A Virtuous Balance Between Pure

and Applied Science

Will DelaatManaging Director

APRU Presidents’ Meeting22-24 June 2006

Shifts in Biomedical Innovation

Creating Breakthrough Medicines from Cutting-Edge

Science• 9,500 research employees

• >100 years of innovation (eg antibiotics / anti-

infectives, thiazide diuretics, anti-arthritics, antihypertensives, statins, HIV medicines, vaccines)

• 250-300 patent applications per year

• Nearly $4Bn in R&D spend last year (~1% of world R&D)

• 20 new medicines / vaccines since 1995

Merck’s History of Innovation

“We try never to forget that medicine is for the people. It

is not for profits …If we have remembered that, [the profits] have never failed to appear. …How can we bring the best of medicine to each

and every person? …. We cannot step aside and say that we have achieved our

goal by inventing a new drug or a new way by which to treat presently incurable diseases …. We cannot rest till the way has been found, with our help, to bring our

finest achievement to everyone.”

- George W. Merck, 1951

Dr Randolph T Major (centre), Dr Selman A Waksman (left), Sir Alexander Fleming (1949)

Shifts in Biomedical R&D In approach & technology In partnering - the interplay

between universities, biotechs and pharmaceutical companies

In the study of life sciences.

A shift in the approach to biomedical R&D & technology

Eras in Drug Discovery

• Pre-1990’s Drugs ‘discovered not designed’ Resource intensive screening of

biologically active compounds• 1990’s Molecular biology in full swing

The Biotechnology Era begins• 2000 The Dawn of Genomics

5,000-10,000 potential drug targets identified

The 90’s – Biotechnology Era

• 500 targets identified in 1990’s (receptors + enzymes)

• Synthesis of compounds rDNA MAb Structure-based drug

design Combinatorial

chemistry• High Throughput

Screening

A ‘simple’ enzyme(alcohol dehydrogenase)

The New Millennium –The Dawn of Genomics

Genomics will have a major impact on drug discovery and development and will change the way

that medicine is practiced.

The Pace of DiscoveryAfter Human Genome comprehensive sequence was

published in 2001

Key Milestones have been:• Advances in Structural Biology

3D structures in days and weeks, not months and years• Rapid generation of Monoclonal Antibodies

humanized mice; phage libraries• RNA interference

profiles as genome sensors• Proteomics

approaching required bandwidth• Pharmacogenomics

as the basis for response/non response• Engineering Sciences, Informatics

dramatically influencing biological sciences (UHTS; Bioinformatics)

• Biomarkers Predict response, disease resistance or toxicity

A shift towards greater partnering - the interplay

between universities, biotechs and pharmaceutical companies

Professor Ian Frazer

Number of Biomedical Alliances 1990 to 2005

Number of Bio Medical Alliances 1990 to 2005

0

500

1000

1500

2000

2500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Drug-Biotech Biotech-Biotech Drug-Drug Uni-Biotech Uni-Drug

Source: Recap June 2006

Shifts In Pharma Value Chain

HMOs

RESULT HAS BEEN DECONSTRUCTION OF THE PHARMA VALUE CHAIN

Research Development Trials Registration Manufac-turing

Sales &marketing

PBMs

Research Development Trials Registration Manufac-turing

Sales &marketing

Academic labs

Biotech firms

Contract research organizations

CMOsJVs/

licensing

Increased development costs

Role of global launches increasing

Quality outsourcers leverage scale advantages in individual layers of value chain (specialized)

Easier IT enabled coordination and knowledge management

CSOs

Late 1990’s -Early 2000’s

1980’s -Early 1990’s

Note: PBM=Pharmaceutical benefit management, HMO=Health maintenance organization, CMO= Contract manufacturing organization, CSO=Contract sales organizationSource: BCG analysis

Five Enablers For Innovation

Merck has identified five key conditions necessary for successful innovation:

1.A market based on competition, customer choice and a pricing structure that rewards innovation.

2.Effective intellectual property protection3.Regulatory systems that put patients first

by approving effective and safe new drugs for critical diseases as rapidly as possible.

4.A global business environment based on free-market principles and the rule of law.

5.Continued government support of basic biomedical research

Bioscience ClusterMoneyMoney InfrastructureInfrastructure

ScienceScience

Talent

Life Science Cluster – Partnerships are critical

UCSDScrippsInstitute of

Oceanography

Burnham Institute

Sidney Kimmel

La Jolla Institute of Allergies and Immunology

The Scripps Research Institute

Neurosciences Institute

UCSDScrippsInstitute of

Oceanography

Salk Institute

Burnham Institute

Sidney Kimmel

La Jolla Institute of Allergies and Immunology

The Scripps Research Institute

Neurosciences Institute

San Diego Cluster Partners - Research Institutes

San Diego Cluster Partners- Pharma Companies

Pfizer Lilly

Novartis

Merck

Johnson & Johnson

Cluster Partners - Boston

This “agreement is an example of the kind of strategic partnerships that we like to build with an industrial partner to bring fundamental research forward

as a potential new therapy. By combining the licensing rights and

the expertise behind the original findings, and partnering with a leading

company such as Merck, we can advance this research into clinical development and application much

faster than would otherwise by possible.”

Isaac T. Kohlberg, Head, Technology Development Office, Harvard University -

2004

Harvard University’s View of Strategic Partnerships

A shift in the study of life sciences

State of Chemistry in Australian Universities

Chemistry, Biology and Physical Science University Studentsas a percentage of all University Students

International Perspective on Science Graduates

Within the university context, the number of science graduates as a proportion of all graduates in the US is low compared with other OECD countries. In 2000, for example, only about one-sixth of the total number of university degrees conferred was in science compared with one-quarter of all degrees in the EU and in Japan.

(OECD, 2004)

In South Korea, 38% of all undergraduates receive their degrees in science or engineering. In France, the figure is 47%, in China, 50% and in Singapore 67%. In the United States, the corresponding figure is 15%.

(National Academies of Sciences, 2006)

Some 34% of doctoral degrees in sciences in the United States are awarded to foreign-born students. In the US, science and technology workforce in 2000, 38% were foreign born.

(National Academies of Sciences, 2006)

UK Looking Overseas for Science Graduates

• UK companies are starting to recruit science graduates from overseas rather than rely on the home market because they have a larger pool of high calibre students to choose from.

• China is producing 300,000 graduates every year in science, technology, engineering and mathematics – three times the number coming through UK universities.

• India has 450,000 engineering undergraduates in the current academic year alone.

Confederation of British Industry (CBI)March 2006

Recruitment of Science Graduates to Industry

Pharma Industry – Largest Employer of Science Graduates

(USA)

Sectors employing newly graduated chemists in the US (2002).Adapted from Chemistry and Engineering News (Mehta. 2003)

Universities can help to:

• Commercialise innovations via licences, strong patents and establishing start-ups

• Assemble multi-disciplinary consulting teams for international development projects;

• Provide a wide range of consulting, testing, expert opinion and advisory services as well as research and development projects.

• Promulgate the importance of science-based careers

What Can Universities Do To Support Biomedical Innovation

In summary …

• Drug Discovery is entering an exciting new era

• It requires a healthy interplay between pure and

applied science a steady flow of talent from academia an entrepreneurial spirit the capital, know-how and creativity

of Big Pharma