Life Sciences Insight

Merck KGaA turns to deals, ‘leaner’ organization to expedite R&D. Will layoffs follow?

Merck KGaA hopes to double its R&D productivity while simultaneously becoming a “leaner” organization.

The message echoed by Merck KGaA’s R&D team was concise and clear: We need to develop more drugs and we need to do it faster. But executing on such a strategy that is, by and large, an aspiration held by the whole industry is easier said then done.

For the German Big Pharma, the steps laid out in the company’s R&D update Monday centered on external innovation as a source of added productivity. Specifically, the company wants half of its future product launches to come from other companies, placing increased emphasis on business development. That, combined with sped-up internal development, are the basis for the company’s larger goal: doubling its productivity and launching one new product every 18 months. 

In addition to focusing on deals, Chief Medical Officer Danny Bar-Zohar, M.D., said he wanted the company’s R&D operation to be a “leaner organization.” Later on in the call, he elaborated that Merck wants to redirect funds from “lower value-adding activities” into the pipeline. When asked explicitly whether or not the company was planning layoffs to fit this strategy, a spokesperson for Merck KGaA said the company wouldn’t specifically answer at this time.

“As we said at the R&D update call, we are continuously looking into the structure, size and processes in the organization,” the company said in an emailed statement. 

More details were available, however, on Merck KGaA’s future partnership strategy, although it was unwilling to unveil exact partners or suitors. For now, the plan is to prioritize “bolt-on” deals over full acquisitions, meaning scooping up specific assets rather than whole companies. 

“We’re not necessarily talking about huge deals,” said Bar-Zohar. “And we can definitely move forward without huge ones.” The CMO specifically highlighted the company’s March 2021 deal with Debiopharm for oncology med xevinapant as the kind of deal it hopes to replicate. 

The elevation of deal-making as a more critical piece of the company’s pipeline progress doesn’t necessarily mean a massive diversion from established disease priorities, with leaders on the call making clear that the focus will remain on oncology, neurology and immunology. But it did mean adding new modalities for these respective areas.

For cancer, Merck KGaA, like many of its counterparts, is diving deep into antibody-drug conjugates, following in the footsteps of counterparts like AstraZeneca and Merck & Co. The company currently has two in clinical development, with specific excitement aimed at its anti-CEACAM5 currently in phase 1. The other pillars of its oncology pipeline include DDR kinase inhibitors and IAP inhibitors, including xevinapant. 

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