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MIT System Design & Management, 1-Jun-2015

Creating a Technology Strategy & Roadmap for Manufacturing

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Forward-Looking Statement This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; Merck’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of Merck’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck’s 2014 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

$6.5 billion; 25 drug candidates in late-stage development; key areas: oncology, CV, diabetes, respiratory & immunology, neurology, infectious disease and vaccines

2014 R&D EXPENSE

$42.2 billion; 61% of sales come from outside the United States

2014 REVENUES

Pharmaceuticals, Vaccines, Biologics and Animal Health

BUSINESSES

Kenilworth, New Jersey, U.S.A. HEADQUARTERS

Operating since 1851 RICH HISTORY

Known as Merck in the United States and Canada, and MSD elsewhere

WHO WE ARE

Approximately 70,000 worldwide (as of 12/31/14)

EMPLOYEES

Key Company Facts

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To discover, develop and provide innovative products and services that save and improve lives around the world.

Our Mission

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Major Therapeutic Areas • Cardiovascular • Diabetes & Obesity • Infectious Disease • Neurosciences • Oncology • Respiratory & Immunology • Vaccine-preventable diseases

PRESCRIPTION PHARMACEUTICALS & VACCINES

• Livestock • Companion Animal • Aquaculture

ANIMAL HEALTH

Business Areas of Focus

Some Definitions...

TECHNOLOGY: In the context of this effort, technology is defined as a system comprised of scientific/technical knowledge, processes and equipment that is used to accomplish a specific goal.

MANUFACTURING TECHNOLOGY: Manufacturing technologies are combinations of knowledge, process and equipment that are directly or indirectly involved in the transformation of raw materials into products and their subsequent delivery in a useful form to our customers and final patients. PRODUCT CONFIGURATIONS: These are actual changes in format to a product that a customer would see or perceive – for example formulation platforms or packaging configurations. For our purposes, they often help to classify various manufacturing technologies. COMMERCIAL INNOVATION: New approaches, or new combination of existing approaches, to create or capture business opportunities. Includes marketing of products and services, production/distribution channels, partnerships, media, technologies, data management, etc. to improve patient access, adherence and outcomes.

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Big Problem

• How do we effect transformations and coordinate actions at a sub-system level so that we have optimized results…

- at physical sizes that span a global enterprise - at time scales that run decades

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What do we need to do – Supply Chain Transformation

Robust incoming materials Lower cost, environmentally sound products

Customer-focused packaging Transport without human & environmental threats

Access, adherence, ease

Raw Materials Manufacturing Distribution and Logistics To Patient

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Transformation requires integrated & aligned action

RANDOM MOB

SYNCHRONIZED MARCH

Citation: Public Domain Images

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Create a systems-level overview for the technology platforms considered

Therapeutic Protein Bulk

Biologically-Derived Small Molecule API

Chemically-Synthesized Small Molecule API

Non-Sterile Devices (If applicable) (e.g. applicators)

Oral Dosage Form (e.g. tablets, capsules, soft chews)

Vaccine Bulk

Non Oral Specialty Formulation

(e.g. ointments, creams, rods, rings)

Sterile Formulation/Filling

Primary Packaging

Secondary Packaging

Distribution & Logistics

Sterile Devices (if applicable) (e.g. pens)

Info Tech

Anlyt Tech

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Define a framework for the external world

Shareholders

Drug Wholesalers /Retailers

Health Authority

Hospitals

Govt Agencies

Managed Health Care Providers

Health Care Provider

Family & Friends

Insurance Provider

Investment Analysts

Regulators

Patient

Payers Providers

Patient

Regulators

Financial Stakeholders

Sales & Marketing

Distribution & Logistics

Planning & Scheduling Procurement

Raw Materials Suppliers

Active Ingredient Sites

Formulation Sites

Packaging Sites

Site Quality

Research & Development

Supply Chain Franchise Mgmt

Neighbors

Public

Society

Warehousing Science & Technology

Global Quality

Global Safety & Environmental

Quality- Regulatory

Manufacturer

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Convert the needs to measurable KPIs MAJOR PARAMETER KEY PERFORMANCE PARAMETER MEASURE DEFINITION STAKEHOLDER WHO CARES

Safety & Tolerability The safety profile of the medicine.Patient, Provider, Payer,

Regulator

EfficacyHow effective is the medicine in effecting the disease target, generally measured by bioavailability over time.

Patient, Provider, Payer, Regulator

Features

Attributes that signify the non-biological elements of the product, like integrity and elegance of the medicine, the ease of use of the packaging etc.

Patient, Provider, Payer, Regulator

Manufacturing Efficiency and Robustness Measures

All the manufacturing parameters that are part of being a world class supplier including inventory stock turns, process capability (CpK), overall equipment effectiveness (OEE), right first time (RFT), on time in full (OTIF), and cycle times.

Manufacturer, Regulator

Standard Cost to Make ProductThe manufacturing cost to create a certain number of units of the product.

Manufacturer

Flexibility to Continuously Improve

The measure of how rigid or flexible the process is to learning and then instituting improvements based on that learning.

Manufacturer

Sustainability and Environmental Factor

The inherent operational safety and the green-ness or environmental friendliness and sustainability of the process.

Manufacturer, Society, Regulator

Global Access

Increased global access for medicines is important and this parameter represents the technologies ability to be operable in various markets around the globe.

Patient, Society, Manufacturer

Scalability and Continuity of Technology from R&D to Manufacturing

This measures the continuity of the technology from bench scale and pilot scale models to manufacturing allowing for knowledge to be built over time and across different products using the same platform.

Manufacturer, Regulator

PRODUCT

A winning product fashioned with the customer value drivers in mind and continues to deliver this value consistently.

PROCESS

Sustainable and profitable business/manufacturing system

to create and deliver the product robustly, wherever they are needed while building and leveraging institutional wisdom

seamlessly.

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Create roadmaps

p p p p Solid Oral Dosage Forms Solid Oral Dosage Forms –– RM to Bulk Product Tech Road MapRM to Bulk Product Tech Road Map(Note: Bulk Product to Customer would be covered on another map(Note: Bulk Product to Customer would be covered on another map as we have structras we have structr

BD Phoenix 2

China – Dragon XBD

BoP ProductInnovation

1H2011 2H2011 1H2012 2H2012 1H20131H2011 2H2011 1H2012 2H2012 1H2013 2H2013 1H2014 2H2014 1H2015 2H2015

Premium/Existing Mkts

Premium/Existing Mkts

Bottom of the Pyramid

Bottom of the Pyramid

Emerging Mkts Middle Class

Emerging Mkts Middle Class

Grand Challenge Pilot

Innovation BoP Product/Service

BoP Product

BG – MK-YYYYAcqR

India 7.2BD

BG – MK-XXXX

MK-XXXX

MK-YYYYClinical

Innovaion BoP Product

API TechnologiesAPI Technologies BalhExp

BlahExp

Blah BlahExp

Low Cost API TechExp

BlahExp BlahExp

BlahExp

BlahExp

Business &Organizational

Models

Business &Organizational

Models

MK-ZZZZClinical

Projects not fundedProducts/Technologies In-Use

Projects Funded/In Progress

Technology in Commercialization

Turkey – Korea - TTTJBD

BGx Operating ModelDevelopment Partner NetworkExternal Development

BlahExp

Formulation TechFormulation Tech

RM TechnologiesRM Technologies

Market Segments

Physical Technologies

Color is Type of Activity Required Exploratory, Vs. Incremental Innovation

Major Tech Category

Products/Franchises of Focus & Their Plans i.e.. Commercial Strategy

Sandwich in Business & Organization Models

Dotted Lines Indicate Connections Between Commercial & Technology Work

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Institutionalize the process

Technology Inventories

(a subset of which are Proven

Technology Toolkits)

Product Family Plans

Customer Needs/ Business

Requirements

Market Dynamics

Science & Technology Landscape

Customer Understanding

Voice of the Technology

Technologists Marketers

Voice of the Customer

Feedback & Collaboration

Technology Roadmaps

Proven Delivered

Customer & Business Value

A B C

Proof of Science Hint of Commercial Potential

Proof of Technology System-level Concept

Proof of Regulatory, Operational & Commercial Use Proof of Robustness

Technology Funnel

Horizon III Horizon II

Horizon I

Informs

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CHEM SYNTH

ORAL DOSAGE

NON-STERILE DEVICE

PRIM PACK SECOND PACK

DIST & LOG

ACTIVE INGREDIEN

T

EXCIPIENTS

COMPRESSED TABLET

BLISTER PACK CARTON

CFD REACTOR DESIGN

DIMENSIONLESS

COMPRESSION

MACHINE

EXTRUSION

SIMULATION

SPRAY COATING DESIGN SPACE

FILTRATION

APPARATUS

OPTIMIZATION

STERILE ROBUSTN

ESS

GRANULATOR

MODEL

STOCHASTIC RC

LOADER

THERMAL STABILITY

OPERATIONAL FLOW

MODEL

MULTI-MODAL

TRANSPORT

DECISION TREE

PVDC FOIL

MOISTURE SEAL

PREDICTION

FLOW CONTROL

S

SYS DYNAMIC

S DASHBOA

RD

ENVIRO FACTOR PREDICTI

ON

VIBRATIONAL

SIMULATOR

CHEM SYNTH

ORAL DOSAGE

NON-STERILE DEVICE

PRIM PACK

SECOND PACK

DIST & LOG

ACTIVE INGREDIENT I I I I I

EXCIPIENTS I I I e

COMPRESSED TABLET e e I

BLISTER PACK I I I e

CARTON e e e e e e

CFD REACTOR DESIGN b b

DIMENSIONLESS COMPRESSION

MACHINEb b b

EXTRUSION SIMULATION b, e s

SPRAY COATING DESIGN SPACE b, e t s

FILTRATION APPARATUS

OPTIMIZATIONt, e t, e sc s

STERILE ROBUSTNESS t s

GRANULATOR MODEL w, e s

STOCHASTIC RC LOADER t, e s t

THERMAL STABILITY sc, e sc, e s e e

OPERATIONAL FLOW MODEL t daMULTI-MODAL TRANSPORT

DECISION TREEda

PVDC FOIL MOISTURE SEAL

PREDICTIONb b w w w w w w w da da b

FLOW CONTROLS t, e s

SYS DYNAMICS DASHBOARD e b s

ENVIRO FACTOR PREDICTION e b s

VIBRATIONAL SIMULATOR b w w w

TECHNOLOGY & PSE INITIATIVES

TECH

NOLO

GY &

PSE

INIT

IATI

VES

PROCESSES

PATHWAY AKOQR

OPERANDS

PROC

ESSE

SOP

ERAN

DS

Manage program-program interactions

THERMAL STABILITY

MULTI-MODAL TRANSPORTATION

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Diabetes example: All projects work in unison to transform supply chain

Reduce API costing Green chemistry Biocatalysis

Near IR enabled, Chemometric Real time release testing

Packaging allows for adherence

Serialization & Trust

Raw Materials Manufacturing Distribution and Logistics To Patient

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Technology Feasibility for Mfg Use

Extent of Products Uses for Market Needs

Install/Implement

Proactive Investment

Creation of Need

Reaction To Need

Sunset of Tech/Prod

Unproven (H3)

Proven (H1)

No Immediate Need Exists for Use

Product(s)/System Need Exists For Use

Technology Management Paths

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• Enterprise level transformation to meet human health and sustainability challenges requires many efforts to work in unison

• This innovation, alignment and prioritization cannot be left to chance: Technology roadmapping provides an effective solution for managing wide-scale technical transformation.

• It enables the connection from activities directed at molecular size and immediate time scales to global size and multi-year time scales

Summary

BD Phoenix 2

China – Dragon XBD

BoP ProductInnovation

1H2011 2H2011 1H2012 2H2012 1H20131H2011 2H2011 1H2012 2H2012 1H2013 2H2013 1H2014 2H2014 1H2015 2H2015

Premium/Existing Mkts

Premium/Existing Mkts

Bottom of the Pyramid

Bottom of the Pyramid

Emerging Mkts Middle Class

Emerging Mkts Middle Class

Grand Challenge Pilot

Innovation BoP Product/Service

BoP Product

BG – MK-YYYYAcqR

India 7.2BD

BG – MK-XXXX

MK-XXXX

MK-YYYYClinical

Innovaion BoP Product

API TechnologiesAPI Technologies BalhExp

BlahExp

Blah BlahExp

Low Cost API TechExp

BlahExp BlahExp

BlahExp

BlahExp

Business &Organizational

Models

Business &Organizational

Models

MK-ZZZZClinical

Projects not fundedProducts/Technologies In-Use

Projects Funded/In Progress

Technology in Commercialization

Turkey – Korea - TTTJBD

BGx Operating ModelDevelopment Partner NetworkExternal Development

BlahExp

Formulation TechFormulation Tech

RM TechnologiesRM Technologies

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