Merck & Co.: Exclusive Interview




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Video title: Merck & Co.: Exclusive Interview
Released on: January 01, 2008. © PharmaVentures Ltd
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In this exclusive interview, live from San Francisco, Fintan Walton talks to Barbara Yanni, Vice President and Chief Licensing Officer at Merck & Co. Although Merck is often perceived as being internally focused and has, historically at least, not been known for doing deals, the company is now fully committed to partnering. Its pipeline is strong, with seven compounds in Phase III, of which three were in-licensed during 2007. Barbara and Fintan discuss the methods that Merck uses to source new licensing opportunities, how it competes with other big pharmas and how its alliances are managed. They also look ahead to what 2008 is likely to bring to the pharma/biotech industry.
The role of partnering within Merck & Co organization and progress in the pipeline
Fintan Walton:
Welcome to PharmaVentures Business Review brought to you by PharmaTelevision the world's first on demand pharmaceutical television channel. We are here in San Francisco recording a series of interviews at the annual JP Morgan Conference. This conference was originally run by the famous Hambrecht and Quist Bank and is one of the oldest events in biotechnology. Today thousands to send from around the US but also from around the world into San Francisco to do financial deals and recently it's also become an important partnering event. I hope you'll enjoy the series of interviews we've done from some of the key companies attending this conference. Hello and welcome to PharmaVentures Business Review here in San Francisco. On this show today I have Barbara Yanni, who is Vice President and Chief Licensing Officer at Merck , welcome to the show.
Barbara Yanni:
Thank you very much Fintan Walton.
Fintan Walton:
Barbara Yanni, you are clearly one of the key people within the Merck organization who is responsible for bringing in licensing deals and performing the partnering activities at Merck , what is the role of partnering within the Merck organization?
Barbara Yanni:
Well Fintan Walton, partnering is critical to Merck it's critical to our success to our growth in the pipeline we believe firmly in having an inter goal approach to our scientific efforts such that we are looking for the best programs from both internally at Merck and also externally from potential partners whether they be biotech companies mid size pharma companies where ever we find excellent science.
Fintan Walton:
Because when for any major pharmaceutical company partner is important for those companies going forward but clearly there you require the infrastructure the culture within the organization too, do you think Merck has achieved that?
Barbara Yanni:
We definitely have and Merck was never really known very much for doing a lot of partnering although going back to the early '80's when we did our deal with Astra a small was then a small Swedish company for rights to their pipeline for US commercialization. That was a very, very large very innovative deal for its time but after that time Merck was often perceived has an internally focused company and now I firmly believe that is no longer the case, we've done over 270 deals in the last five-years across many therapeutic areas from early stage research to late stage clinical compounds so clearly I think we've demonstrated to the biotech and pharma community in general that partnering is very important to us and that we are outwardly focused company that we are open for business.
Fintan Walton:
And is Merck , does Merck see that it's making progress in terms of its pipeline as a result of these deals?
Barbara Yanni:
Well we most certainly have and recently we announced our pipeline in December of 2007 and we have I think seven compounds in Phase III and three of those compounds were licensed in 2007 alone, in-licensed from Ariad for a cancer [PharmaDeals ID = 27726] compound in Phase III, an acquisition of NovaCardia [PharmaDeals ID = 27876] which has a Congestive heart failure compound in Phase III and a license for late stage hepatitis Bvaccine from Dynavax [PharmaDeals ID = 28845].
How does Merck compete with other big pharma's?
Fintan Walton:
How does a company like Merck compete against the other pharma companies in getting to the prizes that are around there in the biotech?
Barbara Yanni:
Right, well you are absolutely right. I mean it's incredibly competitive field and one of the ways we compete is that we have a large effort in knowing what is out there and looking very hard at compounds at technologies that could be of interest to us, we evaluated over 5000 opportunities last year alone which is a pretty typical year for us. And when we see something of interest we are ready to move very, very quickly to talk to that company to go to confidentiality to start talking about commercial terms.
Fintan Walton:
Merck needs to have a fast decision making process and do you think you've achieved that?
Barbara Yanni:
Definitely we work so closely together, I am on the commercial side my groups area of expertise is doing the negotiations of the commercial terms and the structures of the licenses but we work very, very closely with our colleagues in the research labs and our colleagues in the marketing areas we have dedicated teams to the licensing effort from all of those disciplines and we are able to move quickly, we love working together, we work very well together and it's just a really been a terrific coming together over this for Merck in the last few years.
Fintan Walton:
How do you know that you are actually making the right decisions?
Barbara Yanni:
Well it's very, very interesting you know how you know that of course research is extremely risky and sometimes will fail and but that's true of the internal pipeline as well. And I think we look back and say you know did we make the right decision we keep track over the things we turned down for example and why we turned them down so that we can examine our track record and think about you know is there something we knew or should have known that would have could have changed our decision, obviously there is many things you can't know to after the fact and that's not the way to judge a program or either internally or externally what happened only if you knew or could have known some issue can you then criticize yourself and say well next time we will do a better job but for the most part we've been very happy with the decisions we've made.
Fintan Walton:
Right, I mean it goes back to this issue of culture, its back to the issue of infrastructure and management support that allows to get through that and to learn from that process?
Barbara Yanni:
Absolutely.
Methods of scouting licensing opportunities
Fintan Walton:
So one of the other key things we notice with Merck is that you are a lot more active in your you've got Grey hill based there with a group of team there as well in Europe, I even think you've been there on places like Australia and New Zealand looking around and scouting for opportunities, could you tell us about how Merck is organized from the licensing perspective?
Barbara Yanni:
Yes, in fact you've touched on the important relatively new group in Merck which either geographically based scouts. These people are all trained scientists most of them came from the Merck research labs so they really have a strong understanding of the kind of thing that Merck is looking for and they are based around the world but especially in places where there is a strong say biotech industry, so (indiscernable) we have in Europe we have a scout in India and China, Australia that you've mentioned, we have scouts in the US and these people's job is to get to know companies and to form a relationship with these companies and to keep track of what they are doing and talk to them about some programs, talk to them about Merck 's interest, talk to them about what they are working on that could be of interest to Merck when the time is right and then if they when they find things the scouts they send them into our group that does the research evaluation at Merck and that group gets in touch with the therapeutics experts at Merck to look at these opportunities and to see if we want to have more data or go into confidentiality, so the scouts are very, very important part and we've greatly expanded our scouting network.
Fintan Walton:
So if I was a biotech company based in let's say in Austria let's say in Europe and I was interested in looking to do a deal with a major pharmaceutical company what should I do?
Barbara Yanni:
Well if you know the scout in Europe or you know (indiscernable) who seems to know everyone and they can contact at the Europeans scout that's responsible for Austria, another way is to simply you know write to me perhaps or to Greg Wiederrecht who is in charge of the group that does the evaluations to Merv Turner who is in charge of all our scientific licensing area. We have a very strong database where we keep track of all the things that come in, so it actually doesn't matter that much who you contact we can get your enquiry to the right place.
How does Merck balance building relationships between known vs unknown companies?
Fintan Walton:
Okay, so coming back to this issue of competing because you know clearly you've already set up these collaborations with the number of biotech companies did you see this continued source of products for Merck coming from the existing alliances and what is the balance do you have for an organization like Merck between lets continue to build relationship with the companies we know versus the companies the companies we don't know?
Barbara Yanni:
Right, well I think we really feel we have to cover the area but sometimes you know with new companies and other companies but just this year for example we have a perfect example that something that comes from relationship building which is we've done two deals with Addex [PharmaDeals ID = 29082] [PharmaDeals ID = 29336] a small company from Switzerland and both in the neuroscience area and we've hosted a deal with them for a Parkinson's program basic research program and then it turns out they had a preclinical program in schizophrenia in the mechanism that we were very interested in and just a few months later we did a second deal with this very same company that was just announced at the very beginning of the 2008, so within this short space of time we did two deals with one company.
Fintan Walton:
Related to that so you that's the working with the existing companies then you move into the area of opportunism?
Barbara Yanni:
Right.
Fintan Walton:
You know there is the opportunistic approach now how do you get that balance right?
Barbara Yanni:
Well I think that's very interesting question, you know our strategy is set for what areas Merck is interested in so we know what mechanisms or actions we are interested in we also know what mechanisms actions we are not interested in and we actually have a published book of these things and we hand this out to potential partners, we handed out to venture capitalist so they can keep an eye out for us on their portfolio companies and lead us to a company that may be interested in a partnership or an acquisition that has one of the items that's on our list of our mechanisms of actions that we are interested in, so we really do need to have feelers out there both with respect to our current partners and with respect to new companies and there is always new companies coming along, we are also very interested in academic collaborations so we are expanding our efforts to get to know even more academics so we really have to reach out to lot of places in order to keep a abreast of the best science.
Fintan Walton:
So are you actually more interested in earlier stage deals as well I mean that clearly from you are doing with the universities perspective?
Barbara Yanni:
Right we are interested in all stages of development and obviously the university deals are much earlier although many of the universities by the same token are interested in hanging on to some of their technologies and developing themselves at least as far as perhaps a preclinical compound or to get some lead compounds which didn't use to be the case, so that's one of the reasons we are keeping in touch with the universities, but we are also interested in candidates in development such as the ones that I mentioned earlier that we've licensed in this year from Ariad and from Dynavax, we also did a deal with that company called GTX [PharmaDeals ID = 28800] in these SARM for SARM and you know that was a Phase II deal. So we really look at a lot really across the spectrum the important thing is the best science and the unmet clinical needs where is this particular mechanism and action where as this particular product going to fit in.
Alliance Management at Merck
Fintan Walton:
Sure, we talked a bit about building relationships now key to building relationship is alliance management and is alliance management a bit of a myth or is it a reality in Merck ?
Barbara Yanni:
It's certainly not a myth and I don't think it's a myth anywhere these days I think companies realize that you know signing the deal is just the first step you have to manage these relationships, it takes a long time even a three year research collaboration a lot happens in three-year scientifically so if someone isn't managing that and paying attention to that you are not gonna maximize the potential of that relationship and we are very committed to alliance management at Merck .
Fintan Walton:
But in the end you've to make tough decisions and so how do you make those tough decisions at the same time be nice and cuddly and warm up thing with your potential collaborations?
Barbara Yanni:
Well I don't think it's a question of being cuddly as much it's a question of you know making the right decisions, communicating to the partner why you are making that decision you know having it understanding. And a lot of times you know for example the scientist will have a great understanding but in you know who are directly working on it but that has to be communicated to other people involved say that the management of the biotech, so it's really well a question of communication and openness and that's what really makes a good alliance. Well we can't change what happens you know lot of things fail in science and so there isn't always going to be a great answer or a wonderful success but you know technically but you want to have that relationship kept up.
What is the criteria for Merck to do an acquisition?
Fintan Walton:
Sure, the other thing of course we talked about collaborations, talked about partnering another aspect is the rise of the acquisitions by pharmaceutical companies of biotech companies and Merck has done a number in recent times?
Barbara Yanni:
Yes we have.
Fintan Walton:
So what is the criteria for Merck to do an acquisition?
Barbara Yanni:
Well it's really interesting it's this is rather opportunistic but I can give you two examples, the first example of course being Sirna [PharmaDeals ID = 25670], so first we were talking to Sirna about a license for a particular therapeutic area and then as we got to know more and more about the technology and the intellectual property coverage that Sirna had the very senior research staff at Merck including the Dr Peter Kim who is head of the research labs realized that this could be tremendous breakthrough for therapeutic and that was very early. He became much more interested in how this would be a technology that applied across therapeutic areas. And so therefore really at that point it made sense to us to just do a deal in a narrow therapeutic area and that's when our thoughts turned to acquiring Sirna. And we have the same teams of people working on licenses and acquisitions the same scientist, the same marketing people evaluating these things and our mergers and acquisition group and licensing group are the actual deal negotiators who are all part of the same team, so it's very easy for us to switch from license mode to acquisition mode. A second example could be NovaCardia which actually didn't start as a license because it was very, very clear that the company was interested in being acquired and therefore you know we take them at their word and we're talking to them from the very beginning about an acquisition and then that made sense to us that made sense to them and their shareholders and so we went on with the acquisition mode for that.
Fintan Walton:
And do these companies tend to be merged into Merck to become Merck 's or do they still stand as independent companies?
Barbara Yanni:
Well Sirna actually is quite independent, it has a independent head of the company Rosetta inpharmatics [PharmaDeals ID = 7965] which we bought quite a while ago at this point is very much a standalone company. NovaCardia was a tiny company only had a handful of employees and so you know they are actually working on another project that people who founded NovaCardia so it's a case by case basis.
Fintan Walton:
Right, so you have your own sort of post acquisition policy integration where this going to be fully integrated or not, so it is an extension really of alliance management is that right?
Barbara Yanni:
Well in an interesting way I guess that's true, although technically it's not the alliance management people to do that but you know it really if there was a reason for the company to remain independent or to remain as a unit GlycoFi [PharmaDeals ID = 24165] another example is an independent unit of the Merck research labs in New Hampshire it has most of the original employees so indeed it's a kind of alliance management you can say.
Fintan Walton:
So I mean Barbara Yanni you've been in the industry for many years now with lot of experience, do you see the continued activities in licensing and partnering and the shape in which the industry is taking now with a mixture of both acquisitions and licensing, what do you see just as an individual working in this industry do we see our industry continuing to have this large pharma company structure with biotech companies being the true innovators being suppliers of innovations or can it ever be that pharma companies can be the true innovators again?
Barbara Yanni:
Well that's interesting because I don't think that the model that you described is quite accurate I think that indeed there are many biotech companies that are true innovators but we have true innovations at the big pharma companies too. Merck has wonderful basic research scientists much of our pipeline is created internally and comes from internal efforts, so I think it's the model I see which is today and that I would expect to continue is this model that innovation can come from either inside a big company it can come from a biotech, it can come from a mid size pharma company and wherever that innovation comes from there is a way to work together with a big pharma company especially one like Merck who really is interested in collaborating, it has excellent science and it's terrific development capabilities, terrific marketing capabilities and to take those discoveries wherever they come from and turn them into products for patients.
Future strategies on licensing and acquisitions
Fintan Walton:
Barbara Yanni, you are here at the JP Morgan conference here in San Francisco which is an amazing place as you know because there are lots of people here milling around not just at the conference centre itself but also around the different hotels, It's a great place to learn about what's going to happen in the year going forward in 2008, how do you feel about 2008 are you optimistic?
Barbara Yanni:
I am very optimistic, we see many exciting opportunities here, we are here to do all the things that we talked about earlier in our discussion or doing some scouting, doing some evaluating, talking about some terms, meeting with venture capitalists we are seeing a lot of companies. We always seem to be a continual pipeline of new licensing and acquisition opportunities and just really exciting science coming to the floor.
Fintan Walton:
So you see that translating into 2008 you see that our industry doing more of the same really and more consolidation?
Barbara Yanni:
Well it's interesting question I was talking to some bankers just today about potential consolidation and I think it's very hard to predict that because of you know there is so many different pressures. But I think that's the possibility from my standard point since I concentrate on licensing you know I certainly see more licensing in the future and we are also interested in targeted acquisitions at Merck as well so.
Fintan Walton:
Okay. Well Barbara Yanni, thanks a lot for coming along on the show and for us to learn about Merck .
Barbara Yanni:
Thank you so much Fintan Walton, it's really a pleasure.
Fintan Walton:
Okay. Thank you.
Fintan Walton
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
Barbara Yanni
Vice President and Chief Licensing Officer
Barbara Yanni is Vice President and Chief Licensing Officer of Merck & Co . After joining the company in 1985 as Domestic Tax Counsel, she now leads the Corporate Licensing group responsible for negotiating agreements to acquire compounds, programmes and new technologies. Before joining Corporate Licensing, Barbara Yanni was Executive Director of Corporate Development at Merck , where she negotiated acquisitions, divestitures and other business arrangements. She graduated from Stanford Law School and Wellesley College, and holds a Masters of Law in Taxation from New York University.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
Merck & Co
Merck & Co is a global research-driven pharmaceutical company. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs. Today, Merck has more new medicines and product candidates in its pipeline than at any other time in its history. Current research and development focuses on a range of therapeutic areas, including arthritis, diabetes, infectious disease and neurological disorders.