How To Snag A Drug R&D Partner: 3 Takeaways From Merck's Latest Deal
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
It’s been a week of high-profile acquisitions. We saw Bristol-Myers Squibb snap up Flexus Biosciences for its immunotherapy programs. Shire bought Meritage Pharma. After the Allergan flop, Valeant finally got Salix Pharma to go steady, and Ipsen shelled out 6 million euros to buy U.K.-based biotech Canbex.
But arguably more attention was placed on one $450 million collaboration than on the billions spent in this latest batch of acquisitions. Merck emerged the victor in the competitive fight for a partnership with the small, low-profile (until now) NGM Biopharmaceuticals. Together, these two will develop NGM’s portfolio of preclinical biologics for diabetes, obesity, and non-alcoholic steatohepatitis (NASH). This five-year partnership will also focus on developing NGM’s NP201, but, in an unusual twist, leaves the biotech’s promising lead project, NGM282 for biliary cirrhosis, completely in NGM’s hands.
In a tale befitting the silver screen, Merck was rejected for another “bird in the hand,” the company’s CEO, Bill Rieflin, said in an interview with The Wall Street Journal blog. Upon hearing that Merck wouldn’t be getting the partnership, Merck’s head of research, Roger Perlmutter, jumped onto a plane and flew to San Francisco to have dinner with NGM execs, where he made them the grand-gesture offer they couldn’t refuse.
In the end, it wasn’t the targeted therapeutic areas or the potential drug candidates (many of which have yet to be found) that made headlines this week. Rather, it was the structure of this partnership and the liberties Merck granted to NGM. There seem to be three big takeaways about building relationships from the way this particular partnership played out.
It’s all about who you know: According to Rieflin, NGM had positive relationships with both Merck and the other “bird in hand.” But in the end, familiarity was enough to quell any concerns over risk. Several key players in the two companies have a long history together. NGM’s CEO Rieflin and Chief Scientist, Jin-Long Chen, worked together at a biotech known as Tularik, which was acquired by Amgen back in 2004. During this acquisition of Tularik, Perlmutter was Amgen’s head of R&D. As Jeff Jonker, president of NGM, told Forbes in an interview, “There’s a tremendous amount of trust and respect going both ways that dates back more than 20 years.”
Keep it friendly: Looking back at the past year, one thing becomes clear: hostile or overly persistent deal-making doesn’t endear you to prospective partners. (Think Valeant and Allergan, or even Pfizer and AstraZeneca). As Rieflin told Bloomberg Business, after learning the deal was going to be signed with the other company, Merck immediately called back, sparking NGM’s fears that Merck might propose to take over NGM. (Given that NGM did not want to sell, that move would’ve probably resulted in some tension.) But it certainly wasn’t that — which leads to the other big takeaway from this partnership:
Supporting, not buying, biotech innovation has its perks: Instead of gobbling up another promising biotech, like Merck did with Cubist and OncoEthix last year, the two companies are adopting what Rieflin calls “the big brother, little brother” partnership structure. We’ve seen it before in the industry: Regeneron and Sanofi, Celgene and Agios, Genentech and Roche.
In this arrangement, NGM is given free reins of the partnership R&D, and it maintains control of its lead candidate NGM282. As Perlmutter said in his interview with Bloomberg, Merck broke from its traditional partnering model and told NGM, “Take your interests wherever they take you.” Should NGM discover a candidate that makes it to proof of concept in humans, which would require late-stage development, Merck would step in — but still give NGM the right to 50 percent ownership of the candidate.
The past week’s display of acquisitions suggests pharma’s continued appetite for biotech. However, there’s also something to be said for letting a biotech be a biotech. In his interview with Forbes, Jonker defined NGM as an “old school biotech” that starts with basic biology and sets its sights on determining how to treat the “biology that hasn’t lent itself well to being drugged.” When it comes to innovation, curiosity in the early stages of research is a necessity — and one that both parties feel shouldn’t be inhibited.
Both Merck’s Perlmutter and NGM’s Rieflin in their separate interviews hit on the need for a collaborative and undisturbed process for research. It sounds like they’re headed into five years of camaraderie, mutual support, and innovation. But at the same time, Perlmutter has admitted that “it’s quite a new model” for Merck. This does make me wonder how the deal will play out — not just in terms of discoveries, but also if this deal’s freedom will lead to any particular growing pains or challenges, especially for Merck, as the two move forward.