Merck research official saved biotech deal with juicy pitch

After a bidding war for a stake in a promising experimental drug, Merck & Co. received a disappointing phone call. A small biotechnology firm, NGM Biopharmaceuticals Inc., had decided to grant rights to the potential diabetes and obesity treatment, known as NP201, to another major U.S. drugmaker.

Unwilling to accept no for an answer, Merck's research head, Roger Perlmutter, hopped a plane for San Francisco. Over dinner with NGM executives, he outlined a plan for a much broader alliance. It won them over.

Merck is paying closely held NGM $200 million up front, plus as much as $250 million to fund research over the next five years, the companies said Monday in a statement. Merck got a piece of NP201 and an open-ended option on any new drugs the biotech company might come up with. When NGM reaches final-stage trials, the biotech firm can choose between taking milestone and royalty payments and co-funding development and sharing as much as half of the profit and costs of the drug.

The episode provides a window into the deals drugmakers strike to secure hot new molecules to fill their pipelines. Drugmakers scout the landscape at scientific meetings, scour research publications, and, as in this case, bank on knowledge of old friends at other companies to help make their decisions.

The deal gives Merck, the second-biggest U.S. drugmaker, the right to take a stake in any drug that NGM scientists come up with - and they remain free to research anything they like. In one notable exclusion, Merck does not get rights to NGM's most-advanced drug candidate, NGM282, which is in mid-stage clinical trials for primary biliary cirrhosis, a liver disease.

"It's quite a new model for us," Perlmutter said. In essence, Merck has decided to "bet on a very talented and accomplished team, and say, 'Take your interests wherever they take you,'" he said.

NGM, based in South San Francisco, was founded in 2008 by Jin-Long Chen, a longtime colleague and friend of Perlmutter's. Chen was vice president of biology at Tularik Inc., a biotech firm developing drugs for inflammation and metabolic diseases, until it was acquired by Amgen Inc. in 2004. Through that deal, Chen became vice president of research at Amgen, working closely with Perlmutter, who was then Amgen's head of R&D. Both sides say the researchers' mutual trust was key to sealing the deal.