Merck Returns to SD, Pouring $90M Into New Schultz-Led Institute

3/15/12Follow @xconomy

The pharmaceutical giant Merck bet big once before that San Diego would be a source for innovative new drugs, and now it’s doing it again.

Whitehouse Station, NJ-based Merck (NYSE: MRK) is announcing today that it is putting $90 million over the next seven years into a new nonprofit biomedical research institute in San Diego called the California Institute for Biomedical Research (Calibr). The new institute will be led by Peter Schultz, the prominent chemist and biotech entrepreneur at The Scripps Research Institute, who previously ran The Genomics Institute of the Novartis Research Foundation.

While the new institute will not be a part of Merck’s R&D operation, Merck will be keeping a close eye on it as R&D chief Peter Kim will be on the Calibr scientific advisory board. And Merck certainly hopes the San Diego research team will provide some good candidates for its pipeline, because it says it will get options to exclusively license any protein or small-molecule drug candidates that emerge from Calibr and its collaborators. The new institute marks a new vote of confidence in San Diego’s biotech community, after Merck shut down its San Diego R&D center in 2005.

This time, the driving concept of the institute is different than just being a branch of Merck’s $8.5 billion global R&D enterprise. By remaining at arm’s length, the company can put in some of its own money, and allow researchers to amplify it with other grant support from academic collaborators. Once a project has reached “preclinical proof of concept,” Merck then has the option to swoop in to in-license drug candidates for further development.

Peter Schultz

“Calibr will provide an important venue where basic research and drug discovery scientists may leverage each others’ strengths in the fight against disease,” said Kim, the president of Merck Research Laboratories, in a company statement.

The new institute will start off with 20-40 employees in the beginning, and is expected to grow to about 150 over time, says Merck spokesman Ian McConnell. While Merck is providing critical support for the nonprofit, the institute will be free to go after grant support from government agencies and other organizations for any projects that Merck chooses not to license. Merck didn’t say in today’s statement what kinds of drugs it hopes to discover there, but did say the nonprofit “will be equipped with the latest high through-put screening and imaging, medicinal and protein chemistry and preclinical sciences capabilities.”

Merck stressed in today’s statement that Calibr will be an independent institution led by its own board of directors. John Diekman, the founder and managing partner of 5AM Ventures, and the former CEO of Santa Clara, CA-based Affymetrix (NASDAQ: AFFX) has been named the chairman of the Calibr board.

“There are not many scientists around as productive as Pete (Schultz) and we need to support efforts like this when big pharma and big biotech are underwriting less and less discovery research,” Diekman says. “I also admire the commitment of Merck to fund much of these efforts and hope they benefit from this commitment.”

On what’s really novel with the new institute, Diekman says, “Pete has the special ability to bridge innovative research with the translational aspects of drug discovery. For a long time he has talked about the widening gap between basic biomedical research and pharmaceutical drug development and here is a chance to bridge that gap, especially for therapeutics for unmet needs. Pete blends extraordinary discovery skills with impatience and practicality. The basic discoveries will be pushed rapidly toward translational development and those that don’t meet the criteria will get dropped quickly. No messing around here; results will be important.”

Schultz is one of the best-known chemists in the world, and at least once has been considered in the past as a candidate for a Nobel Prize, according to a 2005 profile in the San Diego Union-Tribune. He left UC Berkeley to come to San Diego in 1999, when he joined the faculty at Scripps and founded the Genomics Institute of the Novartis Research Foundation (GNF), which he left in 2010. Schultz has also been a prolific entrepreneur, having co-founded eight biotech companies. The list includes Affymax Research Institute, Syrrx, Kalypsys, Phenomix, Symyx Therapeutics, Ilypsa, Wildcat Technologies, and Ambrx.

One venture capitalist not involved in the new institute, Bob Nelsen of Arch Venture Partners, said he has high hopes. “It’s a great group of scientists and directors with a deep understanding of innovation, and I am sure cool things will come out of it,” Nelsen says. “Like all industry colllaborations, it will be tricky to tackle the exclusivity issues, but it’s probably manageable.”

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