of a fast-growing startup.
The first person on the business front Martin contacted was PacBio's lawyer, Silicon Valley guru Larry Sonsini. Sonsini has counseled other tech CEOs through cancer, including Echelon's Kenneth Oshman (he continues to be counsel to Jobs and Apple, though he says he did not advise Jobs during the CEO's most recent illness). Sonsini's advice to Martin was clear: Be as public as you can as quickly as you can. "If you are a high-profile CEO, it is better to get out in front of these things, to get the information out, because it will leak out," Sonsini says. "You really want to show that you are in control of the information."
If Martin were to go public, Sonsini was adamant that Martin had to be able to answer four questions before sharing his news with the world: What is the problem (cancer)? What kind? What's the prognosis? How is the company going to handle any CEO absences? Martin didn't know the answers to the last two questions, but resolving those issues quickly became the next items on his priority list.
He quickly met with a team of doctors at Stanford Hospital and drew on the expertise of the nonprofit Multiple Myeloma Research Foundation. What he found out was that two drugs developed in the past decade, in combination with a steroid, had good success in treating multiple myeloma in some patients. Myeloma was no longer an automatic death sentence. He started prepping himself for the drug treatment. Two weeks after talking to Sonsini, Martin called PacBio board member and friend Brook Byers, a partner at Kleiner Perkins.
A plan of action
Byers was on a trip in New York when he got the call from Martin. At the time, the PacBio board knew Martin had had back surgery and was recovering. Martin told Byers he had cancer. "My first response was, 'Tell me everything -- how it was diagnosed, how much do you know about the disease,' all the questions geeky geeks like me ask," Byers says. "Then I asked, 'What can I do to help? I know a lot of people.'"
Byers then asked Martin to take out a sheet of paper and draw two lines to form three columns. The first column was health. The second was family and friends. The third was Pacific Biosciences. Byers and Martin went through the first two columns, listing the things that needed to be done to take care of Martin's disease and those around him. Then they tackled Pacific Biosciences and what needed to be done to get its gene-sequencing machine onto the market and take the company public sometime in 2010. Byers then asked Martin what things he could honestly offload in the PacBio column? Byers was clear on where Martin needed to focus first: his health and the people around him.
"And then I told him, 'I apologize, but I need to put on my director's hat,' " Byers says. "PacBio has a lot of employees, and they have families. It has raised a lot of investor capital ($370 million to date), and we've got to think about them." Then Byers told Martin that the board was going to have to meet without him to come up with a final plan of action for the Pacific Biosciences.
As the PacBio board saw it, they had three options. They could bump Martin from the CEO spot and leave him in place as chairman. They could hire an active chairman and keep Martin as CEO. Or finally, they could leave Martin as both chairman and CEO and, as board members, have a plan in place to take on more of a day-to-day role in the company if Martin couldn't handle it for certain periods.
The board voted unanimously for the final option. "It felt right," says Byers, who immediately stepped up the recruitment of a CFO to remove that burden from Martin. "We divided up our roles -- operational, engineering, recruitment, and finance -- and we were on hot standby," he adds. "One of the things that helped us as a board to decide on option three is that we had a really good management team in place that were playing their positions well. We could rely on them, and Hugh could rely on them if he had to take some time off." The board's decision took care of the fourth question on Sonsini's list. All that remained was Martin's prognosis.
Back on the job at full throttle
After a painful recovery from back surgery, Martin, with his doctor's advice, began drug therapy. Following an initial and alarming onset of a high fever, Martin's system adjusted to the therapy, and the measurable amount of markers for myeloma decreased rapidly. Martin was one of the lucky ones; his genetic makeup was well suited to the drugs. By the time of the employee meeting in January, his prognosis was good. In March a bone marrow biopsy showed no evidence of myeloma. Martin was in remission.
Through all the life-changing news, the surgery, the treatments, and the pain, Martin was running PacBio at full tilt. The company's gene-sequencing instrument made its debut at the industry's most important trade event in February. Between sales meetings with prospective customers and hosting the most rollicking parties, Martin was laid out flat on a bed in a back room resting up for the next event. The first round of paying customers started signing up in March. Martin raised another $109 million, which he closed in July. And on Aug. 16, PacBio filed to go public in a $200 million offering, almost exactly a year after Martin finally went to the doctor to find out what was wrong with his back.
In that horrific year, one question rose above all others for Martin: Why do it? Why go through the agony of cancer and still work at such a demanding job? Martin's answer is twofold. "The way I am wired, I love doing this job," he says. "I could sit at home and think about how much I want to get better, or I could keep myself busy and try to get better. I really believe that an incredible part of the healing process is your mental attitude."
The other part is the technology that PacBio has built: Martin feels an obligation to see it become a success. If it can do what Martin thinks it can -- make gene sequencing available to everyone -- then the medical world stands a better chance of finding a long-term cure not just for Martin's cancer, but all kinds of cancer and disease.
"Hugh is like a lot of patients. Once they get on top of managing what they have, they want revenge," Byers says. "By building this machine and turning it loose on the world, Hugh is going to get his revenge."