Merck, Staring at a Biotech Future, Seeks to Get in the Game With New Protein Drugs, Biosimilars

1/28/11Follow @xconomy

Biotech drugs will soon dominate the pharmaceutical industry, according to analyst estimates of what are projected to be the world’s top 10 selling therapies in 2014. Eight of these brands on this list are products of genetic engineering, while only two are traditional oral pills made through chemical synthesis.

One other thing jumps out. Not a single drug on the list compiled by Thomson Reuters is wholly owned by Merck, the company with a longstanding reputation as a bellwether of pharmaceutical industry R&D. Like its competitors, Merck has aging blockbuster drugs losing patent protection, and as it looks to the future, it has come to the same conclusion many of the others have in the past few years.

“We need to have some humility about what biologics have done,” says Merv Turner, Merck’s chief strategy officer, in an interview at the JP Morgan Healthcare Conference in San Francisco earlier this month. “Biologics are going to be important in the future, and we have to get into biologics if we are going to be the world’s leading healthcare company, which is our ambition.”

Getting serious about biotech drugs (proteins, peptides, antibodies) was one of the stated rationales for Merck’s $41 billion acquisition of Schering-Plough in 2009. Before that, Merck, partly through its $400 million acquisition of Lebanon, NH-based GlycoFi in 2006, made noise about entering the biotech market through making so-called “biosimilars”—knock-offs of hit protein drugs sold today, which can’t be copied as easily as conventional small molecules. RNA interference, another therapeutic approach Merck paid $1.1 billion for in 2006, is considered separate from the biotech drug initiative within Merck.

Turner, along with senior vice president Rich Murray, talked with me about how they see Merck piecing together its new biotech capabilities to compete in a time when small-molecule chemical drugs aren’t enough anymore. Murray, the former chief scientist at Redwood City, CA-based PDL Biopharma, joined Merck a little over a year ago to apply his biotech know-how to the more traditional pharmaceutical pipeline. Turner and Murray say they spent a lot of their time thinking about piecing together biotech drugs, alongside conventional drugs, as they’ve sorted through priorities in the company pipeline since the Schering-Plough acquisition closed in November 2009.


Merck's Merv Turner


I teased these guys right off, telling them that it was my impression that since you’re Merck and have great chemists, it’s sort of like having a hammer, which makes you think every problem is just another nail. They both laughed, but Turner acknowledged that Merck is really only now having serious, regular conversations in-house about whether to pursue interesting new biological targets with a biotech drug, or a conventional small molecule.

“Let’s just say it’s a conversation that’s now being enabled by having some of the infrastructure in place about biologics that we’ve been talking about,” Turner says.

OK, what does Merck really have in terms of biotech infrastructure? It has the GlycoFi facility in Lebanon, NH, which has expertise in modifying the intricate carbohydrate chains that hang on to the 3-D protein structures that are the essence of biotech drugs. Those carbohydrates can be finicky, and when they do unpredictable things, they sometimes alter the properties of the drug itself. So any technology that can control that in an effective and reproducible way could be valuable … Next Page »

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  • Nathan

    I’ve noticed that big pharma tends to put their R & D facilities in relatively remote places while biotech startups tend to be sited in major cities in proximity to top research universities. Take Palo Alto and Cambridge as examples. It seems the startups have been significantly more productive and as such shouldn’t these big outfits be asking themselves whether it might make financial sense to spend a little more on real estate and open R & D facilities where they can attract the best talent and have easier access to academic research? Saving money by building an R & D facility in rural america or remote suburbs is only worth it if it’s churning out product.

  • Jerry

    Not exactly. Merck has invested heavily to build an R&D facility in biotech and university-rich Boston. Their major research centers are under an hour from NYC and Philadelphia. Even Lebanon, NH is hardly remote; it’s only 2 hours from Boston.

  • Nathan

    Yes, Merk had a lab in Kendall square (essentially on MIT’s campus, down the street from Harvard and across the river BU). That is exactly the type of locations I’m advocating for but they are or already closed it down.

    An hour to 2 hours outside of the cities is not nearly as attractive as a company that’s right in front of you on the transit lines or walking distance to everything. There’s a reason companies in finance pay a premium to put their offices in the cities. Location is a big incentive to top grads.

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