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UPDATE 1-Merck KGaA seeks investors to share clinical trial costs
October 14, 2013 / 10:11 AM / 4 years ago

UPDATE 1-Merck KGaA seeks investors to share clinical trial costs

* Top executive says private equity could co-fund R&D

* Merck trying to rebuild pipeline after setbacks

FRANKFURT, Oct 14 (Reuters) - Merck KGaA said it was in talks with private equity firms and other investors to share the cost of some clinical trials, part of the German healthcare group’s effort to secure long-term growth.

Merck, which is seeking to rebuild a drugs pipeline weakened by a slew of setbacks, is vying with much larger global rivals such as Novartis and Pfizer for licensing deals with biotech research firms.

Pharmaceutical companies often team up with each other to share the financial burden of testing drugs, developed either by themselves or biotech firms, on humans. Costs can run to hundreds of millions of euros.

But Merck is hoping to tap a new source of funding in the shape of private equity, which has largely shunned the high-risk business that requires deep knowledge of medicine and regulatory requirements.

With 6.9 billion euros ($9.4 billion) in sales from prescription and over-the-counter drugs in 2012, the German group, which has no affiliation with its namesake U.S. peer Merck & Co, is about 1 billion short of the global pharma sector’s top 20.

However the drugmaker, controlled by the Merck family of about 150 descendants of the company’s founder, has said it was determined to hold its own against larger rivals.

Merck is also exploring more “risk-sharing” deals under which the company would receive a fee linked to the success of some of its products including in-vitro fertility treatments, the Financial Times cited head of healthcare Stefan Oschmann as saying.

Late-stage trials for a cancer drug typically costs between 150 million and 400 million euros. That cost rises to as much as 600 million euros for multiple sclerosis drugs, he said.

According to Deutsche Bank analysts, trials in the third and last phase of testing required for market approval account for over 35 percent of a drug company’s research and development spending on average.

Analysts expect Merck’s two main products, multiple sclerosis drug Rebif and cancer drug Erbitux, to reach peak sales in 2013 and 2014, respectively.

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