Merck & Co.: Merging With Schering-Plough and Future Plans




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Video title: Merck & Co.: Merging With Schering-Plough and Future Plans
Released on: April 01, 2010. © PharmaVentures Ltd
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In this episode of PharmaTelevision News Review, Fintan Walton talks with Pamela Demain, Executive Director, Corporate Licensing at Merck & Co. Filmed at Bio-Europe Spring 2010 in Barcelona, Spain, they discuss:

• The merger with Schering-Plough and its effect on structure

• How internal and external R&D is balanced at Merck

• The new out-licensing group

• Guidelines for out-licensing

• Merck's policy on purchasing biotechs

• How under-funding in biotechs could affect Merck's pipeline

• Option-based deals

• Relationships with Venture Capitalists

• Potential future deals

The merger with Schering Plough and its effect on structure.
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here in Barcelona at BioEurope. On this show I have Pamela Demain, who is Executive Director, Corporate Licensing at Merck , welcome to the show.
Pamela Demain:
Thank you.
Fintan Walton:
Pamela Demain, Merck has been in the news in 2009 for one very big reason it acquired Schering Plough or merged with Schering Plough [PharmaDeals ID = 32697] and that must have had a significant effect on the corporation while so you wouldn't have done it, had to have some sort of repercussion particularly in an organizational point of view did that change the way licensing and the structure of licensing within Merck , did that change?
Pamela Demain:
The good news is that it hasn't changed which makes us very happy because we think we have a great licensing structure and process that we've put in place over the past 10-years. And it works very well probably one of the most efficient in the industry. We are getting more resources so if it has changed it's changed in a good way in that departments are expanding so we have more resources new more resources in all area of the licensing process and we are now financially stronger so that we can do more deals of strategic importance.
Fintan Walton:
So that the team, the team is the same there is some there is one change I think Mervyn Turner?
Pamela Demain:
Yes at the top Mervyn Turner is no longer the Head of Licensing as he was for many years, he has moved on he is still the company's Chief Strategy Officer plus he is working on the emerging markets strategy for the company. And you know we have a new head Dr David Nicholson, who was the head of R&D at Organon and then was the Head of Project Management at Schering Plough . He seems like a great guy, lots of experience and he is pretty well known in Europe as well.
Fintan Walton:
So what's his specific role at Merck ?
Pamela Demain:
He is the Senior Vice President of Licensing and External Research.
How internal and external R&D is balanced at Merck .
Fintan Walton:
Right, okay. So obviously the drive at Merck is still to look at external research and development, one of the things that's happened in an observation in amongst the large pharmaceutical companies they tend to reduce the amount of research and development that's going on, we are actually seeing people being laid off and so forth obviously with the merger there are going to be staff cuts and that happened in the case of a merger with Schering Plough , but how is it affected the activities in terms of externalization of research and development has that become even more important now to an organization like Merck as it shifts possibly more of its research and development away from internal to an external focus?
Pamela Demain:
Well Merck internal research has always been equally important to bringing things in from the outside. So we have excellent basic research scientist that have discovered and developed many important innovative new medicines and that will continue. They are, their job however is to bring have the best internal programs at Merck as well as knowing what's going on in their field on the outside so they can bring in other programs that complement what they are doing inside, so I think we are going to maintain that balance of very good internal innovative research complimented by our external research.
The new out-licensing group.
Fintan Walton:
Right. Now clearly the other thing that all pharma companies have to do is they have to make sure that their you know keeping the pipeline strong obviously that's one of the goals it has to achieve, with the merger with Schering Plough and there has been a new activity that's coming to Merck as I understand and that's to out license some of it's programs both from within Merck itself and within Schering Plough , could you tell us little bit about that and how that fits in with the rest of the structure?
Pamela Demain:
Right. Well for the first time we have an out licensing group under David Nicholson. It's headed by Meeta Chatterjee who came from Schering Plough . And she has a group of four or five people because there is going to be a lot to out license. Right now we are still going through the prioritization, we've done all the clinical assets and now they are working on the preclinical and early stage assets when that is done by the end of first quarter they'll have the full list of assets that we are going to one out license. Right now anyone is interested they should feel free to contact me or contact us through our website which is www.merck.com/licensing and let us know their interest. Once we get the full list we are going to then contact people and each asset will be licensed out depending on what it is in a specific way according to that.
Guidelines for out-licensing.
Fintan Walton:
Right. And have you got any particular guidelines on that for example some of the companies that are out licensing some of their products want to retain some sort of rights or want to have a call back on the rights is that the sort of thing that you are thinking at?
Pamela Demain:
I think we are gonna be looking at various options that of course is one way to do it there is other ways and I think it's going to be a variety, again depending on what the asset is.
Fintan Walton:
Yeah, I'm sure product-by-product basis and that's good. So clearly we can expect then Merck to be pretty busy.
Pamela Demain:
Yes.
Merck's policy on purchasing biotech's.
Fintan Walton:
In the deal making activities. We can't ignore the fact that also at Merck has in the past bought companies particularly small companies bought company like GlycoFi [PharmaDeals ID = 24165] in the past where does that fit within this whole area of acquiring assets? If I am a biotech company am I, can I expect Merck to buy me?
Pamela Demain:
I think it's possible anything is possible. And what we do is we look at each opportunity and each company on a continuum from licensing to partnerships to acquisitions we do the economics and it's through the economics that we determine what we think would be the best structure sometimes that is acquisition, sometimes it's a licensing or partnership type of deal, so that we are really driven by the economics and the quality of the deal. You mentioned GlycoFi which is a great example of a technology and we have bought several".
Fintan Walton:
Sirna [PharmaDeals ID = 25670] for an example?
Pamela Demain:
Sirna, we've bought Rosetta [PharmaDeals ID = 7965] early in the decade. GlycoFi , we just bought Avecia [PharmaDeals ID = 34358] as well as Insmed [PharmaDeals ID = 32431] for biologics capabilities. But GlycoFi [PharmaDeals ID = 22875] started as a license agreement in one therapeutic area and we liked the technology so much we looked at it and said jeez we could use this throughout the all of our therapeutic areas so then it made sense to acquire rather than sticking with you know multiple license agreements for the same thing.
Fintan Walton:
Sure and then you've also got then this - you've actually got the assets".
Pamela Demain:
Yes.
How under-funding in biotech's could affect Merck's pipeline.
Fintan Walton:
Not just like taking a license and you are stopping smoking buy out. One other thing that we can't ignore that happened in 2009 was the effect on financing particularly for biotech companies and that's been you know, being a biotech company well anybody will tell you we are here at BioEurope is tough but it's being clinically tough in the last 24 or 18 months for biotech, from a company that a significant company as we just talked about going out there trying to do deals, how what was it like from your perspective is it also tough and some people out there will tell us there was never tough environment, but in terms of trying to find good deals in terms of the quality of products out there do you have a concern that you know this under funding of biotech will ultimately have an effect on pipelines like Merck 's pipeline?
Pamela Demain:
What's very interesting we've actually found that what's happened because of the difficult time the biotech's has have found themselves in over the past two-years that there is actually more assets and opportunities that they are willing to partner, where as previously they might have saved them for themselves and doing it themselves now they are open and willing to potentially partner them, so we think there has been a lot of interesting and good new opportunities to follow up on based on unfortunately these difficult circumstances, so I think you know we've been at the table for every deal that we've been interested. We stay in contact with many, many companies that's what we are doing here just to see if things have changed and now you know there is something that they really didn't want to speak to us about that now they'll speak to us about, so that's what we were finding the effect to be which is positive for us.
Fintan Walton:
And does that mean that you are tending to do more deals at an earlier stage are you because traditionally pharmaceutical companies like to get proof of concept and that was always a nice goal?
Pamela Demain:
Yes, yes.
Fintan Walton:
Are you more likely now to be doing deals that are earlier may be in preclinical about to go into the clinic has that changed as you, has that changed?
Pamela Demain:
We do deals across the (indiscernable).
Fintan Walton:
But you haven't seen a shift in the trend in that respect looking because all that (indiscernable)?
Pamela Demain:
No because some of the assets that pharma's - that biotech's were keeping were later stage. So you know it's where ever in the pipeline that they were to begin with, so I don't see any real difference versus two-years ago.
Option-based deals.
Fintan Walton:
Right, Okay one other aspect we can look at is the emergence of options.
Pamela Demain:
Yes.
Fintan Walton:
As an activity, is that something that you would have seen, is that something Merck is seeing that you can do in the last few years more option based deals?
Pamela Demain:
We have been doing more option based deals in the last couple of years. We started out with several companies in India and in those deals we were actually giving them targets to work on. I can name a couple of those, we have one with Piramal [PharmaDeals ID = 29038] for example and Orchid [PharmaDeals ID = 31435] and they are working, they are both working in infectious disease area. But we also this last year in 2009 started working with Galapagos on very early target deals and we started in one therapeutic area diabetes and obesity [PharmaDeals ID = 32125] and found that we like to working with them so much we've done two more deals one in inflammation [PharmaDeals ID = 33149] and the other in cardiovascular diseases. So, and those are all option deals, Galapagos uses a non - a structure where you just work in that therapeutic area and you know it reduces the risk for us and it reduces the risk for them.
Relationships with Venture Capitalists.
Fintan Walton:
Right. So in the model going forward, because and people often talk about what's going to happen in the future and we try and look into our crystal ball and try to gaze into that, we know that probably the traditional biotech model is moving away is not it's going, it's transforming at least, it's in a period of change, as you know the large pharmaceutical companies themselves start to emerge as biotech companies the number of start-up biotech companies which is certainly in recent times when we look at Merck doing these deals some of the pharmaceutical companies have venture funds Merck doesn't have a venture fund, but so how does it work for Merck I mean do you work closely along side some of the other venture funds?
Pamela Demain:
Yes, yes we have a very close relationship with VC's and we invest in certain existing funds that VC's have, we let them specialize in what they do best and we specialize in what we do best.
Fintan Walton:
So basically you are the LP to some of these venture funds?
Pamela Demain:
Yes. Well one of them.
Fintan Walton:
So does that how does that actually work does that, how does that help Merck ultimately?
Pamela Demain:
Well we have very close relationships with number of VC's and we are always in touch with them talking about their companies obviously they want to make sure they are doing research, their companies are doing research where that Merck would be interested on down the line, so we tend to have relationships, close relationships with these companies and give them guidance along the way so that as they are developing their assets they are doing so in a way that could be very beneficial to them and to us down the road when they are ready to do a deal.
Potential future deals.
Fintan Walton:
Right. So in the end you know Merck has traditionally you know we put aside the acquisition of Schering Plough which obviously the significant event, but in terms of keeping it's pipeline strong in licensing has been a strong activity at Merck in the last decade, so from what your, our conversation seems to say that it's more or less the same you like the formula if anything you are doing more of it and you are also gonna do even out licensing?
Pamela Demain:
Right,right.
Fintan Walton:
So, so where does that leave Merck ,I mean is Merck just going to continue to grow organically now from not now on is not going to do any more acquisitions presumably?
Pamela Demain:
I think there will be acquisitions where it makes sense.
Fintan Walton:
Right, even can be on the same scale or more?
Pamela Demain:
Yeah, yes I would say probably small targeted acquisitions. We'll continue to do licensing deals I mean even in the year of the Schering Plough merger of 2009 we did over 50 deals it was business as usual for us. We have our scientific scouts around the world 15 of them searching out new opportunities building relationships. And we've got a great evaluation team for each therapeutic area and you know there are negotiation teams it's very, very experienced and we have alliance management which has proved very successful in making sure that the deals we signed remain as fresh and as good as they are 10-years down the road as when we first sign them. So I think we're really happy with the system and the processes we've put in place. We are happy with our the results and we will continue to we'll continue to go on.
Fintan Walton:
Pamela Demain, thank you very much indeed for coming on the show.
Pamela Demain:
My pleasure. Thank you very much Fintan.
Pamela Demain
Executive Director
Pamela Demain is Executive Director, Corporate Licensing at Merck & Co., Inc. She has been at Merck & Co for twenty-five years. For twelve years, she has been responsible for negotiating transactions with companies, universities and institutions worldwide. Prior to her current position, Ms.Pamela Demain was in charge of the Business Information & Research Group in the Worldwide Human Health Marketing area of Merck & Co providing strategic decision support for new and in-line products.
Merck & Co
Merck & Co ., Inc., also known as Merck Sharp & Dohme or MSD outside the United States and Canada, is one of the largest pharmaceutical companies in the world. The headquarters of the company is located in Whitehouse Station, New Jersey, an unincorporated area in Readington Township. It was established in 1891 as the United States subsidiary of the German company now known as Merck KGaA. In common with many other German assets in the United States, Merck & Co . was confiscated in 1917 during World War I and set up as an independent company. It is currently one of the seven largest pharmaceutical companies in the world both by market capitalization and revenue. Schering Plough Schering Plough manufactures several pharmaceutical drugs, the most well-known of which are the allergy drugs Claritin and Clarinex, and through a collaboration with Merck & Co ., Vytorin, an anti-cholesterol drug.