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Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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June 5, 2012

Merck Finds Its Phase II Candidates For Sale on the Internet

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Posted by Derek

Via Pharmalot, it appears that a former WuXi employee helped himself to samples of two Merck Phase II clinical candidates that were under evaluation. The samples were then offered for sale.

Here's a link to a Google Translate version of a Chinese news report. It looks like gram quantities were involved, along with NMR spectra, with the compounds being provided to a middleman. It's not clear who bought them from him, but the article gives the impression that someone did, was satisfied with the transaction, and wanted more. But in the meantime, Merck did pick up on an offer made by this middleman to sell one of the compounds online, and immediately went after him, which unraveled the whole scheme. (The machine translation is pretty rocky, but I did appreciate that an idiom came through: it mentions that having these valuable samples in an unlocked cabinet was like putting fish in front of a cat).

I would think that this kind of thing is just the nightmare that WuXi's management fears - and if it isn't, it should be. The cost advantage to doing business with them (and other offshore contract houses) is still real, but not as large as it used to be. Stories like this can close that price gap pretty quickly.

Comments (45) + TrackBacks (0) | Category: Business and Markets | Drug Development | The Dark Side


1. Student on June 5, 2012 9:32 AM writes...

With the shaky IP rules in China, is big pharma going to watch this and see if it ends up on shelves under other names? What would big pharma have to do to make stealing their compounds (for use in the Chinese market) useless?

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2. PPedroso on June 5, 2012 9:36 AM writes...

This was just a rebranding...
Chinese Traditional Medicine probably has all the compounds in the world.

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3. Chaos on June 5, 2012 9:48 AM writes...

Derck: Many @ Merck (past and present employees in medicinal chemistry) paid gargantuan price for the short term goals of their inept management policies. I mean when we all came to know that many of our responsibilities will be progressively out sourced, a lot of us envisioned several things that can go wrong. That an employee (disgruntled?) from Wuxi will sell these for a price over the internet was not one of them. I feel sorry for those employees at Merck who have been shortchanged. Merck management must pay and heed the lessons of outsourcing to a morally bankrupt country. The question is, will they ever learn?

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4. anchor on June 5, 2012 10:03 AM writes...

Derek: The link to the article is fine but also in the process loaded some material bordering on "soft porno". Watch out guys!

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5. barry on June 5, 2012 10:14 AM writes...

the theft and sale of the research specimens is criminal, but it is only a shadow of the risk Merck takes in situating a research lab in China. The real value generated by Drug Discovery Research is IP. Not only the IP generated at a China site, but all the company databases that researches on that site must access to do their jobs is at risk as long as China functions as a pirate haven.

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6. Lu on June 5, 2012 10:22 AM writes...

having these valuable samples in an unlocked cabinet

Derek, is it normal for the industry to lock up chemicals?

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7. anon on June 5, 2012 10:24 AM writes...

The asian FTE CRO model will die in the next 5 years. It appears capital-efficient, but you get what you pay for. 4 bachelors chemists at $75K/FTE cannot deliver what a skilled chemist (med or process) can deliver in-house, either synthetically or cerebrally. Take into account IT, internal time-management, communcation and it just isnt as efficient as the sellers pitch. couple onto it the IP concern...and this will all be over in a few opinion.

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8. Anonymous on June 5, 2012 10:26 AM writes...

Knowing the risks very well, big pharmas have already pumped so much into China. AZ, GSK, Novartis etc., are going to play this game and hoping to succeed in the end. In the long run, they may even achieve changing the culture in India and China!

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9. Hap on June 5, 2012 10:43 AM writes...

At Phase II - probably - if they're doing trials, I assumed that the company has to account for the chain of custody. I don't know, though.

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10. Nick K on June 5, 2012 11:09 AM writes...

I'll wager that this won't be the last case of IP theft in China. Perhaps the senior managers who pushed for outsourcing are now wondering if it was worthwhile after all.

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11. Stretch on June 5, 2012 11:27 AM writes...

The WuXi employee who stole the samples was an unsophisticated criminal wanting to make a fast buck. More sophisticated scientists at the country's CROs will use them as entrance fee to garner a senior position at a local biotech.

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12. WCA on June 5, 2012 12:25 PM writes...

This guy was the dumb thief and got caught. The bigger worry are the smart ones that don't.

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13. Anonymous on June 5, 2012 1:38 PM writes...

Merck MBA: "Our compound has been stolen? INCONCEIVABLE!"

Merck Chemist: "You keep using that word. I do not think it means what you think it means."

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14. Quintus on June 5, 2012 1:47 PM writes...

@8, The big companies will fail miserably. They certainly will not change any culture, except perhaps to increase corruption.
And I hope they fail, but of course the big salaried managers won't suffer, the bean counters won't suffer, it will be the companies best asset that will be decimated, the normal workers, chemists, biologists, plant workers etc, they will suffer.
These bastards in upper management should never have started this China/India venture in the first place knowing the morals of the respective countries.

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15. Ed on June 5, 2012 1:49 PM writes...

This particular case may be notable for involving Phase II compounds, but it is more unusual for resulting in a criminal penalty. The behavior evidenced in this story, however, is quite routine.

Chemistry CROs in China routinely use the intellectual property of their clients to benefit themselves. We have found on more than one occasion that intermediates scaled-up for our internal projects soon become commercially available from Chinese companies shortly afterwards. We pay the CRO to prepare a certain amount of material using a synthetic strategy we developed. They then make twice as much as we request. They send half of it to us, and sell the rest to various chemical suppliers. They get paid twice for the same work, and they think we don't know about it.

One time when we requested an intermediate, they delivered it astonishingly quickly. When we complimented them on their delivery time, they responded by saying that they prepared it using a superior procedure that was developed by , who had recently requested the same intermediate.

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16. Interesting on June 5, 2012 1:55 PM writes...

"(The machine translation is pretty rocky, but I did appreciate that an idiom came through: it mentions that having these valuable samples in an unlocked cabinet was like putting fish in front of a cat)."

Is this not a profound cultural statement of where certain morals are regarding unethical behavior?

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17. Crocowboy on June 5, 2012 2:21 PM writes...

There is rumour of a well known uk cro selling old project intermediates and final compounds in their catalogue

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18. CMCguy on June 5, 2012 2:30 PM writes...

The only part I find unusual is that the actual samples involved were stolen from an "authorized source". There are "suppliers" that will list drug development compounds for sale very shortly after the structure is identified in literature or on a Meeting presentation slide (People should test this out and run a search on their molecules, use the CAS# and would bet get a few "offered by" hits). Never have pursued as I suspect what this involves is that material is not on the shelf but if willing to pay them they will make it based on some literature or Patent route.

Not sure about all the legalities but its not uncommon in industry and even academia (if can't get directly from innovator) to make a someone else's compound to use in in-house models- as long as not "sold" them would be considered allowed for Research use.

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19. MTK on June 5, 2012 3:26 PM writes...

I hate reading about stuff like this, because I'd like to believe that all people have respect for laws and ethics regardless of nationality or culture. Unfortunately, this doesn't seem to be the case.

Too often when this type of thing happens it's a Chinese national and therefore reinforces whatever biases one might have. Perhaps it's just a product of the high percentage of work and workers that are Chinese in chemistry, but it sure doesn't seem so. They seem completely over-represented in these types of matters. The amazing part is that most times they don't even think they've done anything wrong.

It's a shame, but it seems that if you've lived your entire life where the authorities are shamelessly amoral and corrupt that it's human nature to do likewise.

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20. processchemist on June 5, 2012 3:33 PM writes...

Routine... is a common industrial practice to make in house or ask to a CRO for patented compounds from competitors to conduct tests. But everyone in the sector knows how strong is the respect for IP by chinese companies. I get spam everyday from chinese companies and in one of the last emails someone was offering fingolimod, bulk, at the lowest price you can think of.

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21. yi on June 5, 2012 3:37 PM writes...

你们这些坐在美国办公室喝着咖啡,一天上八小时班,实际只有五个小时在工作,同时拿着10万美元年薪的,是不会理解在中国外包公司的人是如何勤奋工作的。随便你们如何嫉妒,漫骂和愤怒,这些外包的工作,是不会回到US的。 I am getting a PhD degree in US, I am so pissed off at the fact that every big company is out sourcing too. Now there is almost no chance for an international student stay in US for a job. But those out sourcing jobs are never gonna come back, just like Apple would never make its iphones and Macs in US. Workers in China work hard than salves in order to get 1/30 of US average salary. You really think those "smart" CEO would let people in US to do it?

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22. Todd on June 5, 2012 3:41 PM writes...

Regarding #2, this has happened with astonishing regularity. There have been "traditional medicines" with sildenafil in it, HGH being marketed as "watermelon extract" and diuretics being sold in Chinese herbal weight loss products.

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23. Hap on June 5, 2012 4:00 PM writes...

I think this happens where "Just win, baby" and "If you're not cheating, you're not trying, and it's only cheating if you get caught" are the (un)official mottos. After all, didn't this happen in the US some time ago? (The FDA was started because cough medicine was made and sold using cheaper diethylene glycol rather than glycerol as a carrier, killing > 100 kids; a longer time ago, the US had had a reputation of not respecting others' IP.) People want to win. Since, as noted, the Chinese government wants power, and drives much of the business world, they are likely to foster and harness those impulses as long as those impulses benefit it and don't threaten its power (usually meaning that the winnings come from someone else).

Of course, that implies that protecting your business in China is not just a matter of securing IP and valuables from your employees, but also from the Chinese government. That doesn't seem like a game any private business is likely to win, and perhaps something that companies should have thought about before outsourcing their core businesses.

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24. Esteban on June 5, 2012 4:02 PM writes...

Keep in mind that "return on investment" is not just about research productivity. There is also a diplomatic componnet to outsourcing. Big pharma wants to ingratiate itself with the leadership in China, India, etc. in hopes that this translates into better access to those markets.

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25. startup on June 5, 2012 4:32 PM writes...

Re: ethylene glycol. Chinese did exactly the same thing about 5-6 years ago killing about 400 people in Panama.

Esteban, I've read that it is more like extorsion by the the government demanding companies to develop locally if they want any sort of access to local market.

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26. WCA on June 5, 2012 5:00 PM writes...

Chemistry CROs in China routinely use the intellectual property of their clients to benefit themselves. We have found on more than one occasion that intermediates scaled-up for our internal projects soon become commercially available from Chinese companies shortly afterwards. We pay the CRO to prepare a certain amount of material using a synthetic strategy we developed. They then make twice as much as we request. They send half of it to us, and sell the rest to various chemical suppliers. They get paid twice for the same work, and they think we don't know about it.


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27. WCA on June 5, 2012 5:13 PM writes...

Heard about a year ago that Lilly had some similar issues with final compounds showing up for sale.

Never able to verify this, but it is telling that they opted to source 40+ chemists from AMRI to work in Indy this year. Probably not a coincidence.

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28. Hap on June 5, 2012 5:26 PM writes...

25: That was my point (though I thought it was diethylene glycol, because at least with ethylene glycol, there's an antidote). I don't know how much the perpetrators in the US knew when they sold their product, but the people who killed the Panamanians had to have known of our experience and still sold them poisoned products anyway.

24: There was the question here of whether negotiating with the government over health care had been a good idea, since the government has much more power than a company or set of companies. Here, though, at least some of our economic and physical well-being depend on pharma's existence, which should mitigate how much power the government has. In China, none of that is true. While they've got an awfully big market for medicines (which makes them attractive), they don't need US pharma to exist - onc