Merck has put a new twist on pharma’s embrace of biotech with the announcement that it is creating a new unit to make generic biologics. The company through 2015 plans to spend $1.5 billion in research and development for the new outfit dubbed Merck BioVentures, executives said December 9 at the company’s annual business briefing with analysts and investors at headquarters in Whitehouse Station, New Jersey.

 

“Next year will continue to be a period of fundamental transformation that establishes Merck as a different competitor for the next decade,” said Richard Clark, Merck CEO.

 

Merck BioVentures plans to leverage the technology of GlycoFi, a biotech company that the pharmaceutical giant acquired in 2006. The technology will be used to develop both new and follow-on protein-based drugs in yeast cells rather than the mammalian cells in common use today. Merck says the technology enables more rapid and efficient development and production of biotech drugs. “We believe we can become the leading provider of high-quality, competitively priced follow-on biologics,” said Clark. Merck is already developing several generic biologics, including an anemia drug it expects to launch in 2012 that will compete with Amgen’s Aranesp.

 

Follow-on biologics differ from traditional generic pharmaceuticals in that they are similar but not identical to the biotech drug being copied. Because small molecule drugs are synthesized through a chemical process, a generic can be deemed identical to its branded counterpart. But because biologics are derived from living cells, a so-called generic biologic cannot be identical to its branded counterpart. There is currently no regulatory standard to approve follow-on biologics in the United States. But developing such standards is expected to be on the new Congress’ legislative agenda as part of broader efforts to cut healthcare costs. Pharmaceutical companies Novartis AG and Teva Pharmaceuticals are also developing generic biotech drugs.

 

Merck has been restructuring and recently announced it was cutting 7,200 jobs on top of earlier cost-cutting measures. Company shares have not fared well this year as sales of its key medicines remain sluggish. With several patent expirations on the horizon, the move to diversify its portfolio through a shift into generic biologics underscores the company’s tough position. 

 

In addition to its move into follow-on biologics, Merck plans to derive growth from emerging markets. It is making significant investments in China and India with the goal of attaining a leadership position in those markets over the long term. The company says it is on track to achieve its goal of $2 billion in emerging market sales by 2010.