LSS and Commercialisation in MSDDaniel J. HoeyMerck Sharp & Dohme (Ireland) Ltd.

16th October, 2009

Agenda

• About Merck & Co., Inc.

• Lean Six Sigma and Commercialisation

• Merck Sharp & Dohme in Ireland

• Lean Commercialisation of ISENTRESSTM

Merck & Co., Inc.

• Founded: 1891• Number of employees: ~55,000• Global reach: Does business in 140 countries• 2008 revenue: $23.9 billion

Merck is a global research-driven pharmaceutical company dedicated to putting patients first.

Lean Six Sigma

Align andIntegrate

Achieve “DNA”in the Business

Build Foundation

MaturityLevels

KeyFocus

Key Metrics

ProjectSuccess,

Infrastructure, Capabilities

Early Wins

Training

# BB, GB

Savings/Revenue

Process Metrics

Cycle Time

Industry LeadershipLean Six Sigma

embedded in Key Processes

Sponsorship

Business Benefits

Deploy broadlyacross Merck

Alignment toScorecard

Depth ofpenetration

“Pull”“Push”“The Way We Work”

Owned by the Business

Level 1 Level 2 Level 3

Current Maturity Goal

Commercialisation

Focus on Through Put

Focus on Cost & Reliability

Focus on Speed & Cost

SupplyResearch Commercialisation

PCC I IIA IIB III Launch Long-term Supply

POC

MSD in Ireland

Carlow

Ballydine

Dublin

Ballydine Plant… facts

• Established API manufacturing plant in 1976

• Significantly expanded in 1999 to add Fac03

• Named API Commercialisation site in 2005

• Implemented MPS and Commercialisation organisational changes in December, 2006

• Formulation facility project started in 2007; operational end 2009

• Global API supplier for ~40% of Merck sales (excl. vaccines)

• ~400 Employees

• 25 international customers ~30 shipments/month

Ballydine Plant… mission

PHARMSUPPLY

PHARMPROCESS

DEVELOPMENT

APIPROCESS

DEVELOPMENT

APISUPPLY

PGM ROA ACCESS

MPS-Lean Six Sigma+

Commercialisation

Lean Processes Ready for Supply- Minimal/No Capital for launch- Technical issues resolved- Variability removed- Standardised work developed- Electronic instructions developed- PAT needs determined- Raw materials qualified- In-process tests removed

Ballydine Plant… mission

Lean CommercialisationISENTRESSTM

1. Quality (better)

2. Don’t short the market (more reliable)

3. Rapid Launch and ability to react (faster)

4. Cost to enable developing country access (cheaper)

• First in a new class of treatments for HIV

• Changes paradigm in HIV management

• Impact 40 million people worldwide

ISENTRESSTM reducing cost

Business Need• Reduce Product Cost

• Minimise at-risk Capital

• Enable Access Latin America1.7 million

East Asia750,000

Eastern Europe & Central Asia

1.7 million

Sub-Saharan Africa24.7 million

Caribbean250,000

North America1.4 million

North Africa & Middle East

460,000

Western Europe740,000

South & South-East Asia7.8 million

Oceania81,000

Total number living with HIV - 40 million

Source: WHO, 3 by 5 Progress Report: December 2005Achievements• 18% reduction in API standard cost

• 40% reduction in Cycle Time

• 22% improvement in Capacity

• < $50K Capital for initial campaign

• Transitioning from Internal to External Supply

ISENTRESSTM creating a robust process

Challenges• Supplier/Input:

– Raw material quality

• Process:– Reject rate ~13%

• Output/Customer:– Market threat

Resolution• Stabilize Supplier process

• DMAIC to improve Merck Process

– Identify KPIV’s

– DOE to optimize charge ratio

– Modified the process423-8411-8504-7492-7480-7468-7456-7444-7432-7420-7408-7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

-0.1

-0.2

-0.3

Batch

Ind

ivid

ua

l Va

lue

_X=0.0363

UCL=0.0629

LCL=0.0097

Use Test PCR

Reg Spec. = 0.30

Process A

I Chart of Imine %

423-8411-8504-7492-7480-7468-7456-7444-7432-7420-7408-7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

-0.1

-0.2

-0.3

Batch

Individual Value

_X=0.0363

UCL=0.0629

LCL=0.0097

Use Test PCR

Reg Spec. = 0.30

Process A

I Chart of Imine %

Cpk0.34 to 5.08

Lean Processes Ready for Supply

Minimal/No Capital for launch

Technical issues resolved

Variability removed

Standardised work developed

Electronic instructions developed

PAT needs determined

Raw materials qualified

In-process tests removed

Summary

• Capability development is a powerful motivator of employees

• Operational Excellence can help expand the mandate for the Irish subsidiary

• Lean Six Sigma is an enabler for process development and new product introduction

• Irish plants can establish a mission that enables them to compete on value, in ways other than low cost.