Merck Research Chief Peter S. Kim

Peter S. Kim took over as President of Merck Research Laboratories (MRL) just as the pharmaceutical industry’s venerated giant went into precipitous decline. In 2004 the blockbuster arthritis drug Vioxx had been withdrawn on evidence it was causing heart attacks, facing Merck with upwards of $30 billion worth of damages liability from victims’ families. Worse, as of 2005 Merck had only 11 drug candidates in the pipeline, too few to make up up for big-selling drugs whose patents were expiring.

“A quote I heard a lot was: ‘Well, that’s not how we do things at Merck,’ “ Kim recalled. “My answer would be: ‘OK, but that doesn’t necessarily make it the best way to do things.’”

But it wouldn’t do for the new research chief to be seen as the source of such negativity about his new colleagues. Kim commissioned a survey. Not surprisingly, the survey found that Merck was seen as an arrogant giant with no respect for the small innovative biotech firms with which it needed to partner to create new drugs. It gave Kim just the ammunition he needed to shake things up.

MRL began retraining their research executives to become more sensitive and respectful toward counterparts at the small biotechs. Kim also shook things up by bringing in fresh blood to shed the deathgrip of complacency when he saw that MRL had walled itself off from outside input.

“Merck has outstanding science and scientists — and it did when I came,” Kim said. “I knew that there were some scientists on the outside who were better.” Kim tried to bring in breakthrough AIDS researcher David Ho to oversee Emilio Emini, Merck’s senior vice president of vaccine research. That precipitated Emini’s defection to Wyeth. Undeterred, Kim went on to hire many other outsiders for key research posts.

Kim also led by example. Showing the kind of dynamism more common in much smaller companies, Kim didn’t hesitate to hop on the corporate jet to meet with the heads of smaller rivals who had drugs Merck needed.

“It’s the first time I’ve seen the head of research at a big pharmaceutical company take a plane and show up in a matter of days,” recalled Jean-Paul Clozel, CEO of the Swiss drug company Actelion. “Usually, what you hear is: ‘I have a window of availability for an appointment in a few months.’ Kim and Clozel closed the deal over dinner at a Basel restaurant.

“If Peter Kim hadn’t made that trip, we would have gone with the other offer,” Clozel says.

With this strategy of renewal Kim not only quashed Merck’s prevailing culture of arrogance but also produced solid results on the new drug front. In 1999 Merck had formed only 10 biotech deals. During the first three years after Kim became Merck’s research chief in 2003 the company inked 141 deals. By February of 2006 Merck had 52 new drug candidates in human testing against only 16 in December of 2002.

The investment community seconded Kim’s efforts. By early 2006 Merck’s market value had slipped below that of Amgen, the relative newcomer then seen as leading the way toward a brave new era of gene-based therapies. Today Amgen’s market cap has slipped to $54 bil. while Merck’s has risen to $114 billion. Granted that about $55 bil. of that is attributable to the 2009 merger with Schering-Plough. The balance still represents a hefty gain over Merck’s languishing market cap when Kim took over as chief of MRL. In 2006 Merck was number 123 on the Forbes Global 2000. In 2010 it had risen to number 72. Kim has been rewarded with over $4 mil. in annual compensation, including stock options and various non-equity incentives.

Peter S. Kim was born in 1959 in Korea. He received a B.S. in chemistry from Cornell University and a Ph.D. in biochemistry from Stanford University. While at Stanford he was a Medical Scientist Training Program Fellow and was simultaneously working toward an M.D. Upon completing his Ph.D. work in 1985 Kim dropped out of medical school and became a research fellow at MIT’s Whitehead Institute. His obvious brilliance in the field of structural biology quickly got him promoted from research assistant to a full professorship.

At MIT Kim focused his efforts on discovering how proteins cause membranes to fuse as that is the mechanism by which viruses infect cells. In particular, Kim has devoted much of efforts on a coil-shaped protein used by the AIDS virus to pierce a cell it is about to infect. So far neither he nor anyone else has been able to design a drug to deliver a compound that can disable that protein though Kim did create some new compounds that prevent the AIDS virus from fusing to cell walls.

Kim was at work on that strategy for developing an HIV vaccine with his Whitehead lab staff of 35 when he was recruited by Merck’s research chief in 2001. When he was promoted to the presidency of Merck’s Research Laboratories on January 1, 2003, he was put in charge of a research staff of 4,500 which expanded to 8,000 after the 2009 Schering-Plough acquisition. Yet Kim continued to publish papers in conjunction with some of his key researchers. To date Kim’s name appears of 13 patents involving protein structures, of which 7 were issued after he became Merck’s research chief.

“I don’t think I’ll be buying any three-piece suits,” Kim has said. Yet at Merck he has not been able to don his research smock as often as the suits he wears when meeting biotech entrepreneurs who may be onto the rare compounds that can lead to another blockbuster drug.