Merck has licensed Ingenuity Systems’ pathway-analysis software and data in an agreement that Ingenuity CEO Jake Leschly called “fundamentally different” from any deal that the company has signed to date.
Under the terms of the agreement, the company’s Ingenuity Pathway Analysis software will be integrated with Merck’s internal bioinformatics tools and pathway data and deployed across Merck’s entire research staff via the company’s intranet. Several thousand researchers across Merck Research Labs will ultimately have access to the software through the agreement, which Leschly called “a blanket deal.”
Financial terms of the agreement were not disclosed.
The deal is the informatics sector’s second large-scale agreement with a major pharmaceutical company in as many weeks. Last week, GlaxoSmithKline announced an agreement that will give several thousand of the company’s chemists access to InforSense’s KDE (Knowledge Discovery Environment) workflow technology [BioInform 12-06-04].
These recent agreements appear to be a sign that pharmaceutical firms are once again shopping for enterprise-scale discovery software — possibly closing the door on a bleak period in which informatics companies could barely give such systems away.
A few things set these recent deployments apart from earlier enterprise informatics systems, however. Previous technologies, such as Genomica’s Discovery Manager or InforMax’s GenoMax, focused solely on sequence analysis or other niche “silos” within the discovery continuum, and ultimately failed to gain market acceptance.
But next-generation informatics companies have apparently learned from these high-profile failures, and are signing deals based on the ability of their systems to reach beyond target discovery and into the later stages of the drug-development pipeline, where pharmaceutical companies are now struggling with productivity bottlenecks.
Leschly said that around 80 percent of Ingenuity’s customers are currently using the company’s software in downstream applications. “They’re definitely using it in target discovery, but it’s biomarker work, it’s predictive toxicology, it’s all the way downstream,” he said. “They’re buying it for all of those things because they need to have all their decisions in the R&D process informed by a deep understanding of the biological function — not just data sets.”
Leschly said that it has been difficult for informatics companies to sign enterprise-scale deals with pharmaceutical firms because it is difficult to calculate the return on investment over the 10-15-year drug-discovery process. However, he said, “The pharma industry R&D people are now catching up to the rest of the people who buy technology around the world. … I don’t think anybody — and I don’t care if they’re informatics players or platform players or anybody else — is going to get large deals from anybody anymore unless they can tangibly show a return on the investment they’re making.”
Ingenuity currently claims 15 of the top 20 pharmaceutical companies as customers for its software, but most of these licensing agreements have been “sporadic,” per-seat agreements, Leschly said. The Merck agreement is an expansion of a smaller deployment that began around a year and a half ago.
“The thing that makes this deal so fundamentally different is that Merck … evaluated this, looked at it, tested it in different areas, and then said, ‘Look, this software really needs to be deployed everywhere throughout the process.’”
The Merck deal is obviously good news for Ingenuity, but also for the entire informatics sector, Leschly said: “I think it might be starting to fulfill the promise of bioinformatics. Everybody’s been talking about bioinformatics being an important part of their R&D process forever, but nobody has ever been able to show it.”
Alan Sachs, vice president of molecular profiling at Merck Research Laboratories and site head of Merck’s Rosetta Inpharmatics subsidiary, provided a bit of insight into the company’s informatics purchasing strategy.
“It’s always a balance between what it would cost to build it versus buy it,” he told BioInform. “We recognize how hard it is to build production-level software, so we can cost out, both in time and money, what it would take to replicate this. And then we’ll look at what a vendor is offering, and often it’s only 70 percent of the way there, so we build into that equation what it would cost us to work in a collaborative way with the vendor to make it fit our requirements, and then we will compare the two.”
In “many cases,” he said, “we decide to go outside, because if you build something like this exclusively for Merck, you could never capture the value that went into building it.”
Sachs said Merck doesn’t perform an ROI analysis across its research pipeline for software purchases. “We don’t actually do a cost-benefit analysis in the traditional sense because we work in a much broader umbrella of interpreting data to identify new targets and identify pathways and biomarkers, etcetera. That’s the justification for almost everything going on at Merck,” he said.
“At Merck, our goal is to make the best and the safest drugs,” Sachs added. “And we know the value of being able, for instance, to assign a function to a biomarker. The value of that is large enough so that a deal such as the Ingenuity deal becomes common sense.”
Sachs stressed, however, that the Ingenuity agreement doesn’t rule out future collaborations with other pathway informatics software or content providers. “Merck is not committed to any one system,” he said. “Ingenuity is attractive because of the scale of the knowledgebase and the quality of the software, but it doesn’t cover necessarily all of our needs. So we are continuing to work in smaller deals with other informatics software and content companies to acquire more information and more tools that will become part of a much larger package that we have inside. This is one piece of the puzzle, and it hasn’t excluded us from working with other companies at all.”
Room for Growth
Ingenuity also sees an opportunity for expanding its relationship with Merck.
Leschly described the current agreement as “enterprise-like” rather than a true enterprise deal, because “there are still more things we can do.” For example, he said, the company offers a knowledge-management capability based on work that it has done with Millennium Pharmaceuticals.
“That is something that Merck I think at some point will get interested in, but for now we’re focusing on the [Ingenuity Pathways Analysis] deployment as the first step,” he said.
The company also expects to benefit from integrating its software with Resolver and other third-party bioinformatics tools under the Merck partnership. Any development that Ingenuity carries out as part of the integration process will be “stuff that we can use for everybody,” Leschly said.
“This is a deal that we think we can do with every major pharma,” he said. “It’s not tricky, it’s not a very draconian term sheet. It’s a very straightforward deal, very easy to understand. So we think there will be a few more of these coming, hopefully in the short term.”