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January 11, 2005

Merck Needs Biotech Startups More Than Ever

Sarah Lacy

It’s day two at the JP Morgan Healthcare conference and the morning started with big pharma presentations. The most anticipated seemed to be Merck & Co. Inc., still reeling from the Vioxx recall.

The mood was grim, compared to the hopefulness that marked yesterday’s presentations. Walking in, I heard hallway chatter like, “Oh yeah, I sold Merck. You have to.”

Inside, the room was packed and CEO Raymond Gilmartin looked as if he were staring down the barrel of a gun. I’ve never seen him in person before—maybe that’s just how he looks when presenting to investors and analysts. But he spent the next 30 minutes trying to answer and unasked question the hallway chatter had alluded to: “Why should anyone buy your stock?”

He laid out several reasons from ongoing stock buybacks to permanently reducing the cost structure of the company. But it was clear that startup biotechs are going to play a big role in any revival Merck has. The company credits partnerships and licensing deals with smaller companies for filling out its pipeline, which is still limited and filled with several new iterations of existing blockbusters—not new compounds. Gilmartin said the company had “redefined” its view of the outside world from just licensing to real partnerships. A few years from now, such deals could prove savior to the pharma giant as well. And that’s good news for startups with juicy R&D.

02:01 PM


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