The Real Art of the Deal:
Making Alliances Work

Partnerships are critical to the success of today's pharmaceutical companies. That is well understood at Merck, where approximately 60 percent of the company's revenue comes from alliance-related products and enabling patents. While scouting for the right partners and developing creative deal structures are key factors for success, they are just part of the story. For Brian Daly, head of Alliance Management for Merck's Worldwide Licensing and Business Development organizations, the real work for his team begins after the contract is signed. This is also when, Daly believes, Merck must truly excel in order to achieve the vision for the partnership.

"We work hard to ensure that no momentum is lost once negotiations have been successfully completed," says Daly. "Merck's investment in collaborations includes making sure they have the active support of engaged Merck teams — whether those teams reside in pre-clinical or clinical research, finance, manufacturing or commercial areas."

Fostering Communication and Building Trust

"Merck has more than 50 actively managed alliances currently under way, which I believe makes ours one of the most active alliance management programs in the industry," says Daly. "Our aim is to realize — or increase — the potential value of the alliance for both Merck and our partners."

Daly believes the partner relationship is like any human relationship: open communication and trust are vital. And, as with any relationship, intent and enthusiasm may fluctuate over time. New scientific findings and changes in the commercial environment are dynamics that often affect the landscape of existing partnerships.

"Collaborations may fail for technical or commercial reasons. For example, science that was once promising can reach a dead end. What is key, however, is that we don't want our alliances to fail because the partners cannot collaborate effectively."

From the start of a collaboration, Merck's alliance managers make sure expectations are set on both sides, clear communication mechanisms are put in place, and both parties understand and live up to their respective obligations without losing sight of what brought them together in the first place. To Daly, that means creating a fair forum for conversations in which both sides have a voice. "Our alliance managers are accountable for ensuring that all points of view are heard and considered before a decision is made. The goal is to build a strong foundation of trust between the partners in order to advance the mutual goals of the collaboration," he says.

Merck's Alliance Management team regularly shepherds alliance teams through difficult discussions. In a recent example, Merck and its partner had different views on the next steps for a program that was advancing through regulatory review. The result was poor communication and general frustration on both sides. Through Alliance Management working with both teams to examine the assumptions and rationale of the differing positions, better discussion and understanding emerged — and ultimately alignment. The companies now await the product's approval with a unified vision and a renewed appreciation for their partner.

Diverse, Creative Team

The members of Merck's Alliance Management teams have diverse backgrounds in science, marketing, finance, project management and law. "Our alliance managers draw upon their skills and those of their colleagues to ensure that each partnership receives the highest level of attention and expertise," says Daly.

Daly's own legal background has prepared him well for his current responsibilities. Since joining Merck in 1994, he negotiated and authored agreements for partnerships inside and outside the United States.

"Understanding each party's underlying interests and concerns is a key part of contract negotiation. That same understanding must carry over into the implementation stage of an alliance. Each side needs to be attuned to the other's expectations for the alliance and open to new ways of doing things. That understanding can give partners the ability to be creative and innovative in how they work together to sustain or evolve the collaboration," says Daly.

Facing Obstacles with Openness and Candor

The test of any relationship is how the parties involved handle the inevitable rough spots. Daly notes that Merck alliance managers are very effective problem solvers, but their real skill lies in proactively identifying — and resolving — these potential rough spots well before they occur.

"The skill is seeing the small pothole down the road, and then getting others to see it and reach an agreement on how to effectively address it before it turns into a sinkhole. Sometimes we still may hit an obstacle. But the hope is that because we saw it and talked about it openly and honestly, our partners will see Merck as a fair dealer," he says.

"Oftentimes small companies in a partnership complain that big companies don't explain why they've made a decision or taken a certain course of action. Alliance Management strives to ensure there is an environment for open and transparent communication between the companies."

For example, when Merck recently made a difficult decision not to advance a scientific project with a current partner, it was the way in which Merck communicated the decision that resulted in an amicable conclusion.

"We met with the partner and walked through the rationale for ending the project. We explained to them our thought process and assured them that their perspective was represented in the decision-making by the Merck team," Daly says. "Partners respect and appreciate straight talk in communications, even when a conversation is difficult."

Merck later received a thank-you note because the partner was impressed with the care the team put into the thought process and the prompt communication of the decision.

Committed to Relationships

Strong relationships are the glue that holds the best partnerships together — they can also bring partners together for new collaborations even after an initial partnership has ended. In 2007, for example, Merck and Lundbeck mutually agreed to terminate a joint insomnia development program after an active three-year collaboration. At the time of termination, Merck publically recognized Lundbeck as a valued partner and acknowledged that the scientific collaboration had benefited from the strong relationship between the companies.

In 2010, that strong relationship paid off when Merck and Lundbeck decided to work together to commercialize Sycrest (asenapine). The foundation of goodwill and mutual respect created in the insomnia collaboration enabled the Merck and Lundbeck teams to jump-start the collaborative activities needed to make Sycrest available to patients worldwide.

Friendships have been forged as a result of the work that goes into these partnerships, Daly notes, and that leads to a great sense of job satisfaction. "When you work closely with people and have a shared goal and a common bond, it's easy to love your job and do what it takes to keep things moving forward," he says.

"We want our potential partners to understand that once the ink dries on a deal, our relationship with them, and the care and concern their projects will receive, is just beginning."

At Merck, flexibility, innovation and creativity are at the heart of the way we work with partners around the world.

Our Business Development & Licensing team works with partners to advance their science through drug discovery and development collaborations and licensing agreements that are mutually beneficial.

Partnership Success

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