Breakthrough Innovation, Barcelona 2010

Dr. Ulrich BetzDirector, Head of DepartmentCenter of InnovationMerck SeronoMerck KGaA

InnospireThe global innovation initiative@ Merck

Innospire 2009 1

Milestones in the history of Merck

1668

Friedrich Jacob Merck (1621-1678) buys the Angel Pharmacy (Engel-Apotheke)

1827

Heinrich Emanuel Merck (1794-1855) starts production on an industrial scale

Merck is the oldest pharmaceutical and chemical company in the world

Innospire 2009 2

• Merck KGaA and the U.S. pharmaceutical company Merck & Co. have been two independent companies since 1917.

• Common historical roots:

• 1891 Merck & Co. founded in New York by Georg Merck, a member of the Merck family

• As a consequence of World War I, Merck & Co. was expropriated and became an independent company.

• Today, Merck & Co. holds the rights to the name within North America. Merck KGaA operates there as EMD and holds the rights to the name Merck in the rest of the world.

Merck is not the same as Merck

Innospire 2009 3

Corporate structure

Pharmaceuticals

Merck Serono

Chemicals

Consumer Health Care

Liquid Crystals

Central functions

Merck Group

D i

v i s

i o

n s

Business sectors

Performance & Life Science Chemicals

Innospire 2009 4

Merck GroupFY 2009 by division

Innospire 2009 5

Merger between traditional Pharma and BiotechOpportunity to take the best of both worlds

Merck Ethicals Serono

Division of Merck KGaA (family-owned since 1668)

Major success with Erbitux® in developing a world-class Oncology franchise

Successful CardioMetabolic Care franchise built on core product families (Glucophage®, Concor® and Euthyrox®)

Family-owned since 1906

Major success with Rebif®, the leading multiple sclerosis product outside the U.S.

Strategy of focusing on specialized therapeutic areas for serious medical needs (fertility, metabolic endocrinology)

Strong capabilities in developing biotech compounds

Founded 5th January 2007

Focus on innovative small molecular and protein drugs

Around 17000 employees

€ 4.993 billion sales in 2009

Headquarter in Geneva, Switzerland

Innospire 2009 6

Reaching the next level

Innospire 2009 7

The 7 sources of innovation

OpenInnovationplatform

The Innovator Mindset

CustomersScoutsCollabo-

rationPartners

Companywideidea

sourcing

Lineorgani-zation

New business

Evaluate- market potential- probability of success- exploitability- cross-divisional synergies

Enable operational phase„fit for purpose“

Consul-tants

Innospire 2009 8

To proudly go where nobodydared to go before…

Innospire 2009 9

Or …to proudly go where nobodydared to go before…

Innospire 2009 10

Mobilize Merck‘s full innovation potential in challenging times

Established processes

• Across organizational units

• Beyond existing businesses

Fostering entrepreneurial spirit

Involvement of all employees

• Across the hierarchy

innospire

Innospire 2009 11

Corporate structure

Pharmaceuticals

Merck Serono

Chemicals

Consumer Health Care

Liquid Crystals

Central functions

Merck Group

D i

v i s

i o

n s

Business sectors

Performance & Life Science Chemicals

syne

rgie

s

Innospire 2009 12

• innospire: The Chemical and Pharmaceutical divisions have jointly started a new worldwide process to source and develop ideas from all Merck employees

• innospire mobilizes Merck‘s full innovation potential in economically challenging times

• innospire created an environment for entrepreneurial individuals to form highly motivated professionally trained teams and move forward with innovative business ideas and professional business plans

• innospire especially welcomes ideas that benefit both chemical and pharmaceutical divisions

• innospire is complementary to the Merck Innovation Award, local suggestion schemes and the divisional R&D pipeline processes

What is innospire ?

Innospire 2009 13

IdeaSourcing

InnovationMarket-place

InnovationBootcamp

IdeaSelection

17 business concepts

6 projects

Oct 2010DecJuneApril May

EnablingProjects

Phase 1 Phase 2 Phase 4Phase 3 Phase 5

Kick-off March 30

GrandJury

The innospire Process –Five phases towards global success

Three key differences to „classic“ idea competitions:1) Idea matures and evolves

(the idea put in does not need to be identical to the idea that comes out of the bootcamp)2) Team matures and evolves

(it can be different people that propose the idea, that mature the idea to business caseand that finally implement it, teams get training and consulting to overcome hurdles)

3) Self-assembling teams, survival of the fittest(only those ideas survive that manage to convince a team to work on them)

462submissions

Innospire 2009 14

innospire - Call for Ideas

Innospire 2009 15

innospire.merck.de

Innospire 2009 16

Innospire has received 462 submissions

from 550 idea championsout of 32 countries

Thank you!

Innospire 2009 17

Entries by DateTo

tal N

umbe

r of E

ntrie

s

Date

Innospire 2009 18

Entries by Countries

3 1 2

61

5 5

136

3 1 3 1 19

52

5 3 39

1 1 19

2

36

16

71 4

17

60

2 10

20

40

60

80

100

120

140

160

Austra

liaBelg

iumBraz

ilChin

aColu

mbiaFran

ceGerm

any

Greece

Guatem

alaInd

iaInd

ones

iaIre

land

Italy

Japa

nMex

icoNeth

erlan

dsPeru

Phillip

ines

Poland

Ruman

iaSau

di Arab

iaSou

th Kore

aSpa

inSwitz

erlan

dTaiw

anTha

iland

Turkey

United

Arab

Emirates

United

Kingdo

mUSA

Venez

uela

Vietna

m

Country

Num

ber o

f Ent

ries

Innospire 2009 19

Entries by targeted Business Sector

22%

33%

45%Pharma EntriesChemicals EntriesPharma+Chemicals Entries

Innospire 2009 20

21%

41%

22%

16%Application Entries

Material Entries

Process Entries

Service Entries

Entries by Idea Type

Innospire 2009 21

1st set of Criteria• Suitability for further optimization

to a full business plan • Market attractiveness,

potential revenue • Industry attractiveness,

competitive situation • Risk profile, proof of concept

feasibility• Breakthrough vs.

incremental innovation • Synergies with existing business

2nd set of Criteria• Prioritization of joint Chemical

& Pharma ideas

• Balance Blue Sky (long term) ideas, medium-term ideas, and Quick Wins (fast sales generators)

• Balance ideas with a focus on materials, technologies, applications and new business models

The innospire process –Phase 2: Idea Selection

IdeaSelection

Phase 2

462 ideas

Pre-assessmentwith

scorecards

40 interviewswith ideaowners

Evaluation by 1st set of criteria

Re-evaluation by 1st set of criteria

Evaluation by 2nd set of criteria

17 membercross-functionalevaluation team

Innospire 2009 22

Phase 3Objectives and Criteria

The Objectives of this Phase • First presentation of idea on marketplace events

• Recruitment of bootcamp teams• Creative entrepreneurial colleagues can apply to join a team.

• Refinement of business concepts

Criteria for next Phase 4• Refined business concept• Are the different roles, e.g. champion, finance, marketing/sales, present in the team?

• Is there a clear leader? • Do the team members have a consistent vision? • Are the team members very committed?

The innospire process –Phase 3: Innovation Marketplace

Innospire 2009 23

Innovation Market Place

• Presentation of 17 business concepts

- Market Place Kick-off event- Poster sessions at key locations including Darmstadt, Geneva and Boston- Date: June 2009

- Presentation by Poster, Powerpoint, or Video- Intranet portal for global coverage

• Recruitment of bootcamp teams and refinement of business concepts

Innospire 2009 24

Innovation Bootcamp

The innovation bootcamp has the objective to nurture and coach early stage ideas in Merck, to advance in the company and to become successful businesses

Modules- Teaching - Coaching - Writing - Fun

Content- Case studies - Basic theory - Presentation skills - Marketing plan - Market Forecasting - Manufacturing issues - Financial plan - Legal issues - Team building - Integration plan - Launching plan

FacultiesProf. Stefan Stremersch, Chair of Economics and Chair of Marketing at Erasmus University RotterdamProf. Dr. Walter Van Dyck, Professor of Technology and Innovation Management, Tilburg UniversityDr. Guido Petit, Director of Alcatel-Lucent Technical AcademyMerck internal experts on manufacturing, patent, financial, integration issues and HR

Innospire 2009 25

Teams are inspired and innovative

I need innospire becauseIt gives a chance to make cross-divisional

ideas real, that have no home in thebusiness units

and would not have a chance otherwise

I need innospire becauseIt adds a lot to the fun I have at my job and makes Merck a more attractive employer. It

is a great opportunity to broaden myexpertise and knowledge.

Innospire 2009 26

Statements from innospirebootcamp participants

I need innospire because– It gives a chance to make cross-divisional ideas real, that have no

home in the business units and would not have a chance otherwise

– It gives us the possibility to think of innovations by combiningdifferent divisions expertise

– The process brings ideas to reality

– It encourages Merck employees to use their own creativity for thegood of the company

– It adds a lot to the fun I have at my job and makes Merck a moreattractive employer. It is a great opportunity to broaden myexpertise and knowledge.

Innospire 2009 27

The Grand Jury

• Composed of members of theExecutive Management Boardsfrom Merck Chemicals Division and from Merck Serono

• 20min for each team leaderto present the business plan

• 10min Q&A

• Selection of projects that are endorsed to move to the enablingphase

• Allocation of budget

• Debriefing of teams

• 5 of the 6 presented business plans were endorsed!

Innospire 2009 28

innospire

internal idea call

directuptake

TAs/BUsLC/PC/ATPipelines

innovation

mature with innovation funding

incubator

From idea to business

Project selection and governance via

Innovation SteeringCommittee

Innovationincubator

later uptake

spin off

formation of newbusiness unit

out-licensing

Innospire 2009 29

Merck Innovation SteeringCommittee

Members

• Head Porfolio Development Head Advanced TechnologiesHead R&D Head Performance Life ScienceHead Patents Head Innovation Management

Mandate• Fully exploit cross-divisional synergies• Promote innovation @ Merck• Align on innospire calls and other innovation initiatives• Governance of cross-divisional incubator projects

Innospire 2009 30

Two cross-divisional project teams are in theenabling phase supported by innospire funds

Innospire 2009 31

IdeaCall2009

Project Enablement

2009 2010

Additional ideas will be followed-upand qualified in 2010

2011

InnovationBootcamp

IdeaCall2011

InnovationBootcamp

2012

Project Enablement

Project EnablementIdea

Follow-upWorkshops

2010: Focus on idea evaluation and maturation from 2009 callfeedback to all idea submitters, new idea call in 2011

InnovationBootcamp

Innospire 2009 32

innospireA success story

• Highlighting the importance and the support for innovation at all times

• Fostering global inter-divisional collaboration

• Supporting innovative thinking and an entrepreneurial mindset

• Training, coaching and support for project teams

• 5 endorsed business plans on their way in highly motivated project teams to generate new business for Merck

Innospire 2009 33

Thank you!ulrich.betz@merck.de