We develop products and technologies that enrich people’s lives. To this end, we are constantly on the lookout for groundbreaking developments and trends. Research and development (R&D) and innovation are the cornerstones of our success, enabling us to make many sustainable contributions. In 2020, we spent € 2.3 billion on R&D, corresponding to 13% of our net sales. Advances in digitalization are helping us to identify pioneering business models.
Research and development costs by business sector1 – 2020
1) Not represented: research and development costs of € 62 million allocated to Corporate and Other.
Our approach to creating innovation
Our business sectors use established strategies to drive new product developments for the benefit of patients and our customers. The diversity of the business sectors provides us with a breadth of technologies and depth of market knowledge, giving us a competitive advantage in developing new products.
At the same time, we aim to create new businesses between our business sectors and beyond the current scope of our activities. Innovation fields in which we see potential for new business provide strategic direction. In our end-to-end innovation process, we endeavor to identify innovation projects that transcend our current portfolio and to develop them from the initial idea to market launch. This can succeed only if our business sectors work closely together and if we are open to external momentum.
We also create and foster an innovation ecosystem in order to bolster our overall innovative power in several areas. This ecosystem includes a presence in Darmstadt (Germany), in Guangzhou and in Shanghai (both China) as well as in Silicon Valley (California, USA) with internal and outreach programs. Additionally, we invest in innovative technologies and transformational ideas that have the potential to shape our core business areas and our sustainability pathway.
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OUR INNOVATION FIELDS TO DRIVE INNOVATION BETWEEN AND BEYOND
Clean meat
This field concentrates on the biotechnology required to produce real meat grown in vitro. It is expected to enable the production of animal protein that is healthier, more ethical and environmentally sustainable.
Liquid biopsy technologies
This area focuses on non-invasive alternatives to traditional tissue-based diagnostics, such as liquid biopsy, thereby reshaping methods of detecting and managing various diseases.
AI-enabled Health Solutions in China
Our first innovation field targeted specifically to China focuses on Artificial Intelligence (AI)-enabled Health Solutions. It includes AI-related products and services that impact the medical and healthcare industries across their value chains, for example by increasing efficiency, saving costs or improving the customer experience.
We drive promising projects from the brainstorming and idea generation stage to an incubation and growth phase, where we provide project teams with a suitable environment to develop their business models and scale up their ideas. Projects are monitored in a lean process in which they prove their commercial relevance at different stages. All activities are supported by experts in business model design, business development, market research, and agile methodologies. The objective is for the new products or services to make a measurable contribution to our business success once they have been launched.
Digitalization is a major focus of our innovation efforts. We leverage digital opportunities to boost business performance, and we are increasingly forming new strategic partnerships with organizations that offer different perspectives. In this way, we expect to accelerate our research and development activities, better manage our supply chain and broaden our existing product portfolio to include new digital services, such as our PETRA health-screening robot.
You can find more information on research and development in our 2020 Annual Report.
How we drive innovation
The organizational set-up of our research and development (R&D) activities reflects the overall structure of our company. All three of our business sectors operate independent R&D units, which pursue their own innovation strategies.
Our Group Strategy and Transformation function facilitates innovation between our individual business sectors and beyond our current business scope. It establishes an innovation project portfolio to generate long-term new businesses for our company. Projects of this kind are developed through our Innovation Center at our global headquarters in Darmstadt (Germany), our China Innovation Hub (Guangdong and Shanghai) and our Silicon Valley Innovation Hub in California.
Our Innovation Committee (IC) oversees the implementation of innovation projects between and beyond our business sectors. It reviews the progress of ongoing efforts and ensures that the decision-making process for selecting innovation projects is both transparent and consistent. The committee consists of leaders from our Group functions and our three business sectors. For projects requiring larger-scale investments, the IC consults our Executive Board.
Investing in promising ideas
M Ventures is our strategic corporate venture capital arm. With a € 400 million evergreen fund, M Ventures invests in innovative technologies and transformational ideas with the potential to significantly impact our core business areas. M Ventures focuses on investing in early-stage start-ups, including the creation of spin-offs, to leverage our science and technology orientation.
Leveraging data
We are in the process of rolling out a new Enterprise Data Strategy. Our focus is to increase the data and analytics capabilities across our company. To this end, we have established a consistent operating model that helps us make faster, better-informed decisions and take calculated risks based on past behaviors and future predictions. This will also help to drive innovation and research at a higher pace with strong business impact. The rollout of the strategy and the implementation of the associated organizational changes are scheduled for completion in 2021.
As a part of this data strategy, we are also investing in additional capacity for data management and data science. Linked via a global expert community, we employ several data science teams across the business sectors that drive projects in advanced analytics and machine learning. For example, these teams work with external and internal data to provide insights to sales teams in Life Science, use image recognition techniques to support the work of clinicians and researchers in Healthcare, and assist the research and innovation process in Performance Materials.
In the process of integrating Versum Materials and Intermolecular we have established a Chief Technology Office (CTO) to enable business innovation. The CTO will focus on identifying trends and vetting technologies that are beyond the time horizon or scope of our business units. We have also created a Technology Leadership Board to review and optimize technology investments across our Performance Materials business sector.
Our commitment: Protecting innovative ideas
We are committed to ensuring the confidentiality of sensitive information, particularly of intellectual property in digital projects, and to protecting our innovative ideas. Our Policy for Personal Data Protection and Personal Data Privacy defines the standards that govern how we process, save, use, and transfer data.
You can find more information on data protection in the corresponding chapter.
Innovation in the fight against Covid-19
To harness our company’s innovation capabilities in the fight against the pandemic, we established a cross-business Covid-19 task force. The task force launched an internal idea-generating initiative and an external idea call for 2020 research grants. In addition, our task force implemented multiple projects. For example, it oversaw the selection process for medicines that could be used to treat Covid-19, including Rebif® and M5049, through to clinical development and it launched an antibody detection assay.
To learn more about our clinical development efforts to address Covid-19, please see the chapter on Clinical Studies.
Easier employee testing with the help of software
We developed a software solution that digitalizes, streamlines and automates a significant proportion of the Covid-19 testing procedure for employees. The first version of the software, which is for internal use only, is focused on administration tasks associated with testing, e.g. automating e-mails, test invites and medical history. In addition, we document user consent, patient profiles, test cases, and sending out test results.
Our Innovation Center: Growing ideas into business
Located in Darmstadt (Germany), our Innovation Center offers an ideal environment to cultivate ideas and scale them up into viable new businesses. In addition to propelling strategic growth fields, such as our innovation fields, the Innovation Center offers a platform for serendipity. It is open to anyone at our company who has an idea that is either cross-sectoral or beyond the current scope of our activities.
For example, this kind of lateral thinking has led to a collaboration to improve the manufacturing of tablets for oral administration in clinical trials. Producing tablets for such trials is typically time-consuming and costly using the traditional tablet manufacturing processes. Through a new partnership with AMCM, a sister company of 3D printing world-market leader EOS, we are developing a GMP-certified 3D printing solution to make tablet production simpler and more flexible, saving time and costs.
Silicon Valley Innovation Hub: Accelerating the future of food
The Silicon Valley Innovation Hub is leading our Clean Meat innovation field, also referred to as cultured or cell-based meat. As a technology enabler for this emerging industry, we are leveraging our vast Life Science expertise in bioprocessing technologies. Apart from building strong connections and partnerships with start-ups, academia and leading organizations, such as the Good Food Institute, we are working on innovation projects to address specific technology challenges.
A major hurdle and cost driver in cultured meat production is cell culture media, which is estimated to account for 55% to 95% of production costs. For production at scale, the media needs to be cost-efficient, suitable for effective growth and differentiation into specific cell types and free of any animal-derived material such as fetal bovine serum. One of our innovation projects addresses exactly these challenges and aims to design and commercialize media formulations that are free from animal-derived products. Utilizing our cell culture media expertise, we partner with start-ups to enable the efficient production of various cultured seafood as well as avian and mammalian species. The project is led by the Silicon Valley Innovation Hub in collaboration with the Innovation Center and Process Solutions experts from our Life Science business sector.
China Innovation Hub: Growing the global impact of our innovation ecosystem
Our China Innovation Hub expands our innovation ecosystem to China and strengthens our global innovation impact. The China Innovation Hub leads the China-specific innovation field “AI-enabled health solutions” to explore future business for our global innovation pipeline.
The local presence of two innovation hubs in Guangdong and Shanghai also accelerates our innovation and digitalization development by building up a nationwide innovation network and leveraging the vibrant innovation ecosystem in China. For example, we have formed partnerships with leading academic institutions, incubators and accelerators, cross-industry players, and local governments in Guangdong and Shanghai.
Since 2019, the Merck Accelerator China program has connected us with 18 start-ups to support entrepreneurs’ early-stage technologies and foster open innovation. In addition, we established a China Seed Fund of € 13 million in 2019, with the objective of strengthening our links with local entrepreneurs and investors. It targets early innovation generated within the Chinese innovation ecosystem. The first investment was made into SynSense, an AI-chip start-up, in May 2020.
In 2020, a series of cross-functional internal ideation programs, such as “Innovate to Fight Covid-19”, inspired hundreds of employees to ideate and submit their creative ideas for new solutions. Our Innovator Academy and Innovation Salon provide training sessions on innovation approaches and idea exchanges for employees and external stakeholders, helping to empower them to transform ideas into business projects.
Synergizing external ideas
The Merck Accelerator supports select enterprises in their development through programs at our global headquarters in Darmstadt as well as in China. This helps us gain insights into innovative start-ups, which supports our efforts to identify emerging market trends early on. Our primary goal is to link these start-up companies with our innovation projects or our business sectors for future collaboration.
M Ventures has a mandate to invest in the areas of Healthcare, Life Sciences, Performance Materials, and Frontier Tech & Sustainability and takes an active role in its portfolio companies. One such investment example is Akili. In June 2020, Akili announced that the U.S. Food and Drug Administration (FDA) had approved EndeavorRx™ (AKL-T01) as a prescription treatment for children with attention-deficit/hyperactivity disorder (ADHD). This is the first digital, video game-based therapeutic device prescription treatment to receive FDA approval. Delivered through a video game experience, EndeavorRx™ can help to improve attention span among children aged 8-12 with primarily inattentive or combined-type ADHD.
Fruitful strategic partnership
Syntropy is a joint venture formed by our company and Palantir Technologies. The partnership’s imperative is to unlock the power of data in the fight to cure cancer and several other diseases. Through its secure, trust-based environment, Syntropy enables data curation, collaboration and the generation of new insights while ensuring that data ownership remains with the provider. The partnership offers the scientific community a new model for collaboration, supporting our collective purpose to achieve breakthrough cancer research.
By simplifying and accelerating collaboration-driven insights, Syntropy will help to usher in a new era of scientific discovery, enabling researchers, their institutions and the scientific community to make further advances.
Promoting visionary research
At the 2020 Future Insight Virtual Event, which we sponsored, the Future Insight Prize in the Multidrug Resistance category was awarded to a team from the Technical University of Munich led by Stefan Sieber for its activities to identify new antibacterial compounds with the potential to make the multi-drug resistance breaker product a reality.
In 2020, we also offered additional research grants to the scientific community, focusing on four topics: drug discovery oncology and autoimmune disease, pandemic preparedness including the fight against Covid-19, bioreactor design for cultured meat, and neuromorphic computing. In total, we received more than 1,200 research proposals from around the world.