The New Merck




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Video title: The New Merck
Released on: July 07, 2009. © PharmaVentures Ltd
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In recent years, Merck & Co.'s corporate strategy has included a significant amount of licensing and partnering in order to externalise their pipeline and ensure that the company gets access to the best innovations from around the globe. Mervyn Turner, Chief Strategy Officer and Senior Vice President, Worldwide Licensing and External Research talks to Fintan Walton about the reasons behind the recent acquisition of Schering-Plough, and how the research areas and product pipelines of the two companies complement each other. However, he stresses that the new Merck will continue to look externally for opportunities as a company's pipeline can never be too strong.
The key effect of licensing and partnering strategy by Merck & Co. Inc..
Fintan Walton:
Hello and welcome, we are here at Bio 2009 at the Annual Convention here in Atlanta. We are here to record a series of programs with leading pharmaceutical and biotechnology companies to talk about the both their vision and what they are doing to build their organizations in tough economic times. Hello and welcome to PharmaVentures business review here at Bio in Atlanta. On this show I have Mervyn Turnerwho is Chief Strategy Officer & Senior Vice President of Worldwide Licensing & External Research. Welcome to the show.
Mervyn J. Turner:
My pleasure, thank you.
Fintan Walton:
Mervynyou have presided over a period at Merckwhere Merckhas done significant amount of licensing and partnering. What has been the key effect of that strategy?
Mervyn J. Turner:
The key effect has been to really externalize a large part of our pipeline that is to say about 40% to 50% of our Phase III programs now are originated from discoveries made outside of Merck and we are trying to build on that so that 25% of our early pipeline comes from external relationships.
Fintan Walton:
So has Merckas an organization changed in your perspective over the " over the last say five-years?
Mervyn J. Turner:
Oh yes I think so. I think we've changed the organization very much from being inward looking to outward facing. I think it's been a great cultural transformation.
Fintan Walton:
And where would you see the key advance that happened in that period? And what were the key deals for Merckand how do those " what sort of impact was -- have they had on Merck?
Mervyn J. Turner:
You know I don't know that I would highlight any one deal as I say we have so many compounds around in our pipeline that came from externally. The key change was getting to see " getting scientist to see the value of those external relationships and to have them see the world as there Oyster [ph] to accept the idea that innovation knows no boundaries the very empowering message for scientists and it " it had a big effect on the labs.
Fintan Walton:
Right, and in part of that strategy as well as doing licensing deals, setting up partnerships, co development arrangements and so forth, the type of deals that have now more or less become very common, you've also made acquisitions of specific technology companies, has that been a success too?
Mervyn J. Turner:
I think so, we " we of course acquired Rosetta [PharmaDeals ID = 7965] a number of years ago that become a great platform for us, so another couple of years ago to get us into the siRNA [PharmaDeals ID = 25670] field really a major bet for us and GlycoFi [PharmaDeals ID = 24165] to give us a platform in biologics which is really the spring board for our efforts in follow on biologics and what we call Merck bio ventures. So those platform deals have been very important for us.
Fintan Walton:
Right, so is that what the pharmaceutical companies have to do these days, they really need to continually look at where opportunities exist, really relying on " on other smaller technology companies coming out come up with the innovation and then use to spot them and acquire them?
Mervyn J. Turner:
I think that's a key element of the strategy as I like to say ideas know no boundaries you really have to be prepared to look anywhere in the world for a good idea and have the mindset that that you are open to innovation and expect that we, we really although we are a huge company we only conduct a small percentage of the world's bio medical research so we are rely on that eco system that's out there to find those great opportunities.
Partnering strategies of Merck & Co. Inc.
Fintan Walton:
Right, now clearly in 2009 there is a different financial climate, economic climate and particularly pharmaceutical small biotech companies and number of biotech companies not just only in the US but around the world are finding it more difficult from a Merck perspective is that an opportunity or is it a hindrance in the sense that you got probably too many companies now wishing to do deals with Merck?
Mervyn J. Turner:
I don't think it's a hindrance, I like to say that we are driven by the quality of the opportunity and whatever the price is the quality is what really drives our interest. And at all times actually there has been a shortage of quality and that hasn't changed very much. So in a sense of course we do have people coming to us all the time with opportunity the standards for us for a deal have not changed though.
Fintan Walton:
Right, does that mean that you still would prefer a product that's got proof of concept? Or are you "are you prepared to change the way you do deals whereby may be you will take options for an example on a product?
Mervyn J. Turner:
You know most of our deals have always been pre proof of concept and we like to think that what we have a terrific scientific environment at Merck we like to think that Merckscientists perhaps are better than their peers that other companies at spotting the value of early opportunity before proof of concept, gets very expensive of course once someone has proof of concept, colleague of my like to say that POC stands for Pull Out the Checkbook and so obviously we would rather pay a little less if we think that the quality of the science is there and we will take the risk on the bet [ph].
Fintan Walton:
Right, so you are prepared to take higher risks?
Mervyn J. Turner:
Yes.
Fintan Walton:
On the basis that you'll access presumably to a what a broader range "
Mervyn J. Turner:
That's right.
Fintan Walton:
-- of opportunities. So cheap deals are not a driver?
Mervyn J. Turner:
No, quality of the opportunity is the driver. It has to be.
Key elements in the recent acquisition of Schering-Plough
Fintan Walton:
Right, the other thing of course is you've taken on the role of as Chief Strategy Officer for Merck and you report straight into the CEO (indiscernable), so does that " that role is literally corporate wide it's not just specifically to do with research and development?
Mervyn J. Turner:
That's correct, yes.
Fintan Walton:
So it's the overall corporate strategy going forward?
Mervyn J. Turner:
Yes., yes.
Fintan Walton:
Clearly, obviously a key part of that strategy has been implemented I presume which is the acquisition of Schering-Plough [PharmaDeals ID = 32697].
Mervyn J. Turner:
Yes.
Fintan Walton:
So why do that come about? How do that come about and what impact does that have on the organization of Merck?
Mervyn J. Turner:
It came about because T- Clark was " was anxious that we do an acquisition. He felt it was necessary for to sustain the pipeline that we were really looking for and we saw when we looked hard at Schering-Plough and that there was an excellent complementarity both between the research programs that they had undertaken and the products that they had on the market. So it was a " it was a very nice fit and we were very pleased that we were able to get into a conversation with Schering-Plough and make that transaction happen.
Fintan Walton:
So where does that shift the focus, does it shift the focus for Merck I mean you said there is they are complimentary programs in a sense it brings you into areas that you weren't in before reinforces some of the existing ones?
Mervyn J. Turner:
Yes, yes.
Fintan Walton:
So where, how would you describe the net effect of the acquisition of Schering-Plough?
Mervyn J. Turner:
It's in that complementarity for our marketing groups that they have more products in the bag for those visits that they make to a clinician, now we can talk to a gynecologist not just about Gardasil but about the Organon [PharmaDeals ID = 20572] women's health products when we talk to a respiratory clinician we can talk about not just singular but -- but the clarity and the other Schering-Plough products and now we have a tremendously strong cardiovascular pipeline for example really accelerated our ambitions in the anti viral area a lot of great complementarities. Going forward we " we feel that this deal will allow us still to do the kind of business development and licensing transactions at that we really specialized in over the last half dozen years.
Fintan Walton:
Right.
Mervyn J. Turner:
Or more and that's " that's a key element of this transaction, you can't stop looking externally.
Fintan Walton:
Okay, well that's obviously key point because often when companies go in through a post acquisition they go into integration mode, they can slow down on some other- other activity particularly external activities?
Mervyn J. Turner:
Yeah.
Fintan Walton:
So are we going to expect to see a change in the way Merckis going to do deals over the next months as the integration takes place?
Mervyn J. Turner:
Well we've had a tremendously busy first half of this year we're really thrilled with where we -where we've landed on the licensing front over the last six months. We still continue to see opportunity out there in the same time of course we do have some digestion to undertake to really understand what these combined pipelines mean for us and think about where the gaps reside and therefore where the external opportunities is. But the real bottom line is that once this deal is complete it will do nothing but enhance our appetite for external discoveries. Pipeline is never too strong.
Fintan Walton:
Right and so has there been any effect in the race in which you are doing deals? is there a slow down as all other part?
Mervyn J. Turner:
Hasn't been so far.
Fintan Walton:
Right.
Mervyn J. Turner:
It's been " it's been terrific for the first half of the "
Fintan Walton:
Right and you say that " that this is going to be an great opportunity to do even more deals and going forward?
Mervyn J. Turner:
Yes.
Fintan Walton:
So are you going to change the way in which you are doing deals? are you going to change the organizational structure of doing deals within the new Merck as like you could describe it?
Mervyn J. Turner:
No. No plans to do that currently of course we are still thinking through over all organizational models for the combined entity but we think that we've got a model that works really well for us between the research labs and corporate licensing and business development that's a " it's a terrific partnership. We all have a lot of fun in it and I would want to disrupt that as a little as possible I must say.
Merck & Co. Inc.' priorities in future deals
Fintan Walton:
Right and the other thing obviously when two organizations merge there is an opportunity to possibly divest parts of the business but also potentially spin out some of the products or probably some of the " particularly the research and development lines. Is Merck likely to, to start looking more at externalizing some of the, let's say the " the projects that are probably not core to its future strategy? is that likely to take place as a way in which you do further deals?
Mervyn J. Turner:
Yeah. I would say it's a second order issue for us right now so the first order issue again that's really understand the pipeline where come we enhance the value of the existing pipeline products perhaps there are new opportunities which neither Merck nor Schering-Plough has really considered and those have to be our first order priorities now when that's all done we can ask ourselves well at the " at the second order does this provide us opportunity as you say to monetize some assets perhaps in favor of other ones we will certainly look hard at that but that won't happen until after well after the deal is complete.
Fintan Walton:
Okay and going back to the 2009 financial climate or economic climate particularly the funding of biotech companies from a Merck perspective does the current climate and the condition of some of the biotech companies does that concern you? does that mean that you'll say well may be in the future we will not get access to some great technologies because these companies are now struggling, they are making probably the wrong decisions in terms of, of backing certain products when they should have you know continued the backing because they still have the money.
Mervyn J. Turner:
Yes.
Fintan Walton:
So are you planning for that and do you see a concern for that?
Mervyn J. Turner:
I'm concerned about that. I think it is a worry. I always refer to our business as an Eco system and we depend on the thriving biotech sectors very, very important for us. That was some of the thinking behind the consortium approach we started with PureTech and the Enlight [PharmaDeals ID = 30768] fund where we now have a number of big pharma partners in venture fund looking for our technology platforms precompetitive for us the way we see it. And it's also some of thinking behind the creation of what we call external basic research at Merck which is all about making partnerships earlier and trying to find the biotech companies with whom we can construct non-dilutive financing deals for them which give us access to technology earlier in a difficult financial environment.
The change in biotech model: from Merck & Co. Inc.'s perspective.
Fintan Walton:
Some people say that the biotech model may not be completely broken but it has changed and will continue to change. From a Merck perspective do you see that and would you agree with that?
Mervyn J. Turner:
I'm sure it will. I think our whole industry the pharma sector will undoubtedly go through a massive changes over the next 5 to 10-years, with the patent cliffs coming, the regulatory environment, the pair [ph] environment and healthcare reimbursement this eco system is going to go through some " some wrenching changes and we will all have to adapt big pharma, biotech, venture will all gonna have to find a different ways of working together, I believe.
Fintan Walton:
And the future for companies like Merck not just Merck itself but other similar large pharmaceutical companies are we likely to see a change in the productivity that these companies can do? I mean clearly there are the regulatory issues, the FDA is a tough organization to get products through these days but or pharmaceutical companies and the affiliated companies like biotech " biotech companies doing enough to change this? to change the way in which we can ultimately be more in the end more productive in our ability to get drugs into the market?
Mervyn J. Turner:
Yeah increased productivity is a key for this industry it's something we've been talking about for many, many years no one has found the --- at the Holy Grail there of increased productivity and I think the standards for bring new products into the marketplace are getting higher-and-higher. The way I think about it is we have to think more broadly about what we mean by innovation, find ways to innovate beyond the discovery of new molecular entity into different innovations all across the value chain to make sure that we capture all the possible value for new products but also I think about different ways to " to improve outcomes for patients, physicians and " and providers across the whole sector. That I think it's going to be a real challenge for us that's certainly were I'm devoting a lot of my time.
Fintan Walton:
Well we wish you luck with that Mervyn. Thank you very much indeed for coming on the show. Thank you very much.
Mervyn J. Turner:
It's my pleasure. Thank you very much.
Mervyn Turner
Chief Strategy Officer & Senior VP Worldwide Licensing & External Research
Dr. Mervyn J. Turner is chief strategy officer for Merck & Co. Inc. and senior vice president, Worldwide Licensing and External Research, for Merck Research Laboratories. Since joining Merck in 1985, Dr. Turner has held many positions of increasing responsibility. Through his multiple and diverse experiences in the Merck Research Laboratories he has acquired a broad perspective on the issues surrounding drug discovery and development. Most recently (November 2008), Dr. Turner was appointed chief strategy officer for the Company. In this role, he reports to Richard T. Clark, chief executive officer, and has primary responsibility for partnering with Merck 's Executive Committee and leading the formulation and execution of Merck's long term strategic plan. His role focuses on ensuring alignment of enterprise strategy with the business plans of Franchises, Divisions, and Functions. In August 1999, Dr. Turner was appointed senior vice president, Merck Frosst Centre for Therapeutic Research in Montreal, Canada. Dr. Turner returned from his assignment in Montreal in October 2002 to take up his position as senior vice president, Worldwide Licensing and External Research. In this role, he is responsible for the oversight of all of Merck's licensing activities, and for the management of academic relations. During 2004 through 2006 there was a sizeable increase in deal activity for Merck, with more than 140 transactions completed. Merck has also been active in mergers and acquisitions, with Aton, Abmaxis, GlycoFi, and Sirna all acquired to build areas of key strategic importance. Dr. Turnersees all this activity as a logical product of a cultural shift within Merck toward a more outward-facing organization. Dr. Turner is the author of more than 80 articles in peer reviewed journals. He has served on the editorial board of a number of journals, and since 1998 has been a member of Health Care Ventures Scientific Advisory Board.
Merck & Co., Inc.
Merck & Co. Inc. ,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.