Merck Shutdown of Rosetta is Seattle’s Loss, Boston’s Gain As Company Tries to Lure Key Researchers East

10/24/08Follow @xconomy

Merck is saying goodbye to Seattle, and it’s really trying to entice its people to say hello to Beantown. Following up on Wednesday’s announcement that the Pharma giant is shutting down its Rosetta Inpharmatics research facility here in Seattle, yesterday I got the scoop on what’s happening from Douglas Bassett, Merck’s executive director of molecular profiling, and the head of the Merck Seattle site.

First off, Bassett says that Merck is trying to lure something like 100 of the 300 Rosetta employees in Seattle to move to a consolidated research center in Boston, although the number of offers isn’t final. The company wants to retain what it calls the “molecular profiling” skills of the Rosetta team, he says. Merck wants those people to stick around to help analyze human genetics in a way that helps the company determine which patients are likely to benefit from a drug and which aren’t, and which drug candidates ought to be pushed forward or scrapped.

Seattle ultimately got the axe because it didn’t have the full sweep of chemistry, animal testing, and clinical research capabilities that Merck already has at a cancer research center in Boston, Bassett says. The Rosetta group’s molecular profiling will help enhance the work going on in Boston, he says. It had better. Merck has gotten itself in this cost-cutting mode partly because it hasn’t been able to improve upon the industry batting average, which says that only 1-in-10 drugs that enter clinical trials ever turns into a marketed product. Merck bought Rosetta for more than $620 million in July 2001, but despite Wednesday’s new, Bassett makes it sound like the company considers it money well-spent.

“Merck is still extremely excited about the opportunities with molecular profiling and the capability that Rosetta has built up over the years,” says Bassett, an 11-year veteran of the company.

Seattle employees will have more than a year or “well into 2009″ to complete the transition to Boston, to make it easier to manage moving logistics for families with kids in school, for instance, Bassett says. Employees will get severance payments if they aren’t offered a transfer, or if they turn down a transfer to Boston, Bassett says. The Rosetta Biosoftware unit, which operated as a subsidiary that sold software for protein analysis, has about 60 employees, and may still remain in Seattle, although it’s unknown if they will keep a subleased portion of their current home in the South Lake Union neighborhood, he says.

The Merck employees in Seattle first heard the news in an all-hands-on-deck meeting on Tuesday night, before the fateful Wednesday press release. The meeting was led by Rosetta’s key founder, Stephen Friend, now a senior vice president at Merck headquarters. The assembly with Friend, a revered figure among employees, was “emotional,” Bassett says. Friend tried to cheer the team up by pointing out they “built some amazing capabilities” and that the work will live on at a center of research excellence in Boston.

Bassett declined to answer how employees responded to this. He said he couldn’t yet say what Merck plans to do with its lease on its 133,000-square-foot property in South Lake Union, although Vulcan real estate head Ada Healey told me on Wednesday that a negotiated buyout or sublease are possibilities.

All of this seemed intended to soften the blow to Rosetta employees, but I also had to ask how this is going to affect the larger community. Merck, after all, brought an important amount of stability and credibility to Seattle biotech when it bought Rosetta in 2001, and invested in the South Lake Union property a year later. In the volatile business of biotech, pharmaceutical companies that have diversified product lines can usually weather tough economic times, and provide steady paychecks for scientists.

“It’s certainly a blow to the Seattle-based biotech community,” Bassett said. “But Merck as an organization has collaborations with individual researchers and those will continue.”

It sounds like small consolation for Rosetta employees with roots in the local community. Caroline Lappetito, a Merck spokeswoman based in North Wales, PA, tried to put on a happier face by pointing out the virtues of life as a scientist in Beantown. “If you’re looking for a rich, intellectually stimulating environment, this is a hotbed,” she says. That’s certainly true, but this move by Merck builds up one hotbed in Boston, while subtracting from this one in the Northwest.

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  • Arterio

    Just a FYI:
    Doug is not the head of the Seattle site.
    Stephen Friend was not at the initial announcement on Tuesday evening.

  • Mark

    Rosetta Inpharmatics should never have moved from Bothell to Seattle.