Merck & Co., Inc. (MRK) Earnings Call Transcript & Summary

Hi, everyone. Welcome to the BIOMEDigital conference theater, where the panel discussion: The development and manufacturing of combination products for next-gen healthcare is about to begin. I'm [ Hilly Hagerty ], the [indiscernible] Event Director for the pharma markets engineering. And before I introduce the session's moderator, I'd like to go through some helpful tips to make sure you make the most of this session. [Operator Instructions] I would now like to introduce you to our moderator, Anthony Listro, from Foster Delivery Science. Over to you, Anthony.

Thank you, [ Hilly ], and we're going to get started with the -- our panel today. And it's the development and manufacturing of combination products for next-generation health care. And today, we have with us Ali Jahangir of Janssen Pharmaceuticals. We have Steve Persac from Merck, and we have Adam Lambert from Pharmatech Associates. And at this point, I'd like each of the participants to introduce yourself, and then I'll introduce myself. So Steve, do you want to go first?

Sure. Steve Persac, I'll introduce myself first. Like Tony said, I work for Merck. I am a principal scientist in the MRL, the R&D division of Merck, the device development group. I've been at Merck about 10 years, totally focused on medical device and combination product development and commercialization. Originally, my education is Mechanical Engineering. And at Merck right now, I'm really heavily focused on parenteral delivery devices. Thanks, Tony.

Adam?

Yes. Adam Lambert, I'm Pharmatech Associates. I'm the Vice President of Product and Process Development. We've been working in combination products and medical device, drug product development for most of my career, most of the time has been on drug device combination, but I recently had an opportunity to do a lot of work on device drug products. Thank you.

Okay, and Ali?

Good morning. Good afternoon. It's Ali Jahangir. I am a senior principal engineer at Janssen Pharmaceutical. I'm part of combination products, center of excellence in Janssen, based in Springhouse in Pennsylvania. And my job essentially revolves around launching combination product and ensuring flawless execution of commercialization of these products throughout the globe. My background is -- I'm a PhD in biomedical engineering, specializing in polymers. And I've been part of J&J for the past 10 years, first in the consumer division and now in the pharmaceutical but mainly and heavily focused on medical devices in both fields and both domains.

Okay. Thank you. And my name is Tony Listro, and I'm Vice President of Technology for Foster Delivery Science. My background is in plastics engineering. I've been in polymer processing and polymer formulations for the past 30 years. And right now I'm at Foster Delivery Science, we're a CDMO focused on extrusion technologies and just creating various dosage forms for pharmaceutical applications, including combination devices. So great. Then let's get started with the questions. Our first question today for the panel is, what trends were we seeing in combination products prior to the pandemic? And have those trends changed any? And what are we seeing as we move into 2021? So who would like to get started with that?

I can start that. I think we are -- that's a great question, Tony. I think what we're seeing and it hasn't been impacted by COVID per se is the fact that our pipelines are getting more populated with large molecules, large molecules, anti monoclonal antibodies that requires essentially a higher volume of them being delivered. So more sophisticated devices are needed, more sophisticated system of deliveries are needed. We're talking about patch pumps. We're talking about above 2 mL deliveries. And I think those are some of the challenges that our industry is facing at this point. Because up until now, we've been dealing with probably optimally about an mL or less than 1 mL delivery. So I think that would really bring a new sets of guidelines. And from an R&D perspective, quality perspective and manufacturing perspectives. I also think that mobility and basically electronics, electromechanical devices are also becoming quite popular. So I think I will let my other panelists to sort of chime into that. I'd be happy to contribute further.

Yes. I'll take that a little further and to add on to your comments, Ali, is in reference to the current COVID situation. At least on my end, there's been a lot more talk around 2 things. One, self-administration, for products that are normally [ in miss ] or in clinic. How do we get those at home, so people don't have to travel to get those products administered to them and as well as kind of in tandem with that adjusting dosing frequencies, right? So if -- whether or not the product was administered in clinic, if it's something that you're looking at administering every week, can you push that schedule out to be less frequent. And I think the holy grails lands somewhere in a much less frequent product moving from the clinic at home. And the current COVID situation, I think, has put a stronger light on that type of movement.

So, I absolutely agree. The self-administration, non-clinic administration has been good. It's always been a push that I've seen from a device perspective because increasing patient compliance, getting patients to take the products and administer them and get the drugs administered has been -- always been a challenge. And one of the biggest drivers for efficacy of products is compliance. So increasing compliance and increasing the ability of patients to get the medications has been something that's been a push. And I think COVID has really kind of accelerated that a little bit, more complex devices, devices that communicate with apps and that will directly communicate back to physicians, and allowing it an easier use of products has been a trend. But I think COVID has kind of accelerated that a little bit.

I think I'm just going to add one more point to Steve and Adam's point. I think complexity of the devices also means that their design has to be intuitive, if they're going to be push toward people's home and self-administration. So that really becomes a challenge for the companies who design these devices that how do we make sure that the usability of this device, if you will, is more intuitive so that we don't end up in a situation that we're getting a lot of complaints. And at some point, one of the health care authorities will knock on our doors. So we really have to be careful, not that we haven't been thinking about that, but I think COVID, as Adam mentioned, is putting a little bit more emphasis on that aspect of intuitive device and ease of usability.

Right, absolutely.

Okay. So we talked about large molecules, mobility, electronics, and I guess we could probably categorize that as Internet of Things or IoT, self-administration being a key factor and the complexity of these devices. Are there any other trends that you can think of? Or is that pretty much capture it? That's quite a bit actually.

So that's a lot of work.

Yes.

For sure.

Yes. So of all -- so I guess those are all the things that are driving these new or next-generation combination devices. Are there any -- or maybe it's embedded in those topics. But are there any technologies that are driving new innovation?

Do you mean other than, like, for example, Internet of Things, the virtuality of the devices and the connectivity, you mean -- I mean, I think I've alluded to the fact that the large molecules require, I mean, we can't just rely on auto-injectors that are used today. And we have to come up with auto-injectors that are high volume. As far as I know, I mean, gentlemen, correct me if I'm wrong, but I think 2 mL is the optimum that we've seen up until now. I mean there might be -- but I mean that's just stretching the limits of an auto-injector. So we need to come up with the devices that could accommodate higher volumes.

So what type of volume is that? Because you said traditionally, it's less than 1 ml and 2 mLs maximum. What -- for a biologic, what are you looking for the device to achieve?

I think we're trying to push that boundary to about 5 mL. I mean, I think basically some of the things that I have looked at. I mean, before that, we've been using other technique of delivering it, but I think patients have to go to the hospital and get the injection like that. But if you're trying to make that more patient-centric design and basically more mobility associated with it, we ought to have to come up with a better delivery system, I think. I don't know, Steve, what you think?

Yes. No, I agree with everything you said. I think what that forces us device folks to do is really engage our formulation colleagues early. I think the paradigm was once, okay, here's the formulation. Now go develop the device, where now with these larger molecules, larger volumes, we're engaging earlier and it's a give and take, right? We have our set of device options, and they have their set of formulation levers. And we have to work together to get to that point, whereas, I think, historically, it's more been -- here's the hand off, here's the formulation you have to deal with, now go and put that into a syringe or vial or whatever, now it's much more of a 2-way street, I think.

Right.

Yes.

And it's getting the development people to work with the device people and vice versa. I've been working in biotechnology. And with monoclonal antibodies, is always developing high concentration formulation. And then trying to find an off-the-shelf device that will work with it. But working in conjunction with the device development team, again, going to 5 milliliters, that to me, is -- would be as a formulator, I would have been like, thank you. Because it's something that like -- as you increase concentrations, small molecules, increasing concentrations is relatively simple, it's not exactly that easy and please [indiscernible] people don't shoot me for that statement. But from a perspective of being able to work with the device people to identify what the requirements are and how to meet those needs, delivery pumps that deliver larger volumes over a longer period of time and understanding how the drug is going to have to interact with the device over that longer period of time. And on all of those factors really play a role in defining the overall product. And also, that has to be -- if it's going to be delivered over a longer period of time. If it's going to be self-administered, then you have the patient interaction is longer. So the user requirements change and get more complicated. So really, it's -- I think, yes, that, to me, is really critical is to get device and drug people and understand that everybody is on the same team and really kind of work is a give and take to make sure things are optimal for the patient who are ultimately delivering these products.

If I may just add one more -- one more point. Adam brought a really interesting perspective into this. I think we're looking at a shift in paradigm, right? I mean, I think a shift in paradigm from the perspective that we're no longer getting rid of symptoms, we're actually getting to the root cause of the disease. And in fact, monoclonal antibodies are able to do that. So that's from a very broad perspective of what's going on in our field. And to facilitate that, I think we are changing the rules. I mean, those good old rules of small molecules, still relevant. But I think we're moving more toward patient-centric approach across industry. And I think that's when I think this merger of disciplines like engineering and medicine and biology or whatever should actually come together. And we also have to acknowledge the fact that there will be obstacles as far as communication is concerned. I mean, when I just sit down and talk about stability, stability of the biologics, stability of a small molecule, stability of a device, I mean we use different lingos. We use different languages, we use different criterias. So I think from an industry-wide perspective, we have to acknowledge that. We have to work toward this common language. We can all have our own language but at least in the way that we can all understand it and also regulatory folks, FDAs and EMAs of this world should also acknowledge that so that we can actually come up with a I guess agreeable solution at some point. So I think those are some of the challenges that we're facing at this point. And I think we're working through it. And I think to Steve's point, I mean, we already have started getting together with the formulation folks from the very beginning to sort of contemplate different devices, different device options. But I think all of that, I'll get back to my original point, it reflects a changing paradigm that I think COVID and the situation has just accelerated it. I mean it would have happened, but I think it's just -- we're just going through that at a little bit of a faster rate.

Yes. It's good. Yes. Absolutely. We're taking -- it's an opportunity to accelerate it, actually, it going in that direction, I think it's looking at it as an opportunity to move things in the right direction.

Absolutely.

So from a therapeutic standpoint, it sounds like that the science behind large molecules and getting to treat the disease itself and not just the symptom, that's probably the biggest driver for the type of molecule you're dealing with. I guess, from a more practical standpoint, you -- and that's incredible, and we're really lucky. But just even moving from a 1 mL to 5 mL dose, for example, you mentioned stability sort of as an example, but is it more like keeping that large molecule stable? Is it -- is stability an issue? Or is it the pump technology? How do you have a consistent dose? Because I'm sure if it's 5 mLs instead of 1 mL, is it because it's dosed over a longer period of time. Is it more preserving the molecule? Or is it the pump technology itself?

Sorry, is that question direct to me?

Yes, anybody.

So I mean, I think that's a good point you're raising, Tony. I think I guess when it comes to managing stability between device and drugs, I think your -- the weakest link becomes your rate-limiting step here. And I think at that point, what I mean by that is that your drug and your biologics is always the entity that you need to actually consider because those usually have the least amount of shelf life, if you will. And they're prone to -- I mean, we're talking about proteinaceous kind of drugs and the fact that, if they go through agitation, if they go through temperature changes, they can denature and you basically render them completely useless. So I think I would always put the emphasis on understanding the behavior of your biologics over the long term. The volume of it is also an important factor but I really think that that's just a little bit more that we need to consider. But I think the configuration of protein structure and its longevity becomes really important, and it's the interaction with the device, right? And there are no guidelines per se from FDA or other health authorities to tell us how to do that just because of the complexity of combination product. We go from like a single cup to an MRI machining, if you will, like, for example. So there's a lot of complexity. And so those are the things that, again, I'll get back to Adam's point, that it helps us to sort of when you -- when the team tries to decide what to do, you need to have stakeholders from all functionalities involved to sort of figure out this end-to-end stability, I guess, protocols, if you will.

Yes. So it's more of a multidisciplinary approach [indiscernible] involved.

Yes.

Adam?

And I know, even when you're in the early phases of development looking at your formulation and its stability conditions across its shelf life, that's a big driver for device selection early on, too. If you got something that's 2 to 8 C, you got something that's room temp stored, you have something that's frozen completely, that's really going to play into, obviously, your drug delivery device selection, too.

Yes. Yes. So it's the drug interacting with the device and how they interact that kind of drives what the stability is. And from my perspective, taking it from a risk-based approach, what are you doing a risk analysis, looking at overall what are the drug interactions, how is the drug interacting with the device? What is the end user going to be looking at, how is the device going to be stored? How is that going to affect the materials? How is the product going to interact with the materials? The complexity kind of grows. I mean if you look at just doing like an ICH stability program that may or may not be adequate for the product that you're developing, right? So I mean you want to know what your critical attributes are. What are your critical design requirements in stability? What are your critical product requirements on stability and tie all of that together, so that at the end of the day, the product at the end of its shelf life is still as functional as the product as it came off the assembly line. So there's a huge amount of complexity. When you talk about stability that when you marry a drug and a device, that they -- that needs to be considered. It doesn't necessarily need to be more complex, but it needs to be considered upfront, right, during the design.

Yes. And I think -- I mean, I can -- let me go, and I can speak about stability for the next few hours just because -- I'm dealing with those issues within Janssen. But I think the type of combination product that we're having in mind also contributes to that. The consideration of stability, like whether it's a single entity, whether it's a co-pack, whether it's cross label, the fact that is the device and drug in constant contact with each other in the case of single entity product, or if it's like cross labeled or co-packed products. So they're not in contact with one another. So that -- those elements essentially comes into it. And we can definitely talk about that should there be more interest.

Yes. No, that's a good point, Ali. We're -- and sometimes the characteristics of each of the products kind of define how that has to be done, too, right? So...

Absolutely. Yes.

Great. Right. So that's a good discussion. I guess shifting gears a little bit and taking a look at the regulatory landscape with COVID-19 in focus. What are some of the hurdles that you faced in the recent months, in the past 7 months or so, as things have evolved? I would think that if you're trying to do a multidisciplinary approach and you have COVID, certainly, one of the things might be the personal interaction just like water cooler talks and things like that. But are there other things that come to mind from a regulatory standpoint.

I mean with COVID and the regulatory landscape of just the EMAs and all the -- all the different allowances to get products in the market, getting ventilators approved and facemasks and N95 and getting all of these things out there. I mean, from my perspective, it's working within that framework. And I don't think it's changed a whole lot from the regulatory -- if you're talking about a device combination product that's not related to COVID but when it's related to COVID, it definitely impacts your regulatory strategy and how you pursue approval of that device. It's complicated. There have been some trends that were taking place on the regulatory side in the U.S. that were moving forward. And now with COVID, I mean like just if you look at EMA, right, if you look at Europe, the MDR was supposed to be in effect now. And whereas now we're still under MVD, but how do you -- I mean -- but then there's a complexity of, okay, well, we still need to submit probably under MDR right now because nobody is accepting MDV applications currently in the EU. And so it's affecting the timing and the thinking and how to get the submissions put together and submitted to authorities and so that you can achieve. And we can keep delivering these products to patients in a timely manner. Because ultimately, we want to get products to patients as quickly as possible because these are products that are -- our goal is to help patients' lives, to save lives, to improve their lives. So it's kind of learning in the COVID environment from a regulatory perspective, how to keep the ball rolling, so to speak, has been a challenge.

Yes. I mean, I tend to agree with Adam on this. I'm not too sure about the implication of COVID, but I think EU MDR is something that has been delayed. And I think -- I like that agreement. I think all of us are trying to make sure that our organizations are following that mandate. I mean, at the end of the day, it's sort of enforces stricter premarket control of high-risk devices in EU. I mean, they're introducing a new risk classification system for diagnostic medical devices. So I think all of that needs to be somehow be considered, but I'm not too sure how COVID has done that. I think the remoteness of us and basically talking to FDA, when we're submitting our applications, obviously, has been done through virtually, through teleconferencing, Zoom meetings and things like that. And obviously, it's not the same as one-on-one perspective. So I think that's my, I guess, understanding of it.

Yes. And from my perspective, I'll agree with both Adam and Ali, that things really haven't changed significantly from a regulatory perspective due to COVID. Of course, there's the remoteness of it all that we're all Webex-ing and Zoom calling. But we're still moving forward and getting things done. But yes, the EU MDR thing, that's definitely always has been on our radars and something that we have to make sure that we're prepared and plan for. So regardless of COVID, that is still a challenge we're preparing for.

Okay. Great. Okay. Next question. Are there any manufacturing hurdles that you've dealt with as a result of the issues associated with the pandemic. For example, materials, supply or just working with contractors or just internally?

I mean I can kick that one off. I think the short answer is yes. There have been hurdles. And I think it's not only from a material standpoint, but -- when you're commissioning a piece of equipment, you go through qualification and acceptance testings and now none of us can travel. So how do you do an FAT remotely. We're getting it done, we're learning. It's certainly going to change how we do this in the future, right? I think people are going to think twice, do we need to get on a plane to go halfway around the world, when we can maybe use VR goggles or something like that.

Yes.

But, there have been challenges up and down that chain from qualification, acceptance testings to glass shortages, all sorts of things that we had to deal with that are, I think, directly linked to the current pandemic.

Yes, glassware shortages, vial shortage. I mean they're being allocated to other things. Yes, suppliers, virtual auditing has been -- is up to do. And at the end of an audit, sometimes, you're like, is that adequate? Do we see enough? Did they show us everything? I mean, because especially with VR goggles and having somebody walk you around a plant, it's not the same as being there and seeing things and noticing things. So it's -- to me, it puts a little bit more emphasis on, okay, there's -- you have to take a little bit more ownership and responsibility in these things and make sure that you're doing an adequate job of being thorough enough and approaching it from that perspective. From a manufacturing hurdle perspective, it's getting people in, being able to get in is relatively an impossibility. There's people who say no, non-essential, you're not entering the plant, we can't do it. So it's a challenge to make sure to take -- to be able to take the responsibility as a manufacturer to ensure that quality systems are in place, that the quality of the supplier is sufficient for your product.

Yes. I tend to agree with both of those points. I just basically a little bit more on this. And from a broader perspective, I think supply chain interruptions has happened throughout the globe because of pandemic. I mean I think the raw materials is one of them, but also transportation of it has also been significantly impacted. And I don't really see how we would be able to get over that until we have some kind of a therapeutic that addresses the disease, to be honest with you. But from an auditing perspective and quality control perspective, I think I've personally done 2, 3 of them. It's not the same thing as in person auditing, quality auditing of the facilities. But to be honest with you, you can make it work. And I think those are one of the technologies that is here to stay. And I think we've probably come up with a better technologies in the future to sort of do that. Now having said that, we've always said that we're going to do this virtual auditing. But in a year from now or whenever it's possible, we will be there in person to make sure that things are in place and what we saw is exactly the reflection of what exists out there. But I think those aspects of virtual working and the technologies that could help us to I guess, make that more realistic, it's going to be part of our future world. And they termed that Industry 4.0. In other words, the fourth industrial revolutions. I think we're looking into that. I think we're just at the beginning of it, and we can -- I think to me, it's an opportunity for us to shape that and to form it the way [ we want to ].

Yes. And even kind of moving earlier in a development process, where you're kind of looking at platforms that you'd want to develop and commercialize, those early phases of, I'd say, non-design-controlled development activities. When you really kind of intimately engaged with that device vendor learning about their platform, picking things apart, making sure you, as the customer, understand all the risks, that stuff now that has to be done all virtually. You're working across many time zones and really took granted those face-to-face meetings with those engineers and project leaders, to understand holistically as a platform as you're looking at their risks, pros and cons, and now that all has to be done virtually. So to your point, Ali, yes, that's going to be, in some degree, baked into how we move forward. But yes, I'm anxious for the day, we can get back on a plane and sit down in front of somebody and talk through that stuff.

Yes. Steve nothing -- I mean, you just pointed out something, and I wanted to take that. I think it's an interesting point. I mean, you've spoken about risk management and then assessing the risk. And I think a lot of industry have been caught by surprise of the fact that we haven't really demonstrated our agility and resiliency in our risk documentation. So how do we make our risk documentation more agile? And our systems more agile that can handle stresses and global pandemics like that because this might not be the last pandemic that we're facing. So what do we do throughout our systems and throughout processes, that accounts for that level of resiliency and agility. And I think that's something that if you go and talk in various industries, I think that's what you're talking about at this point. And I think that's what we need to do in our industry and in our field as well.