Merck_PE - Reprint 9985050 - (Page 4) what a company gets out of a platform, because it’s harder to trace. It’s not a calculus that we’re used to performing. For us, it’s much more about nding great ideas or pursuing a mechanism we’re willing to bet on. It’s also part of the Merck philosophy to go after the best science. And if they have to get the technology platform to enable the science, like with Sirna, then we’ll do that. Do you ever review the deals Merck didn’t go forward with? We do look back and try to evaluate the deals we didn’t complete. Maybe we weren’t interested in the science, but then it turned out to be something that worked. Or maybe we couldn’t agree on terms; we thought it was too expensive. But it’s hard to learn from that. Take inhaled insulin. We looked at a lot of different companies, and it seemed to make sense. But we never did any deals. This is one of those times when you look back and ask “Were we smarter than everyone else?” And I think the answer is no. To some extent, we were still looking and thinking about it. And it just didn’t work out. You say, “All right, it turned out that this mechanism didn’t work, so we’re glad we didn’t do the deal.” But it could have gone the other way. To me, the important thing is to ask: “At the time we were looking at this deal, was there something we knew or we should have known so it could have come out better?” But if something happened that couldn’t have been predicted, we can’t give ourselves credit or beat ourselves up about it. The field of business development is growing and becoming more sophisticated. What new trends do you see developing? Competition is ferocious, and prices are de nitely going up. I especially notice the growing prices for preclinical deals. We’ve also done two deals with Indian companies that have a very interesting structure. There’s one with a Merck’s Alliances: A Decade of Growth Merck has become more externally focused over the past 10 years, and has drastically increased its focus on deals 60 50 47 40 30 20 10 0 10 1999 2000 2001 2002 2003 2004 2005 2006 2007 22 23 38 50 44 53 55 Number of Alliances Formed company called Advinus, which is in the metabolic eld, and another with Nicholas Piramal India, which is in the oncology area. They have low up-front payments; the deal is instead based on achievement of certain milestones. They’re interested in doing those kind of deals because the Indian companies have great chemistry expertise, and they’re looking for more biology and clinical expertise. Anything is possible. Look at the Big Pharma/Big Pharma deals. BristolMyers did a couple of those—one with P zer and one with AstraZeneca. At the end of the day, we just have to be totally open when thinking about development and look at all the possibilities. Are there any big changes in licensing within Merck? We’re organized around six franchises: oncology, neuroscience, infectious disease and vaccines, respiratory/in ammation, endocrine/other, and cardiovascular. We know we’re going to play in these areas, and that’s where we’re going to be looking for opportunities to complement the science we’re doing. And we have a scienti c leader and a marketing leader for each of those. One area where we really have loosened up, if you want to put it that way, is Merck’s willingness to do late-stage deals. We were much more reluctant to do these in the past. The issue with later stage deals is there’s more data—and many more opportunities for the company to say, “I wouldn’t have done it exactly this way or that way.” The more information you have, the easier it is to nd a reason not to do a deal. But now we realize we have to take these opportunities for what they are. With the increased competition for promising compounds, do smaller partners have a bigger say when it comes to development? Obviously, the later stage a compound is, the more you’re talking about codevelopment, because the licensor, to a certain extent, has already developed the drug. Take the deal we did last year with Ariad for their oncology compound going into Phase III. Ariad has done a tremendous amount of work, and they’re the experts—they know the trials and results, and they have de nite feelings about what areas to go into, because this is a mechanism that could work on several different types of cancers. If you’re talking about a basic research deal, it’s possible that the com-
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