Big Pharma has been slow to adopt out-licensing strategies for a plethora of reasons: fear it will regret giving up something that could turn out to be a hit, the perception that out-licensed compounds are tainted, and an ingrained mentality that it could afford to develop everything worthwhile on its own.
Merck is the latest company to change its tune in the face of a resource-constrained reality however; Lilly, Pfizer and others started earlier, by far, as IN VIVO has long tracked. At Elsevier's Pharmaceutical Strategic Outlook conference Thursday morning in NY, David Nicholson, the company's new SVP and head of Worldwide Licensing and Knowledge Management, gave the largely biotech and Big Pharma audience a message loud and clear: Merck's new out-licensing department is open for business-or will be shortly. "We have set up an out-licensing group, headed by Meeta Chatterjee," and are now looking at "what we want to out-license" and "how," he said in a talk with Elsevier's Roger Longman.
"In the past, Merck didn't out-license because out-licensing was traditionally used to jettison "rubbish," but that is not the case anymore," noted Nicholson, who previously headed worldwide licensing at Schering-Plough. The company has some very attractive assets, but there is "no way Merck can afford to develop everything" in its R&D program. "Our R&D model is to generate a lot of output—more than we can deal with. So we have to make some tough choices and it poses the question: What do we do with these other assets?" And who might be potential in-licensors? Take note: Merck's not only interested in talking to biotechs and small pharma—its Big Pharma competitors could take a look too.
Details have yet to be worked out – Merck's looking at the best business models and deal structures for outlicensing and "brainstorming" ideas. And the company is generating a list of out-licensing assets.
Meanwhile, its in-licensing program is also moving forward. Now that its merger with Schering is completed, it's finalizing a list of its revamped pipeline, which it will announce in the next few weeks, and shortly after that it will "be able to talk to the world," Nicholson said.
Nicholson also spoke –albeit generally-- about Merck's partnership strategy going forward, i.e. biotechs will remain an incredibly important to Merck, because "the vast majority of new science is done outside Merck's walls," he said. "There are more opportunities outside than inside," and Merck wants to partner with all kinds of technologies, companies, and at all stages of development."
That includes externalizing discovery- a hot topic within Big Pharma at the moment, especially in light of a recent Morgan Stanley report, which argued that Big Pharma isn't doing worthwhile research and should evolve its "R&D" model to an "S&D" or search and develop model. Nicholson quarreled with the report's conclusions, but noted it did raise "interesting questions" about how much discovery research pharma should be doing internally versus externally.
Nicholson's message –a willingness to work with new kinds of partners in new ways--wasn't new for Merck – but it honed in on a trend that's been ongoing in Big Pharma for several years now, and practiced with more urgency as patent cliffs loom: In a growth constrained reality, companies need to evaluate what they can and can't afford to do internally and work with partners in new ways as they become more cost efficient and upgrade pipelines.