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Expression Profile: Merck s Bennett Shapiro on Renting vs. Buying a Bioinformatics Company




BS in chemistry from Dickinson College, MD from Jefferson Medical College.


Executive vice president for worldwide licensing and external research at Merck Research Laboratories since 1999. From 1990-1999, served as MRL’s executive vice president for worldwide basic research.

Last May, Merck’s $620 million acquisition of Rosetta Inpharmatics was the talk of the bioinformatics world. BioInform recently spoke to Bennett Shapiro, executive vice-president of worldwide licensing and external research at Merck Research Laboratories, about Merck’s decision to turn its research collaboration with the Seattle-based bioinformatics company into one of 2001’s most successful acquisitions.

Merck has its own bioinformatics group, so what initially made you decide to partner with Rosetta? How did this partnership evolve into an acquisition?

In an area like this, which is fundamentally platform technology and infrastructure for drug discovery, it’s likely that the people doing the best, most comprehensive projects of that nature are going to be outside of Merck. We do have bioinformatics inside and we have people doing creative bioinformatics, but we would never be dedicating the kind of effort that a complete entity would toward this type of activity.

With that background, in this case the reason we went for an acquisition was that as we looked at what we wanted to get done, we wanted everything that Rosetta was doing.

We started off talking about doing a regular licensing deal and building a relationship. We’d been doing internal arrays and we had bioinformatics based on that, but their whole structure was to do that in super-high throughput with lots of bioinformatics. If we made a list of things that we wanted to do, they were doing all those things, so the deal would have been a global universal deal on everything they were doing.

Beyond that, we believe that this is disruptive technology. It’s the kind of technology that will change the way you do research and drug discovery. We recognized that what we really wanted to do was to apply this technology all over Merck Research Laboratories, at every one of our sites, to deal with all the thorny problems we could identify in drug discovery. … We felt that this would be as important to everything going on here as everything else we do — as weighing out chemicals.

We wanted to effect a cultural shift in the way people think about doing biology. For that reason we thought that the only thing to do would be to buy Rosetta and have them disseminate this approach throughout our laboratory.

How far along are you in the dissemination process?

It’s going really well. A lot of the people at Rosetta really wanted to make a difference in human health, but the gap between where they were and coming up with drugs was enormous. And now here’s an opportunity for them to really translate their exciting scientific concepts into drug discovery. So they have just gone wild over this and they’re all over the lab teaching people how to do this and people are out there visiting them and they’re expanding the technology in different directions. It’s just been a fabulous integration.

Has Rosetta’s technology been used in any unanticipated sense?

What I’ve been surprised at is how validated our intuitions were about what this might be used for. We had some wild ideas where you might be able to use this to sort through extremely complicated problems, but as with everything in drug discovery the failure rate is so high that it might not have worked. But in this case, everything that we’ve anticipated is paying off.

Did you rely on any particular criteria in your decision to move from partnering with Rosetta to acquiring them?

Everyone looks at this deal and wonders — especially if you’re a little biotech company, and especially if you’re trying to figure out what your business model is — how do you lead to something like this happening? Another company could look at an acquisition completely differently, but my position, and I believe the Merck leadership position, is to look at something and say how much of the total resources of the entity are going to provide us with such a competitive advantage that instead of doing a deal and having, let’s say, three companies doing deals with this entity, how important are the approaches being done by that company? If they’re very important I think that an acquisition makes a lot of sense.

So it depends on the taste of the company and what it sees as its immediate challenges, and in our case this was really an important answer to an immediate challenge.

How important was it for you to eliminate the possibility of Rosetta partnering with a competitor?

There’s no one doing quite what Rosetta’s doing, but there are other companies doing related kinds of things, so maybe people could find other paths for getting there. We think that just for pure technology development they were unique and that’s one reason why we bought them.

They weren’t too broadly based. Had they become a fully integrated or early pharmaceutical company like certain other companies have tried to do they probably would have been less attractive to us because there would have been a lot of duplication.

In negotiating the deal, how important was it to Merck to keep Rosetta’s software business intact?

There was a lot of discussion that went into it, and to encapsulate it I would say that it was a useful bit of technology that was good for the industry itself and the interplay between [Rosetta Biosoftware] and the rest of the world was such that both sides would be getting better and we saw that that would be good for Rosetta in the long run — to have that division get improved. We didn’t see it as having any competitive downside for us.

The bioinformatics sector is going through a turbulent time right now. Would you be less likely to partner with a bioinformatics firm now than you would have been a year and a half ago?

For us it would always be a question of whether they had something specific that would be helpful to one of our specific needs. We have felt that one important area to go after would be mechanisms to change the fundamental way you discover drugs. So if we saw another opportunity in the bioinformatics arena that really looked like it would have that heuristic impact — it would just change the way you did things — we would go after that as well.

We’re not looking for other acquisitions that way, but as we evaluate what’s going on in the world, things could come up that we get similarly interested in.

A lot of the issue is that much of bioinformatics has been oversold to a significant extent. It’s enormously important. The basic issue is that biology is an information science. The skills to optimally handle that information are really important and the better we can handle that information in a way that is transparent, simple, and readily understood by everyone involved in the drug discovery process, the more effective we’ll be from a competitive point of view.

So, just focusing on the bioinformatics part of the genome, there was the sense — maybe not said specifically by anyone, but inferred by many and certainly bought by the public — that now that the human genome is sequenced, it’s just a matter of a hop and a skip until we have drugs for all the important diseases. Forgetting that that’s just a code and the code has to be translated into biology, and that biology has to be clearly associated with disease and has to be tractable as a target, and then one has to go through all the issues of making safe drugs that are targeted to one of these new targets that one discovers.

All the problems in drug discovery really are around downstream issues like toxicity and metabolism. Those are major problems and they haven’t been solved in one fell swoop by the genome project. So all the biology still is there to be done, this is just an enormously powerful tool to make better decisions about how to do human biology.

Anyone rational about this would say to translate that tool into high-production drug discovery is a matter of five to ten years just to manipulate that tool. And then drug discovery takes five or ten years. So we’re really talking about something playing out over the next couple of decades. It doesn’t devalue the information; the information is enormously valuable. I think the problem was that the investment community and a lot of people in many different areas expected something to turn around in the next couple of years, and this is not that kind of information. It’s going to turn around in the next couple of decades and it’s going to change our lives completely, but not overnight.

What you’re seeing is people finally getting that realization — that drug discovery is hard, it takes time, there’s a lot of failure, and the genome is one component of dealing with that. That and also, many of these companies have not really come up with robust business models that some third party could look at and say, ‘Gee, that makes sense.’

But, having said all that, I think it’s very important to say that there are many really important companies doing bioinformatics that are going to change the rate of drug discovery, and I think it’s unwise to turn one’s back on the industry. It’s a great time for drug discovery and I think these bioinformatics companies are going to have a big impact on it.

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