Has the scouting organization proven its return on investment?
I think so. It's good to get to know people and make them feel comfortable with who we are at Merck, what we're interested
in, and what we're about as a company.
You can see how that plays out. For example, take Ray Hill, who is our scout in England and the second scout we hired. Ray
is a neuroscientist, and he got to know Addex right when they were founded. Ray has been there since then, chatting with them,
and became interested in what the company was doing. And we ended up doing not one but two deals with Addex. In December,
we signed a basic research deal around a Parkinson's compound, and then in January of this year, we signed a second deal with
them to work on the preclinical schizophrenia drug.
In 2007, Merck tendered an impressive number of deals. Do you expect a similar volume of deals in 2008?
The number is growing. We get teased by our investor relations people, who call us up every quarter and ask, "How many deals
are there?" And we always say, "40." But they're always a different 40. Those are the deals that advance. Our external scientific
affairs liaisons and scouts see somewhere between 5,000 and 6,000 opportunities a year.
We don't start out with a target—we're driven by the quality of the opportunity. We didn't start out last year looking for
three Phase III deals. Obviously, if we can find late-stage deals that we think are a good opportunity, that's great. But
that's a very unusual year.
Is licensing technology more or less risky than licensing a compound?
It all depends on what you think is risky. For a compound, it's more binary. It's less risky in that you know what you're
buying and you have plans for it. But if that mechanism of action fails, then it's done. With technology, in a sense, it's
much more difficult to measure later what a company gets out of a platform, because it's harder to trace.
It's not a calculus that we're used to performing. For us, it's much more about finding great ideas or pursuing a mechanism
we're willing to bet on. It's also part of the Merck philosophy to go after the best science. And if they have to get the
technology platform to enable the science, like with Sirna, then we'll do that.
Do you ever review the deals Merck didn't go forward with?
We do look back and try to evaluate the deals we didn't complete. Maybe we weren't interested in the science, but then it
turned out to be something that worked. Or maybe we couldn't agree on terms; we thought it was too expensive. But it's hard
to learn from that.
Take inhaled insulin. We looked at a lot of different companies, and it seemed to make sense. But we never did any deals.
This is one of those times when you look back and ask "Were we smarter than everyone else?" And I think the answer is no.
To some extent, we were still looking and thinking about it. And it just didn't work out.
You say, "All right, it turned out that this mechanism didn't work, so we're glad we didn't do the deal." But it could have
gone the other way. To me, the important thing is to ask: "At the time we were looking at this deal, was there something we
knew or we should have known so it could have come out better?" But if something happened that couldn't have been predicted,
we can't give ourselves credit or beat ourselves up about it.