The Deal
Alex Lash and Peter Moreira
May 9, 2006

Merck & Co. Inc. announced two acquisitions Tuesday, May 9 in efforts to boost its ability to make its own biotech drugs. Both buyouts, which total $480 million, are of privately held biotechs with which Merck already has business ties.

The larger of the two is GlycoFi Inc. of Lebanon, N.H., which Merck will buy for $400 million in cash. The companies signed a collaboration agreement in December to provide drug candidates for Merck using GlycoFi's drug discovery platform. Dollar figures were not disclosed, but the deal called for an upfront payment, an equity investment, research funding, and milestone payments.

Terry McGuire, the managing partner of Waltham, Mass.-based Polaris Venture Partners and GlycoFi's founding investor, said: "Merck's commitment to biologics and deep discovery and development expertise make it an ideal partner for GlycoFi."

Other venture capital investors that backed the company include: Boston Millennia Partners, Fletcher Spaght Ventures LP and SV Life Sciences (formerly Schroder Ventures Life Sciences), all of Boston; Borealis Ventures of Hanover, N.H.; Village Ventures Inc. of Williamstown, Mass.; London's International Biotechnology Trust plc; Peninsula Equity Partners of Menlo Park, Calif.; and Eli Lilly and Co. of Indianapolis.

Now GlycoFi's expertise, which uses yeast culture to grow proteins and more quickly determine their therapeutic potential, will become Merck's property. It remains to be seen how the buyout affects GlycoFi's other corporate partnerships, with Eli Lilly and Medimmune Inc. Lilly took equity in GlycoFi as part of its September 2005 deal.

Lebanon, N.H.-based GlycoFi was founded in 2000, employs 55 people and has received three rounds of venture capital financing worth a total of $18.6 million. The latest round closed in October 2005, and it was increased to $11 million from $10 million due to strong interest in the company.

The transaction is expected to close in the second quarter of 2006.

The second deal Merck announced Tuesday is the $80 million buyout of Abmaxis Inc. of Santa Clara, Calif. As with GlycoFi, Abmaxis had a working relationship with Merck. In October, the biotech announced it had received a milestone payment for improving one of Merck's monoclonal antibodies.

After reaching the market in the mid-1990s, monoclonals have become a mainstay in drug development. But big pharmaceutical companies, which have built their empires on traditional chemically synthesized small molecules, have been slow to shift to biologic drugs. Both purchases give the Whitehouse Station, N.J.-based Merck additional development resources in the biologic area.

In fact, the GlycoFi acquisition is the largest recent purchase for Merck, which is struggling to regain the No. 1 position it held in the global drug market about a decade ago.

Chief executive Dick Clark took charge in May 2005 and has announced a series of measures designed to cut costs, increase research and development and find new drugs to increase profits.

However, the company has been distracted by almost 10,000 lawsuits associated with Vioxx, the blockbuster drug that Merck withdrew in 2004 after finding it increased the risk of heart problems.