Merck confirms diabetes retreat
diabetes and either sell or partner out its existing research and
development (R&D) activities in this field, which it no longer
feels able to compete in effectively.
The move is the result of an "extensive R&D portfolio review", that will see Merck refocus its in-house R&D efforts on therapeutic areas treated by specialist physicians, namely oncology, neurodegenerative diseases, autoimmune and inflammatory diseases, fertility, and certain areas within endocrinology. According to an English translation of an internal memo circulated to Merck's employees in France, Elmar Schnee, the board member with responsibility for the pharmaceuticals business sector, wrote that: "An in-depth analysis of various strategic options demonstrated that Merck Serono's limited number of Type II diabetes pipeline candidates does not allow us to maintain a competitive position in the market." "Today, I am writing to you to confirm our intention to seek a partner to carry on the existing R&D diabetes activities". While Schnee said that the precise scope of the intended R&D externalisation is still under review, he indicated that the firm's intention is to include the projects in clinical and pre-clinical development, as well as the Chilly-Mazarin Diabetes Research Center near Paris, in any new partnership. Also under evaluation is the possibility of the redeployment of resources and capabilities at other sites, he said. In his letter, Schnee confirmed that the Executive Board of Merck supports "this strategic option", believing "such a divestment project could constitute a favourable solution in terms of preserving competences and employment." A Merck spokesperson confirmed the authenticity of the internal memo, dated 28 November, 2007, and said that the contents had not previously been released beyond its employees in France. The spokesperson also provided further information in the form of a statement that indicated that rather than a licensing partnership, Merck is first and foremost "seeking a buyer for its research in diabetes". In the statement, Schnee announced his intention not to continue to invest in R&D in the area of diabetes, instead, leaving the field to market participants "who have reached the critical mass necessary". Merck Serono France's research in the field of diabetes, which involves "many projects... may be of interest other pharmaceutical companies", he said. "Several companies could be interested in the proposed takeover, which should integrate the 104 employees of the site of Chilly Mazarin". The firm hopes to complete any sale or licensing out of its diabetes business by the end of 2008. Merck's initial internal confirmation of the plan was delivered just a month after the firm first revealed in a shock announcement when reporting its third-quarter results that it was "considering" the move away from diabetes. Despite revenue growing in the quarter by 61 per cent to €1.7bn, mainly thanks to the company's purchase of Serono, a decision like this from Merck was not so out of left field - strategic pipeline cuts are becoming commonplace across the industry at the moment as big firms struggle to plug pipeline gaps created by loss of patents on key drugs coupled with a dearth of internally discovered drugs. In the area of diabetes, Merck has at least two drugs in its pipeline. The first is EMD387008, which is in Phase II trials in patients with Type II diabetes, and is a novel class of drug called a sodium-dependent glucose (co)transporter (SGLT) inhibitor. The second is an unnamed dipeptidyl peptidase IV (DPP IV) inhibitor, which is also in Phase II clinical trials. Looking at these two compounds, it becomes clear why the firm chose to make a retreat from the field. Its competitors, GlaxoSmithKline (GSK), Bristol-Myers Squibb (BMS), Astellas and Taisho all have rival SGLT inhibitors in Phase II development and its DPP IV inhibitor is effectively a "me too" drug, unless it can establish a signifcant benefit over the therapies in this class that Novartis and Merck & Co. both already have established in the market. However, in his internal memo, Schnee indicated that its commercialised Type II diabetes treatment, Glucophage (metformin), will remain firmly in Merck's hands, highlighting "the future importance of our marketed Glucophage franchise, which through excellent life cycle management and innovative local approaches makes a significant contribution to our business success". Although Glucophage has already come off patent, the diabetes market is large enough to ensure it has continued to be a big seller for Merck, with more than six million patients currently being prescribed a product from this drug franchise.