"Germany's Merck KGaA is betting on artificial-intelligence partnerships to develop new drugs but refraining from bringing in external expertise through acquisitions, the head of the group's healthcare segment said.
Pharmaceutical companies are increasingly looking to AI tools for everything from designing new experimental drugs to predicting the response patients will have to treatments. Merck, known as EMD Group in the U.S., sees greater value in teaming up with independent AI companies, rather than in an outright acquisition of a company that specializes in the technology.
"Acquiring such a company is probably not a good idea because the field is moving so fast that we have to leave those companies in their own ecosystem so they can continue to evolve," said Merck Healthcare Chief Executive Peter Guenter, also a member of the group's executive board.
Merck Healthcare is also taking a cautious approach toward another hot trend, weight-loss drugs. Booming sales of Novo Nordisk's Ozempic and Wegovy and Eli Lilly's Mounjaro and Zepbound sparked a race in the industry to launch treatments for obesity that has attracted giants such as Pfizer, AstraZeneca and Roche Holding, but the German company decided to stay out of it.
The market for obesity drugs is incredibly crowded and highly competitive, according to the Merck pharma chief. Instead, the company aims to concentrate on its three therapeutic areas of oncology, neurology and immunology. "If you stay close to the therapeutic areas you know, you have more chances to be successful," he added.
Darmstadt, Germany-based Merck has operations spanning electronics materials, life-sciences equipment and services, as well as pharmaceuticals. In the pharma business, which Merck houses under its healthcare segment, Guenter sees room for structural change triggered by AI.
"We see the biggest potential game-changer in research and development."
He is particularly optimistic about the technology's potential in the initial research phase, a process that is long, risky and costly. Even if a compound shows promise in the simulations, it still has a long way to go to become an approved treatment.
AI has already been deployed to develop new drug candidates, but most of the molecules discovered by the technology are still in early trials. Some have progressed to the mid-stage trials, particularly within oncology, which accounts for half of AI-discovered molecules in the first two phases of clinical studies, according to research by Boston Consulting Group.
"What we do is a high-risk, but also a high-reward business. Most of the products that we start working on, we know that many of them will fail," Guenter said.
A Morgan Stanley report from 2022 predicted that 50 new drugs developed thanks to AI would enter the market globally in the next decade." [1]
1. EXCHANGE --- Germany's Merck Looks to AI For New Drugs, Rules Out M&A. Smolak, Helena;
Haxel, Stefanie. Wall Street Journal, Eastern edition; New York, N.Y.. 08 June 2024: B.9.
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