Merck Goes Back to Basics




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Video title: Merck Goes Back to Basics
Released on: December 16, 2008. © PharmaVentures Ltd
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As VP & Head, External Scientific Affairs at Merck & Co., Greg Wiederrecht is responsible for the scientific side of the licensing process. Taking the lead in deal making in the early stages, Dr Wiederrecht looks for strong and innovative science and, with Merck's recent decision to focus on basic research, his role is vital. Here he explains the role of his department and how they work with the global scouts and the corporate licensing group to ensure that deals Merck makes are founded on solid science.
Role and functions of external scientific affairs.
Fintan Walton:
Hello and welcome to PharmaVentures business review here in Melbourne, Australia. On this show I have Greg Wiederrecht, who is Vice President of External Scientific Affairs at Merck & Co. Welcome to the show.
Greg Wiederrecht:
Thank you Fintan Walton.
Fintan Walton:
Greg Wiederrecht, your role within the Merck organization is quite clear you are Vice President of External Scientific Affairs but it belongs to that family of activities that takes place within Merck which is part of the licensing activities and also the mergers and acquisition activities, so could you help us understand where you're positioned within the organization and how that relates to other parts of the group particularly Barbara Yanni's group for an example?
Greg Wiederrecht:
Okay. Sure I can do that. The External Scientific Affairs is the front end of Merck 's licensing organization. We are located in the Merck Research Labs division of the company where as Barbara Yanni who is our Chief Licensing Officer is in the Corporate Division of the company. We lead at the initial stages of the licensing process, the initial stages of the licensing process constitute all the finding and the filtering of opportunities and we look at about 6,000 opportunities per year. We find opportunities via a number of mechanisms, one of those mechanisms are the World Wide Scouts that we put in place during the past six or seven-years. They are non-transactional, they exist solely to find opportunities, they are organized geographically and they in their regions they have to find all platform and therapeutic area opportunities which they then send in to the headquarters of External Scientific Affairs in Rahway, New Jersey. And then there is a scientific assessment process that's performed by another part of my group, some of the scientific assessment is done by the scientist in my group and some of it the more ones that look quite good are then triaged with subject matter experts in the Merck research labs. And then there is another part of the group who do some of the more modestly sized deals, so Barbara " we work seamlessly with Barbara Yanni's organization on the big biotech (indiscernable) deals.
Fintan Walton:
Right.
Greg Wiederrecht:
But there are also thousand's about three thousand in fact of the smaller deals that we do to support the big deals such as non-disclosure agreements and evaluation agreements.
Fintan Walton:
Sure.
Greg Wiederrecht:
And we also do a lot of the smaller deals that support the scientists in the Merck Research Labs such as study agreements, non-exclusive licenses to research tools et cetera.
Fintan Walton:
So just looking at the scouts and there you said they are all around the world, so you would have scouts service say for an example here in Australia looking out for good opportunities around the Asia Pacific region?
Greg Wiederrecht:
Correct, we have a dedicated scout Dr. Phil Kearney for Australia and New Zealand. We have scout in Japan, one in Korea, one in China, our scout in India just started two weeks ago. We have four scouts in Europe, three scouts throughout the United States, a scout in Canada altogether about 13 individuals.
Fintan Walton:
Right. So they go out there, they are building the relationships with the various companies, they are building relationships with the universities finding out what the opportunities are and then once those opportunities are found they are fed into the organization?
Greg Wiederrecht:
Correct.
Deal process at Merck
Fintan Walton:
So you know clearly that's quite an organization, that's quite a complex organization, so the process of triage the actual reduction in the opportunities, I mean usually if I was a biotech company and I started to talk to Merck how long would it take before I get you know some sort of response and what - how long does it typically take to get to a deal I know that's a broad question, but"
Greg Wiederrecht:
Right.
Fintan Walton:
Give us some sort of indication?
Greg Wiederrecht:
So when an opportunity comes in it is logged in a proprietary database that we have, we developed it over the past eight-years it's called the Licensing Knowledge Repository. So it is basically an electronic filing cabinet that everybody in the licensing organization can see throughout the world, all correspondence to and from any potential partner goes into that database. All documents are maintained in that database so confidential information is maintained confidentially. We can track whether an opportunity is open or closed or term sheet stage or in agreement stage and we have processes to make sure that all opportunities that come in receive a very timely response. So we have as I told you we can make decisions ourselves within my group on about half of the opportunities and then the other half we take them to subject matter experts and the most attractive opportunities are reviewed at a series of committees we have called Review and Licensing Committees and these Review and Licensing Committees are in each therapeutic area, they are composed of the preclinical and clinical managers of each franchise they meet once a month to review all of the opportunities that came in, in each franchise and they make decisions about next steps, do we want to get confidential information? Do we want to have a face-to-face meeting et cetera.
Fintan Walton:
Right. So and clearly that's a very important process it's " lot of that is just scientific assessment or scientific evaluation and then clearly it has to move into commercial terms as you said that been once they - once it gets to the consideration for the type of deal it's going to be, if it's a big deal which has puts Merck into longer-term obligations like royalties and so forth that will tend to go to Barbara Yanni's group?
Greg Wiederrecht:
Right. So we have a we are sister organizations with Barbara Yanni's group, we have a very close working relationship. Barbara see's everything that's coming down the pipe from my group and once an opportunity has passed scientific muster then there is an inflection point in the leadership of the project.
Fintan Walton:
Right.
Greg Wiederrecht:
And Barbara Yanni's group takes over, one of her transaction managers is assigned to the project and someone from my group works in close proximity to the transaction manager because there are always scientific issues to be resolved which we handle in association with them.
Fintan Walton:
Right, right. So typically if somebody was up there at the close end of negotiating a term sheet for an example then how many people normally turn up from the Merck side?
Greg Wiederrecht:
The "on a major deal the typical Merck team is one person from Barbara Yanni's group a transaction manager one person from my group to handle the scientific issues and one person from legal licensing to draft the agreement. The teams can get bigger on more complex agreements, we might have manufacturing people, manufacturing lawyers involved time-to-time.
Fintan Walton:
Right. Okay, so the other component of this clearly Merck and has really changed over the last few years since it's really gone out there to look for opportunities and so of other pharmaceutical companies and so when you are looking at this from a competitive point of view looking at the competitive landscape how would you " how do you see yourselves competing with let's say with other major pharmaceutical companies?
Greg Wiederrecht:
Let's say all pharmaceutical companies are taking steps to refine their licensing process and we've undergone a couple of consultant lead processes to make sure that we are competitive in that space and I am sure other pharmaceutical companies have also. And a lot of companies take good ideas from one another. I think Lilly lead in the alliance management space and a lot of companies have copied that model. We were an early leader in these scouts space, I suspect that we have the largest scouting organization of any pharmaceutical company but I now know that many pharmaceutical companies are emulating that model. And we are currently " we are currently looking at other processes to gain an edge in licensing, so it's something that is ongoing.
Will Merck change policy towards licensing?
Fintan Walton:
Sure. Clearly at the moment in the financial markets things are changing and some biotech companies will find it more difficult to raise funds and so forth so it gonna be a tougher market for biotech companies. Will Merck change its policy towards it's licensing as a result of the changes that are gonna occur in the biotech field?
Greg Wiederrecht:
Well we are going to change our policies with respect to licensing in a very positive way, but it has nothing to do with the current financial climate and it has been long in the planning. And we plan to do a lot more basic research collaboration type agreements than we've done historically. So this is something positive that is been in the works for about 15 months as part of our new basic research global operating strategy. And we will ultimately be sourcing 25% of all of our preclinical candidates from outside companies and we have a group " another group called External Basic Research in the Merck Research Labs that will be dedicated to making sure that our basic research collaborations are successful and we will populate the preclinical and ultimately the clinical pipeline space.
Fintan Walton:
So as long as a biotech company has good IP something that's a value to Merck there are good opportunities?
Greg Wiederrecht:
That's right we are looking for it.
Fintan Walton:
From a revenue perspective?
Greg Wiederrecht:
We are looking for innovation, that's what we are looking for.
Fintan Walton:
And on innovation, I mean it does there is clearly looking for specific drugs, you are also looking for specific technologies and platforms, how would you balance that in your search how you " is that just based on an opportunistic approach or is it have you got some very specific goals?
Greg Wiederrecht:
Well we have both specific goals and we publish those goals in our wants and needs list which can be accessed on the Merck website.
Fintan Walton:
Okay.
Greg Wiederrecht:
If you go to licensing and then you go to another tab called the wants and needs list you will see about a 30 page booklet that's divided by franchise area and by technology area. And you will see some of our specific wants and needs areas where we are working and where we love to partner. But in addition to those wants and needs we will also be opportunistic on later stage opportunities, so there are some therapeutic areas where we are not actively researching, but if there is a late stage compound that looks valuable we will be opportunistic even though it's not formerly on our wants and needs list.
Fintan Walton:
Right. So it's been as flexible within the frame work I suppose?
Greg Wiederrecht:
That's correct.
Fintan Walton:
That is the approach. So clearly again for companies like Merck it's important for those " for companies like yourselves to build relationships with other companies and so once you've entered into a collaboration with a biotech company are you more likely to go back to that company to do deals?
Greg Wiederrecht:
We have done a few deals that way, we've gone back to Addex [PharmaDeals ID = 29336] [PharmaDeals ID = 29082], a Swiss company.
Fintan Walton:
Yeah.
Greg Wiederrecht:
And a couple of CNS deals, we've had more than one deal with CSL in Australia. So I think certainly having the relationship, our previous relationship will help in any future relationship but we you know we are constantly looking at new opportunities and we build new relationships with potential new partners where we something that we value.
Acquisition strategies
Fintan Walton:
Right. And when it comes to the nature of the deals sometime these deals can lead to ultimately an acquisition of a biotech company, what's the position there from a Merck perspective? Is acquisitions a key component of how you are going to develop in the future or is just again based on, on particular needs as they come about?
Greg Wiederrecht:
There tend to be two reasons why we might go the acquisition route, one reason is when it makes the economic sense to do so rather than take a license and if the biotech company is amenable to us acquiring them we will not do any hostile takeovers or anything like that. The other reason is if the biotech company has such a core technology that we believe that it could represent a sea change in our capabilities and so we've done that a couple of times, the most recent of which was with the acquisition of Sirna [PharmaDeals ID = 25670] and siRNA company for about we acquired that for about $1.1 billion because we believe with that technology has such incredible potential that we really wanted to gather up a lot of IP and that is a kind of intellectual property that Sirna has in the siRNA space.
Fintan Walton:
Within that particular case you didn't go out to do the acquisition you were in the " as I remember you were in discussions you are looking at it and then in the end you said well we may ourselves [ph] buy the company an over simplification of probably what happened but that's a way it's likely to happen?
Greg Wiederrecht:
Yeah we don't go we didn't initial start thinking we are going to acquire this company, so you got it right.
Fintan Walton:
Right, yeah. And it's often a lot cleaner to do a deal and just take the whole company because then you don't have all this complex licensing agreement?
Greg Wiederrecht:
It can be clearer, yes it's.
Alliance management and the licensing group
Fintan Walton:
Okay. So well it brings us on to another subject which is alliance management because clearly you've already said building relationships with companies is important and that can give rise to potential other deals, but so where does alliance management fit then within that organization is it or these is that embedded within research and development itself as a separate group and how does it interact with yourselves in the licensing group?
Greg Wiederrecht:
So alliance management is not within the Merck Research Labs divisions, it's in the corporate division. And it is not responsible for executing the scientific aspects of the deal, it's responsible for making sure there is a healthy relationship with the outside party, it serves as a window to the outside party to deal with the any issues that come up in a complex arrangement. Our alliance management department starts out after the deal is executed and a very large deal they will hold a kick-off meeting in which Merck hosts and all of the individuals that are associated on both sides of the agreement, Merck and it's partner meet, we make sure that at that kick-off meeting everybody understands what the agreement is about, our scientist are there, their scientist are there we discuss the work plan, we discuss the boundaries of the agreement to make sure everybody is on the same page, everybody is introduced to one another so it's important to have that kind of function rather than just throw an agreement over the fence. So that's the first thing they do and then from that on they are responsible for maintaining the health of that relationship, they have a lot of metrics to constantly measure the health of the relationship that they have.
How does partnering work for Merck?
Fintan Walton:
Right, okay. And I suppose one aspect of that when you're looking at the metrics I mean does partnering actually work for company like Merck?
Greg Wiederrecht:
Our partnering has worked extremely well for Merck currently 65% of Merck 's revenue comes from product's that we've licensed in or products that we could not sell where not for a patent licenses there is a lot of key products that have contributed to that success historically in the Asia-Pacific region such products as PEPCID or Famotidine from Yamanouchi was a blockbuster, we've licensed intellectual property from academic institutions in Japan such as Osaka University and the Biken Institute and renew those relationships an example of going back to the same partner for our original varicellavaccine and for our new shinglesvaccine, ZOSTAVAX. I'd like to highlight the fact that we've had great success from high quality Australian science, we acquire " we have patent we licensed, we have done patent licenses with CSL [PharmaDeals ID = 16438] that we need to be able to market GARDASIL which has had to date $2.4 billion in sales it's a blockbuster vaccine and as I stated before CSL [PharmaDeals ID = 33936] is another party that we have other relationships with on the - on a asthma opportunity. And FOSAMAX was a blockbuster product that contributed to Merck 's bottom-line for many years, it came from a tiny little Italian company Gentili [PharmaDeals ID = 1334] with fewer than 20 researchers, so you don't have to be big to be innovative.
Fintan Walton:
Sure.
Greg Wiederrecht:
So I am here in Australia you know looking for innovation from companies and institutes of all sizes.
Fintan Walton:
So it sounds like partnering is good for Merck and from what you are saying you've actually going to continue to build greater collaborations?
Greg Wiederrecht:
Correct, when I first started in this job which is about 12-years ago, I've been at Merck for 19-years but joined the Licensing Department 12-years ago about 28% of our revenue came from licensed products or products that we could not sell or not for patent license it has increased year-by-year to the present 65% and as I stated we are ever more committed to doing research collaborations with the outside and who knows what the licensing part of the pie will look like in a few more years, hopefully it will go up from my perspective.
Fintan Walton:
Very good. Well Greg, is great to have you on the show and thank you very much for telling us all about Merck.
Greg Wiederrecht:
Thank you Fintan.
Greg Wiederrecht
Vice President and Head of the External Scientific Affairs
As VP & Head, External Scientific Affairs at Merck & Co, Greg Wiederrecht is responsible for the scientific side of the licensing process. Taking the lead in deal making in the early stages, Dr Wiederrecht looks for strong and innovative science and, with Merck's recent decision to focus on basic research, his role is vital. Here he explains the role of his department and how they work with the global scouts and the corporate licensing group to ensure that deals Merck makes are founded on solid science.
Merck & Co
Merck & Co. is a global research-driven pharmaceutical company that discovers, develops, manufactures and markets a range of products to improve human and animal health. Established in 1891, the Company's operations are principally managed on a products basis and comprises of two business segments: the Pharmaceutical segment and the Vaccines segment. The Pharmaceutical segment includes human health pharmaceutical products marketed either directly or through joint ventures. Merck sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions. The Vaccines segment includes human health vaccine products marketed either directly or through a joint venture. These products consist of preventative pediatric, adolescent and adult vaccines, primarily administered at physician offices.