Known as Merck Serono outside of North America, EMD Serono brings its historical identity as a specialty care drug company to the corporate biopharma division.
During the past eight years, since its acquisition by Merck KGaA, Darmstadt, Germany, EMD Serono has quietly expanded in the shadows of the pharma/biopharma giants and its German parent. EMD Serono is the North American face of Merck Serono, which was featured in our April 2014 issue. EMD Serono/Merck Serono is the biopharmaceutical division of Merck KGaA — a 30 percent public, 70 percent family-owned corporate entity descended from the old, original German Merck, also called E. Merck. Like J&J, the Merck Group has a public stock listing, on the Frankfurt Stock Exchange, but its separate businesses do not.
“Outside of the U.S., the biopharmaceutical division operates as Merck Serono, but the organization is one global team,” explains Paris Panayiotopoulos, president and managing director of EMD Serono. “In 2013, Merck Serono generated 56 percent of Merck Group sales, of which 21 percent comes from EMD Serono in North America.” The umbrella biopharma unit shares four main R&D centers, in Billerica, Massachusetts; Darmstadt, Germany; Beijing; and Tokyo. Reflecting the long-standing Serono heritage, the company says it stands among “the top five U.S. biopharmaceutical companies exclusively focused on specialty care.”
Specialty care is subtly distinct from the simplest concept of so-called specialty pharma; the word “care” implies much more than reformulation and drug-delivery. Consistent with its long focus on the patient-centric area of fertility, EMD Serono supplies a variety of patient support tools with nearly all of its products. All are injectables or infusion drugs that require extensive patient care, and the company offers services such as hotlines and educational materials to ensure proper use and compliance. “Specialty care is defined by smaller patient populations with high unmet needs,” Panayiotopoulos says. A company publication also cites these criteria: “high cost, difficult medication delivery, and/or complex treatment maintenance.”
EMD Serono’s current products on the market are in the areas of multiple sclerosis, metabolic endocrinology, and fertility — all areas where specialty care products fill particular medical needs. But the company’s current R&D pipeline contains a different mix, with candidates in oncology, immuno-oncology, multiple sclerosis, and immunology, signaling changes and new directions in its future portfolio. Still, according to Panayiotopoulos, all pipeline products in the new areas will match the specialty care model, allowing his company to maintain its traditional focus. (See “Plowing Fertile Ground.”)
Globally, Merck Serono’s commercial portfolio now contains nearly all of the products EMD Serono sells in the North American market, but it also includes oncology products. Together, EMD Serono/Merck Serono hopes to emerge as a strong player in the oncology space. EMD Serono currently has no oncology products, whereas Merck Serono had previous oncology experience with Erbitux (cetuximab) but not immunooncology. The two share a nearly identical, global pipeline of products in development, which indicates a long-term strategic alignment, starting with several cancer drugs in Phase 3 trials.
Merck KGaA’s chairman, Karl-Ludwig Kley, in the 2013 annual report, suggested specialty care will remain the focus of the biopharma unit’s long-term global franchise: “The aim is to establish Merck Serono globally as a preferred biopharmaceutical partner that offers innovative specialty medicines, leading brands, and high-value solutions.” In former times, “leading brands” might have been synonymous with primarycare blockbusters. But based on today’s premium-pricing model, specialty care indications can also support leading brands, even in a revenue sense.
Specialty care is more than a marketing term; managed care organizations often have specific rules regarding coverage, cost share, and/or benefit management for specialty care drugs. Dealing with the complexity of treatment for the targeted diseases requires simplifying administration with appropriate technology such as autoinjectors or special formulations, educating patients, and managing supportive care efficiently and effectively. Almost in a class by itself is the imperative of helping patients, providers, and payers work through insurance coverage and reimbursement issues. “As a specialty care company, we have always focused on three areas: innovative products, devices, and patient support services,” Panayiotopoulos says.
He points to a growing industry trend favoring specialty care. In 2008, the FDA approval rate of specialty care drugs was about 30 percent; in 2013, seven out of every 10 FDA-approved drugs were specialty care. “We’ve been strategically well-placed in that space with our drug products, devices, and support services, and given that our pipeline is all specialty, that is where we intend to move forward.”
Typically, the company must create its support services in parallel with the product — planning for, implementing, and constantly improving them from the early stages on, throughout the product’s entire life cycle. As it develops the drug, the company also builds a technical and informational infrastructure to support its use in patients. Whatever the larger corporate context or even the product portfolio, that is the culture, the particular set of capabilities, EMD Serono brings to the business.
“We have a deep expertise in specialty care including a proven track record of success commercializing biologic and specialty pharmaceuticals in fertility, endocrinology, and neurology,” says Panayiotopoulos. “We have worked to develop patient support programs that serve our unique patient populations effectively. We take our responsibility in this space seriously, and our organization is galvanized around the patients we serve.”
EMD Serono has four rDNA-based products on the market: Rebif (interferon beta-1a) for multiple sclerosis, Gonal-F (follitropin alfa) for female infertility, Saizen (somatropin) for growth-hormone deficiency, and Serostim (somatropin) for HIVassociated wasting. Support services for patients include MS LifeLines, Fertility Lifelines, Connections for Growth, and The AXIS Center. The MS LifeLines program support center answers calls 24/7. MS LifeLines includes a nationwide nurse network providing in-home training on product usage and reimbursement specialists to help patients understand their insurance benefits and “assist eligible patients in getting affordable access to Rebif,” including through a zero copay program. In fertility, the company has also created financial assistance programs for patients: Compassionate Care, the Co-Pay Program, the Go Direct to Savings Program, and its recently announced Compassionate Corps program offering financial assistance to qualifying veterans.
Panayiotopoulos gives a more detailed example of how the company develops patient support tools for an innovative product, in this case, Rebif. “Last year, we launched Rebidose, a prefilled, disposable auto-injector to help patients with the self-injections. We have a 24/7 call center with many nurses around the country who are certified by The International Organization of Multiple Sclerosis Nurses. They help patients on the difficult journey of chronic MS, from the beginning throughout their use of the product. Recently, with more pressures on the reimbursement side, we set up specialists who help patients get access, either through our zero-dollar co-pay program for those patients who are insured or our patient assistance programs for the uninsured. If we were operating in the primary care area with millions of patients across the country, all that would be much harder to do.”
Of the 30 compounds in development by the biopharma unit, Panayiotopoulos says four are in Phase 3 and nine in Phase 2 trials. In one new area, oncology, the company and partner, Threshold Pharmaceuticals, are developing TH-302, an investigational hypoxia-activated prodrug in Phase 3 development for soft-tissue sarcoma — an indication with only about 36,000 patients diagnosed in the United States and Europe in 2013 and thus a specialty care area. The partners have the same compound in a Phase 3 trial for pancreatic cancer. (See “Catching Up in Cancer?”)
NORTH TO GLOBAL
Panayiotopoulos describes how the global R&D function is organized to integrate the development programs from which EMD Serono and Merck Serono will draw future products. “Our global R&D efforts are structured along four translational innovation platforms [TIPs], which correspond to the key research areas: oncology, immuno-oncology, and immunology/neurodegenerative diseases, as well as global health, which addresses neglected diseases such as schistosomiasis and malaria. The TIPs define the strategies for respective platforms and projects until proof-ofconcept and articulate the strategies in business plans that span three years. An external independent advisory board approves the TIP business plans and reviews them on a biannual basis. TIPs also largely drive decision making and portfolio prioritization — including which R&D center will run a particular program — until proof-of-concept. It is important to have a global R&D organization because the end output, launching the drug, will be serving a number of markets globally,” Panayiotopoulos explains. “Of course the U.S. market is a very important consideration in the portfolio decision-making process.”
EMD Serono and its corporate twin on the other side of the Atlantic stake the future on specialty care — a heritage brought to the biopharmaceutical unit and the corporation by the namesake they both share. An interesting union of two family and corporate histories, the original Merck and the old Serono, the company should continue to be a strong, global contender in the billowing specialty care field.
PLOWING FERTILE GROUND
Some say history is only useful in business when it is well-related to present or potentially developing circumstances. What does it matter that the company name began as Ares Serono, then a lonely pioneer in reproductive medicine? Has some vestige of the company’s original culture and tradition somehow survived to imbue the new entity, even after its merger with E. Merck? Actually, yes it has.
Geneva-based Serono was fiercely independent and virtually without competition in the fertility field when I met then-CEO Fabio Bertarelli, toward the end of his long stewardship, in 1993. The old man gave this American innocent abroad a bemused but hospitable, and forever memorable, reception. He carried a certain cynicism born of a long struggle in a tough business, but he showed almost affectionate forbearance for my New World naiveté. When I returned to meet Fabio’s son and successor, Ernesto, in 1996, the company had a completely different feel of accelerated modernism. In another few years, it would be shopping around for a buyer in what turned out to be a long and frustrating exercise, but the quest finally ended with the $13.3 billion purchase of Serono by E. Merck in 2006. Ernesto Bertarelli went on to win the America’s Cup for a second time, then turned some of his enormous wealth to buying back the old, shuttered Serono headquarters in Geneva to house a biotech research center.
EMD Serono, descended from a company with a 40-year history in the United States, was E. Merck’s biopharma beachhead in North America, where the German company has been contractually barred from doing business under the Merck name since the end of The Great War (WWI). Merck claims to be the world’s oldest pharmaceutical and chemical company, tracing its roots to 1668, when the family patriarch purchased a pharmacy in Darmstadt, Germany, still its headquarters. The acronym EMD applies to all Merck Group divisions and stands for “Emmanuel Merck, Darmstadt.” (Emmanuel initiated “industrial production” at the company in the early 1800s.) Worldwide, Merck KGaA is also known for its hugely lucrative invention of liquid crystal displays in addition to its pharmaceuticals.
Relative youngster Serono goes back to 1906, when its patriarch founded a “pharmacological institute” in Rome. But a new era began in 1949 when a chemist at the company discovered an industrial way to produce gonadotropin as a fertility treatment. Forty years later, Serono entered the biotech sector with its first rDNA-based products, Gonal-F (gonadotropin) and Saizen (somatropin) for AIDS wasting. From the beginning, the company saw its new rDNA drugs as specialty care products, effectively establishing the model Serono still employs today.
CATCHING UP IN CANCER?
EMD Serono and its German counterpart in the Merck KGaA biopharma division place big hopes on expanding into cancer, where the North American company has no current presence and its global group has only one main product, Erbitux (cetuximab). We challenged the company’s CEO, Paris Panayiotopoulos, on the details of the expansion in the hot new field of cancer immunotherapy.
How does EMD Serono expect to compete with the leaders in the field of PD-1/PD-L1 inhibition who are now going on to Phase 3 trials with exceptional Phase 2 results already behind them?
EMD Serono has strong confidence in its immuno-oncology research and early development platform. For nearly seven years, our company has been actively building our iONC platform by recruiting preeminent talent, creating a world-class immuno-oncology medical consortium, and building a portfolio of novel cancer immunotherapies.
We will compete through our unique strategy that differentiates our efforts — from our science to our business to our focus on patients — and our robust pipeline centered on three Innovation Clusters: therapeutic cancer vaccines, cancer stem cells, and tumor immunotolerance. Our biomarker strategy is also well ahead of the competition with a biomarker program associated with each of our assets in our iONC portfolio.
Our iONC platform has also accomplished a number of firsts in the industry. Two years ago, we established an autonomous immuno-oncology innovation platform integrating research, early development, and biomarker strategies — making us the only company to separate immuno-oncology R&D from the oncology platform. We also established the industry’s first fully dedicated immuno-oncology postdoctoral and clinical fellowship programs.
What are your main oncology drugs under development?
TH-302 is an investigational hypoxiaactivated prodrug in Phase 3 trials for both soft-tissue sarcoma and pancreatic cancer. It is licensed and codeveloped with Threshold Pharmaceuticals. Sarcomas are a group of aggressive cancers of connective tissues of the body for which there are currently limited treatment options. Soft tissue sarcomas are treated with surgery, chemotherapy, and radiation. An estimated 36,000 new cases of soft-tissue sarcomas were diagnosed in 2013 in the U.S. and Europe.
MSB0010718C is an investigational, fully human monoclonal antibody that targets a protein known as programmed death ligand-1 (PD-L1). It is currently under active investigation in a Phase 1/1b clinical trial designed to assess tolerability as the primary outcome, with pharmacokinetics, pharmacodynamics, and efficacy measured as secondary outcomes, in a range of cancers. In addition, we recently initiated a proofof- concept Phase 2 study in subjects with Merkel cell carcinoma (MCC).