Merck: What we Look for in a Licensing Partner

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Merck What we Look forin a Licensing Partner

• Susan Rohrer, PhD
• Senior Director
• Licensing External Research
• Merck 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
Merck Background Partnering Strategy
Criteria for Licensing
Neuroscience Research and Licensing
The Licensing Process at Merck
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Merck is a Global Health Care Leader with
Diversified Portfolio
Therapeutic Area Schering-Plough Products
Merck Products
Cardio / Metabolic
Infectious Disease
Respiratory
Womens Health
Arthritis / Immunology
Oncology
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Mercks RD Strategy Science-Based
Diversification of our Portfolio
Patient Population
Approaches
Modalities
Mercks RD StrategyScience-Based
Diversification of Mercks Portfolio

• Small Molecules
• Vaccines
• Biologics
• Peptides
• RNAi

• Novel
• Best in Class
• Lifecycle Management

• Primary Care
• Specialty Care
• Hospital Setting

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General Areas of Interest for Licensing
Partnership

• Atherosclerosis and Cardiovascular Diseases
• Lipids / Metabolic Syndrome
• Hypertension / Cardiovascular
• Other Areas
• Biologics
• Follow-on Biologics
• Novel Biologics
• Biologic Technologies
• Bone, Respiratory, Immunology, and Endocrine
• Arthritis and Immune-Based Diseases
• Asthma / COPD
• Bone
• Sarcopenia
• Urology and Women's Health
• Diabetes and Obesity

Neurosciences and Ophthalmology Alzheimers
Disease Circadian Disorders Migraine Ophthalmol
ogy Pain Parkinsons Disease Psychiatric
Diseases Oncology Research Technologies RNA
Therapeutics Enabling Technologies Target
Identification / Validation Biomarkers Lead
Identification and Screening Assays Biologics
Production Methods Synthesis and
Purification Modeling Tools Universal
Platforms Automated Workflows Information
Technology / Software Analytical Technology

• 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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Updated October 2009
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Licensing Aligns with Franchises and New
Technologies
Select transactions 2007-2009/2010
Anti-Infectives/ Antivirals/Vaccines Cubist
DNDi Idera MBL/Medarex OrchidPfenex Ranbaxy U
T, San AntonioWellcome Trust
Oncology AriadAstraZeneca Celera Dana
Farber Piramal Life Sciences
Diabetes/Obesity AmbrxEnvoy GalapagosMarcadia
Bone/Respiratory/Inflammation/Endocrine Galapago
sGTx (Endocrine) Harvard University
(Osteoporosis) Japan Tobacco
(Osteoporosis)
CNS/Ophthalmology Addex (PD Schiz) Gladstone
Institutes Santen
TechnologiesAdimabAvecia Biologics DepomedInsm
ed MicroDoseNuevolution
Cardiovascular CardiomeGalapagos KineMed
PortolaXenon
1pre-merger
acquisition
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External Discovery and Preclinical
ScienceCurrent Collaborations
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Agenda
Merck Background Partnering Strategy
Criteria for Licensing
Neuroscience Research and Licensing
The Licensing Process at Merck
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For Academic Collaborations, Mercks 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 universitys 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
Merck Background Partnering Strategy
Criteria for Licensing
Neuroscience Research and Licensing
The Licensing Process at Merck
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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
• Alzheimers Disease
• Schizophrenia
• Pain Migraine
• Also interest in
• Sleep Disorders, Parkinsons Disease, Depression,
  Ophthalmology, Tobacco Alcohol Abuse

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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
Alzheimers 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 Alzheimers
• 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
Merck Background Partnering Strategy
Criteria for Licensing
Neuroscience Research and Licensing
The Licensing Process at Merck
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There is a highly refined licensing process
OpportunityInitiation
OpportunityEvaluation
ManagingPartnerships
Doing the Deal

• 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

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We Constantly Scan for Partnering Opportunities
2008 Alliances
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6000 Licensing Opportunities
2000 Reviewed at RLC
569 Reviewed under a CDA
Key Acquisitions Signed 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
Combining our Strengths Sharing our Successes

• Merck
• Novel technology application
• Development
• Commercialization expertise
• Subject Matterexpertise

• Partners
• Discovery
• Innovation
• Subject Matter expertise

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