Wednesday, May 20, 2009

Notes from BIO: Meet Merck-Serono's Portfolio Guru

While Big Pharma grapples with its business model dilemma and R&D structures, some of its mid-sized competition is busy reaching out in an effort to boost externalization at the early stages of the research continuum.

On Tuesday afternoon we talked with Merck-Serono's executive vice president of portfolio development Vince Aurentz, also a member of the company's executive board, who is essentially tasked with making sure the company gets value from the R&D investments it makes.

It's a unique role. "I don’t think anyone else in industry has this job description," says Aurentz, who is responsible for all business development and licensing, as well as mergers and acquisitions. If that wasn't enough, all R&D project heads report into Aurentz as well.

He has been busy. Merck-Serono has been reviewing its pipeline and deciding what to prune. Of the recent agreement to end a collaboration with NovImmune, for example, Aurentz says "These compounds just didn’t fit where we were going. We’re trying to be a good partner, and sometimes that means you need to untangle relationships." Overall he says that Merck-Serono has looked at trimming about forty ongoing projects since 2007 as part of a portfolio review.

There has also been a decided shift toward earlier stage opportunities. Merck-Serono has in the past few months announced two separate corporate venture capital initiatives and is busy funding R&D within academia as well.

The timing was right to start the corporate venture funds, says Aurentz, partly because of the lack of early-stage funding for projects that aren't quite at the licensing stage. It also reflects a dearth of quality clinical assets available for in-licensing.

"Part of it is because of the lack of [later-stage] opportunities. But it is also because it doesn't make sense for us to build these capabilities out internally," in terms of research infrastructure, says Aurentz. At this point at least 60% of the company's projects are externally sourced, a figure that is only likely to grow.

In fact, he says, "we're passed the point as an industry where recreating all these research capabilities in-house makes sense. It's inefficient. Right now it’s hard not to view business development as the natural source of our product candidates."

Other companies are coming to similar conclusions. Bayer-Schering has also redoubled its academic outreach efforts, with a grant program that is part of a broader effort to drive innovation. Though in our interview with that company's BD head Michael Yeomans on Monday he noted that Bayer's shift toward accessing earlier stage assets hasn't extended to the venture capital arena. “We don't have a corporate VC fund,” says Yeomans. “But we do make investments as a limited partner in certain cases."

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