Merck: What we Look for in a Licensing Partner

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Merck: What we Look forin a Licensing Partner

Susan Rohrer, PhDSenior DirectorLicensing & External ResearchMerck Research Laboratories

ASENT Annual Meeting

Bethesda, MD

March 5, 2010

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Forward-Looking Statement

This presentation contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product potential or financial performance. No forward-looking statement can be guaranteed and actual results may differ materially from those projected. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this presentation should be evaluated together with the many uncertainties that affect Merck's business, particularly those mentioned in the risk factors and cautionary statements in Item 1A of Merck's Form 10-K for the year ended Dec. 31, 2008, and in any risk factors or cautionary statements contained in the Company's periodic reports on Form 10-Q or current reports on Form 8-K, which the Company incorporates by reference.

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Agenda

Criteria for LicensingCriteria for LicensingCriteria for LicensingCriteria for Licensing

Neuroscience Research and LicensingNeuroscience Research and LicensingNeuroscience Research and LicensingNeuroscience Research and Licensing

The Licensing Process at Merck The Licensing Process at Merck The Licensing Process at Merck The Licensing Process at Merck

Merck: Background & Partnering StrategyMerck: Background & Partnering StrategyMerck: Background & Partnering StrategyMerck: Background & Partnering Strategy

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Merck is a Global Health Care Leader with Diversified Portfolio

Cardio /Metabolic

Infectious Disease

Oncology

Respiratory

Women’s Health

Arthritis / Immunology

Therapeutic Area Schering-Plough Products Merck Products

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Merck’s R&D Strategy: Science-Based Diversification of our Portfolio

Merck’s R&D Strategy:Science-Based Diversification of Merck’s Portfolio

• Small Molecules• Vaccines• Biologics• Peptides• RNAi

• Novel• Best in Class• Lifecycle

Management

• Primary Care• Specialty Care• Hospital Setting

Patient Population

Approaches Modalities

General Areas of Interest for Licensing & Partnership

Atherosclerosis and Cardiovascular DiseasesLipids / Metabolic SyndromeHypertension / CardiovascularOther Areas

BiologicsFollow-on BiologicsNovel BiologicsBiologic Technologies

Bone, Respiratory, Immunology, and EndocrineArthritis and Immune-Based DiseasesAsthma / COPDBoneSarcopeniaUrology and Women's Health

Diabetes and Obesity

Infectious Diseases and VaccinesAntibacterialsAntifungalsAntivirals – HIVAntivirals – HCVAntivirals – Other InterestsAntiviral and Anti-infective TechnologiesVaccines

Neurosciences and OphthalmologyAlzheimer’s DiseaseCircadian DisordersMigraineOphthalmologyPainParkinson’s DiseasePsychiatric Diseases

Oncology

Research TechnologiesRNA Therapeutics

Enabling TechnologiesTarget Identification / ValidationBiomarkersLead Identification and Screening AssaysBiologics Production MethodsSynthesis and PurificationModeling ToolsUniversal PlatformsAutomated WorkflowsInformation Technology / SoftwareAnalytical Technology

6Updated October 2009

• We have aligned our areas of interest with our franchises, plus new technologies and biologics.

• Additionally, Merck will continue to pursue external licensing opportunities in other disease areas where clinical proof of concept exists.

• Merck will also pursue niche acquisitions and partnerships in diagnostics and devices where it complements our pipeline, and not as a stand-alone business.

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Licensing Aligns with Franchises and New Technologies

Select transactions: 2007-2009/2010

TechnologiesAdimabAvecia Biologics*DepomedInsmed*MicroDoseNuevolution *acquisition

Anti-Infectives/Antivirals/Vaccines

Cubist DNDiIdera MBL/MedarexOrchidPfenexRanbaxyUT, San AntonioWellcome Trust

OncologyAriadAstraZenecaCeleraDana FarberPiramal Life Sciences

CNS/Ophthalmology

Addex (PD & Schiz)Gladstone Institutes Santen

Bone/Respiratory/Inflammation/Endocrine

GalapagosGTx (Endocrine)Harvard University (Osteoporosis)Japan Tobacco (Osteoporosis)

CardiovascularCardiomeGalapagosKineMed PortolaXenon

Diabetes/ObesityAmbrxEnvoyGalapagosMarcadia

1pre-merger

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External Discovery and Preclinical Science:Current Collaborations

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Agenda



The Licensing Process at MerckThe Licensing Process at MerckThe Licensing Process at MerckThe Licensing Process at Merck


For Academic Collaborations, Merck’s Approach is Driven by Strategy

• Defining goals and delivering against a work plan are the keys to a successful collaboration.

• Well defined goals are critical

• Funding is based on the scientific work plan, not for general lab support– Milestones / Renewal based on delivering on objectives

• Intellectual property is important, but not the whole story– License to pre-existing IP sometimes, but not always– An exclusive option period to license new IP arising from the Collaboration

• Merck is mindful of the university’s mission and obligations– Create a structure that is consistent with university policy

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Desirable Attributes of a Therapeutic Candidate

Satisfies an unmet medical need Novel target

Is it validated? Will the molecule be first in class? Best in class?

Solid IP position

• On the target– Freedom to operate and methods of treatment

• On the molecule– Composition, synthetic routes, polymorphs, etc

Potential for changing standard of care Biomarker strategy is a plus

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Demonstrable Attributes of an Attractive Therapeutic Candidate

Potency in-vitro and in-vivo Mechanism -- evidence that agent “hits the target” in animals

• Minimally a pharmacodynamic assay

• Ideally, activity in a validated animal model

Selectivity vs. a large range of receptors, enzymes, ion channels Predictable pharmacokinetics and proper dose selection Preliminary tolerability and toxicology data Oral bioavailability (for small molecules) Good half-life for biologics or small molecules Licensor understands the competitive environment and can describe

strengths and potential weaknesses of the molecule Clinical efficacy if molecule is sufficiently advanced Understanding of the regulatory environment

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Agenda





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Defining the Neuroscience Strategy at Merck

• Create an innovative & sustainable environment to lead in the discovery, development, and marketing of differentiated therapeutics for chronic, disabling disorders of the nervous system and eye that will be valued by patients, physicians, and payers.

Focus on therapies for: • Alzheimer’s Disease • Schizophrenia• Pain & Migraine

Also interest in:

Sleep Disorders, Parkinson’s Disease, Depression, Ophthalmology, Tobacco & Alcohol Abuse

Merck Neuroscience Franchise at a Glance• New approach to the treatment of migraine

– Telcagepant (MK-0974): First-in-class oral antagonist of calcitonin gene-related peptide (CGRP)

• Develop new approaches for the treatment of sleep disorders

– Potent and selective orexin antagonists for insomnia and related disorders

• Multiple novel mechanisms in preclinical and early clinical development and complemented by strong basic research portfolio across:

-- Alzheimer's Disease -- Schizophrenia-- Pain -- Migraine-- Sleep -- Depression-- Parkinson's Disease -- Alcoholism-- Ophthalmology (siRNA approach)

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Gladstone Institute – Innovative Therapies for Alzheimer’s Disease

• Major collaboration with Dr. Robert Mahley of the J. David Gladstone Institute to develop drugs directed to the ApoE pathway

• Apolipoprotein E4 has been linked to a variety of neurodegenerative diseases including Alzheimer’s– ApoE4 expression is a major risk factor for

developing AD– Blocking ApoE4-induced neuronal damage may

lead to disease modification strategies• Merck and Gladstone will conduct a joint research

program to discover modulators of ApoE4 function. Gladstone will receive milestone payments and product-based royalties.

• Another example of innovative early-stage partnering by Merck

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Agenda





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OpportunityInitiation

OpportunityEvaluation Doing the Deal

ManagingPartnerships

• Worldwide scouts build relationships and seek out opportunities

• Nonconfidential information submitted for review

• Initial nonconfidential review by Review and Licensing Committees

• Confidentiality disclosure agreement signed

• Confidential review

• Face-to-face scientific meetings

• Senior scientific management approval

• Term sheet negotiations conducted by Transaction Manager

• Due diligence

• Definitive agreements negotiated

• Agreements executed

• Alliance Management– Alliance managers

assigned– Alliance launched– Monitor progress

throughout the agreement

• Basic Research Collaboration Implementation

– Senior scientists dedicated to successful execution of the research collaboration

There is a highly refined licensing process

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We Constantly Scan for Partnering Opportunities

2008 Alliances

6000Licensing

Opportunities

6000Licensing

Opportunities

2000Reviewed at

RLC*

2000Reviewed at

RLC*

569Reviewed

under a CDA

569Reviewed

under a CDA

4646

Key Acquisitions & Key Acquisitions & Signed AgreementsSigned Agreements

*Representation from IBR (Biology and Chemistry), EBR, Clinical, Marketing (inc. Commercial Group Leader and New Products Leader), Alliance Management, Portfolio Management, GCI, and other areas

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Collaboration Creates Value

Merck

• Novel technology application

• Development• Commercialization

expertise• Subject Matter

expertise

Partners

• Discovery• Innovation• Subject Matter

expertise

Combining our StrengthsSharing our Successes

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Documents

Merck: What we Look for in a Licensing Partner