Merck BioVentures (MBV), a division of Merck, is focused on the delivery of high quality biosimilar products to the patients that need them. MBV was established to capitalize on the imminent patent expirations of a number of currently marketed recombinant biologic medicines.

Recombinant Biologic Medicines

Recombinant biologic medicines are large, complex molecules that may be as much as a thousand times larger than their small molecule drug counterparts. Predominantly due to their size, biologics are typically injected into the body, whereas many small molecules can be taken orally. The manufacturing processes for biologics also contrasts significantly from small molecule drugs. Biologics are generally produced in complex, genetically engineered living systems such as bacteria or cultured mammalian cells. This contrasts substantially from the chemical reactions used to manufacture small molecules. For this reason, the properties of the biologic often depend directly on the engineered organisms and manufacturing process.

A pathway for approving small-molecule generic drugs was established in 1984. This original legislation was not designed to encompass biologic molecules that, at that time, were in their relative infancy. With the pending expiration of patents covering some important biologic products, the laws and policies governing development of biosimilars are still emerging around the world.

Merck's Position in the Biologics Industry

Merck, and the recently merged Schering-Plough, have a long legacy of biologic product development. Currently, Merck's focus in biologics includes vaccines for prevention, innovative biologics, and the development of biosimilars to enhance access to treatment options.

This approach covering novel biologics and biosimilars has allowed us to advocate for consistent, high-quality standards using state-of-the art scientific techniques and knowledge while ensuring that biosimilars maintain the expected benefits of reaching the broader patient population.

We are confident that we have established the capabilities, resources and expertise necessary to become a leader in delivering biosimilars. The cornerstone of MBV's business strategy is a focus on enhancing access to affordable biologics for those patients who need them. In order to achieve this goal, rapid delivery of high-quality products is essential to competing in the biosimilars marketplace.

Establishing the Scientific Standard for Biosimilars

We strongly support developing an efficient approach to bringing biosimilars to market, and we recognize the primary importance of patient safety. The complexity of developing and manufacturing biosimilars results in a product that is similar to the original product, but not identical, and thus the adequate characterization of biosimilars is essential. We believe that all biosimilar applicants should be required to conduct clinical trials that demonstrate safety and efficacy for biosimilar products. The impact of interchanging products on the safety, efficacy or immunogenicity of a product cannot be adequately predicted by analytical characterization, structure-function relationships or animal studies. Therefore, Merck supports a policy that allows the decision on choice of drug to be made only at the prescriber level.

The regulatory landscape for biosimilars development and approval is evolving rapidly, and there are concerns about a simple generic-type biosimilar regulatory approval process. Because we understand these concerns, our strategy is to conduct a thorough development program, including a preclinical toxicology package and Phase III clinical studies for each of our biosimilars and the submission of biologic license applications to obtain approval. We will, of course, adapt our approach as new legal requirements are implemented.

Portfolio and Partnerships

Merck BioVentures was established to take advantage of the fact that over 40 biologic therapeutics—representing estimated cumulative worldwide sales of approximately $60 billion—will lose patent protection between 2008 and 2015. Merck BioVentures is developing a well-diversified portfolio of candidates targeting several important clinical indications. We have disclosed two developmental programs—a Granulocyte Colony Stimulating Factor (GCSF) candidate and a pegylated GCSF. We anticipate having five biosimilar programs in late-stage development by 2012.

In January 2011, we announced a strategic alliance with Parexel to provide a broad range of regulatory and clinical services to Merck BioVentures, including exclusivity for certain developmental biosimilar candidates. This agreement positions Merck BioVentures for success with an industry-leading partner that has the expertise and resources to conduct clinical development of the company's portfolio of candidates, which will allow timely delivery of products to the marketplace.

In June 2011, Merck announced a global strategic collaboration with Hanwha Chemical Corporation to develop and commercialize a candidate biosimilar form of Enbrel^® (etanercept). This candidate represents a valuable addition to our broad biosimilars portfolio, as we advance our strategy to provide patients with improved access to biologic therapies.