[Ip-health] Wall Street Journal: Merck to Develop Biotech Generics

[Thiru Balasubramaniam]

     * DECEMBER 10, 2008

Merck to Develop Biotech Generics
Its First Copycat Drug Would Compete With Amgen's Aranesp and Is
Scheduled for Launch in 2012


By JONATHAN D. ROCKOFF and RON WINSLOW

In a new challenge to the biotechnology industry, Merck & Co. said it
is creating a unit to make copycat versions of top-selling biotech
drugs, a potentially lucrative market long immune to generic
competition.

The big pharmaceutical company said it already has several generic
biotech medicines -- sometimes called follow-on biologics -- in
development, including some that take aim at the industry's biggest
sellers.

Its first -- an anti-anemia drug that would compete with Amgen Inc.'s
anemia treatment Aranesp -- is slated for launch in 2012, and it will
have at least five others on the market by 2017, Merck said.

"We believe we can become the leading provider of high-quality,
competitively priced follow-on biologics," Chief Executive Richard T.
Clark said of the new division, which Merck unveiled at a meeting with
analysts and investors at its Whitehouse Station, N.J., headquarters.
[Clock is Ticking]

There isn't a clear regulatory-approval path in the U.S. for companies
that want to sell their own versions of other companies' biotech
drugs. But the arrival of the Obama administration has raised
expectations that Congress will clear the regulatory path as soon as
next year, either in stand-alone legislation or as part of a broader
effort to overhaul the health-care system.

"This is a legislative train that is going down the track," said Jon
Glaudemans, senior vice president at Avalere Health LLC, a nonpartisan
health-care consultant in Washington.

Follow-on biologics differ from generic versions of traditional drugs,
such as those now available for Merck's Zocor cholesterol pill.
Merck's anti-anemia drug, for example, would be similar to Amgen's
Aranesp but not identical.

While it is targeting products already on the market, Merck said it
believes its drugs will be different enough from the current versions
that they will avoid patent infringement. Its reasoning lies in how
Merck plans to make the drugs.

The Merck BioVentures division is being built on the foundation of
GlycoFi, a biotech company Merck acquired two years ago that uses
yeast cells to develop protein-based drugs rather than the mammalian
cells commonly used by others.

Merck is the second major pharmaceutical company after Novartis SA of
Switzerland to take aim at the follow-on biologic market. The strategy
is not without irony for an old-line chemistry-based giant like Merck,
which like its rivals has struggled to come up with blockbuster new
pills. Now it is placing a big bet on churning out new products
derived from biotechnology's innovations. Merck said biologics
accounted for $94 billion in sales last year and will have $187
billion in sales in 2014. Amgen's Aranesp had sales in 2007 of $3.6
billion.

Analysts welcomed the plan, considering the potential size of the
market and the limited competition. But some worried that the lack of
a clear regulatory-approval path and the uncertainly of moving into an
area of unproven technology pose big risks. "What are the real returns
on this?" asked Les Funtleyder of Miller Tabak. "Are you going to
become an early-stage biotech and burn through lots of cash before you
get returns?" He also said he thinks the 2012 target launch for the
anemia biotech drug is optimistic.

Merck said it is moving forward with or without new legislation and
expects to conduct clinical trials for the follow-on biologics it
expects to bring to market.

The company, whose shares have declined more than those of most big
pharmaceutical makers this year, fell 69 cents, or 2.6%, to $26.31 in
4 p.m. New York Stock Exchange composite trading Tuesday.

Big Pharma's increasing presence in the generic biotech market will
likely create a dynamic much different than the generic market for
conventional pills. Six months after such pills go off patent, the
market is typically flooded with competitors. Prices drop 80% or more
from branded levels, and marketing of the drugs vanishes.

But Merck plans to invest $1.5 billion in Merck BioVentures by 2015,
and it is likely to support any products that gain approval with
marketing.

Amgen declined to comment on Merck's plans. It has said it supports
efforts to establish a regulatory pathway for approval of follow-on
biologics.

In a statement, David Beier, Amgen's senior vice president, global
government affairs, said "protection of intellectual property" is "an
essential component" of any legislation opening the door for such drugs.

Write to Jonathan D. Rockoff at jonathan.rockoff@wsj.com and Ron
Winslow at ron.winslow@wsj.com



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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org


Tel: +41 22 791 6727
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