Merck KGaA says big M&A could jump-start stilted pipeline

Merck KGaA head of pharma Stefan Oschmann

Merck KGaA is still crawling through a broad restructuring effort, but the German drugmaker said it's keeping an eye out for major deals that could help it piece together a promising pipeline after years of setbacks.

CEO Karl-Ludwig Kley told investors Merck KGaA is exploring deals across all its divisions, including the long-suffering drug business, and it won't shy away from sizable buys if it sees promise. The company, about a year removed from sweeping job and budget cuts at its Serono division, is still adapting to life on an R&D diet, and repeated clinical failures have marred its reputation and dampened analyst expectations for the immediate future.

But pharma chief Stefan Oschmann is keeping an open mind when it comes to growth, proposing novel risk-sharing deal structures in hopes of jump-starting the company's development programs. Last month, Oschmann said his company is hunting for partners willing to split the cost of Phase III studies for multiple sclerosis drugs, putting up between $200 million and $800 million in exchange for milestones and royalties. Before that, Merck KGaA struck up a deep-rooted agreement with Quintiles ($Q), the world's largest CRO, in which the contractor will handle a hefty chunk of its end-to-end R&D work.

Whether Merck KGaA's all-encompassing approach to dealmaking will lead to any viable late-stage assets remains to be seen, but, considering its recent past, any progress would be an improvement. Ever since its once-promising MS pill cladribine flunked a late-stage study in 2011, the company has run into trouble with two cancer treatments, tecemotide and cilengitide, which didn't meet their primary endpoints of overall survival in Phase III trials.

Since then, Merck KGaA has refocused its research efforts and is limiting its scope to oncology, immunology, immunotherapies and neurology, high-growth spaces the company believes can help spur an R&D turnaround.

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Editor's note: An earlier version of this story misidentified one of Merck KGaA's pipeline treatments. We regret the error.

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