By Gregory Zuckerman and Jared S. Hopkins

As the new coronavirus spread in mid-February, Merck & Co.'s executives and scientists took sides in a high-stakes debate.

Some were eager to develop a vaccine, according to people familiar with the matter, arguing that Merck, a leader in global vaccines, was perfectly placed to focus on the emerging virus.

They were overruled by more senior executives, despite their concerns the virus would turn into a world-wide pandemic. Chief Executive Ken Frazier and R&D chief Roger Perlmutter argued that vaccines usually take years to develop and they worried the effort would divert resources from thriving areas, including cancer research, the people say. Dr. Perlmutter said in an interview he was concerned about betting on an unproven vaccine technology.

A month later, as the virus was declared a pandemic and the need for a vaccine became more apparent, Merck began searching for a partner. Contacting University of Oxford about its vaccine, Dr. Perlmutter proposed a deal but was rebuffed by the school's key scientists. Merck investigated other potential partnerships and announced a Covid-19 vaccine program in late May. By then, several rivals had developed vaccines and begun testing them on healthy volunteers.

The slower start has left Merck playing catch-up in the most important vaccine chase in modern history, a surprising position for one of the world's leading vaccine makers. At the same time, the debate inside Merck underscores the challenge facing all the vaccine makers, despite the excitement and hype surrounding the leading candidates.

Merck, which didn't dispute there was disagreement among its executives, says they appreciated the threat posed by the virus.

"Since the beginning of the pandemic, Merck has moved with urgency" to address it, a spokeswoman said, noting the company has invested $800 million so far on various efforts.

Though top brass weren't yet convinced a vaccine was a top priority, Merck scientists began mining the company's library of basic chemical compounds as potential Covid-19 drugs or vaccines in late January, sending about 1,000 to external researchers for testing a few weeks later, the spokeswoman said. Meanwhile, internal research began.

In subsequent months, Merck formed a partnership with a scientific organization and made an acquisition. It is now working on two vaccine candidates, along with an antiviral treatment for people who fall ill from Covid-19. Last month, Merck began testing its first vaccine in humans and results could come by November. It hopes to produce a single-dose vaccine, perhaps one that can be administered orally. That could make a vaccine easier to scale up for mass vaccinations than the shots some rivals are testing, some of which require more than one dose.

More than 40 vaccines are now being tested in humans, according to the World Health Organization, nearly all of which are ahead of Merck. Pfizer Inc., Moderna Inc. and AstraZeneca PLC are among those conducting late-stage trials of their vaccines. Moderna and Pfizer's shots use a gene-based technology that has never been approved for use.

Merck executives, some of whom have been skeptical of unproven technologies some rivals are using in their vaccines, have noted in public that their own Covid-19 vaccines rely on proven technologies currently used to fight other diseases.

Merck could yet emerge with a successful vaccine. It was a laggard in the emerging field of cancer immunotherapy before becoming the market leader, thanks to its top-selling product Keytruda. And many experts believe Covid-19 vaccines will be needed for years to come, and that different ones will be needed for different populations, such as the elderly.

"My guess is if you're already late you might as well go all in on being the easiest one to give and vaccinate as many people as possible," says Daina Graybosch, a pharmaceutical analyst at SVB Leerink LLC.

In January and February, as news of the new coronavirus emerged, Merck executives gathered at the company's West Point, Pa., research and manufacturing site and elsewhere to discuss potential treatments and vaccines. The team was split and some wanted to focus on a vaccine.

Merck's slow start rankled some inside the company, the people say. Executives including Michael Nally, the company's chief marketing officer, and John Markels, president of global vaccines, were among those eager to develop a Covid-19 vaccine, the people say.

"It's surprising they didn't jump on this right away," says Rod Wong, managing partner of New York health-care investment firm RTW Investments LP, who doesn't have a position in the stock. He noted that the companies furthest ahead received more government funding than Merck, and if these companies are successful, "the bar will be raised" for later vaccines to become widely adopted.

Merck shares are down 12% this year, compared with a drop of 1.3% for the S&P 500 pharmaceuticals industry group.

In an interview, Dr. Perlmutter, who recently announced his retirement, acknowledged there was disagreement on how to proceed with a vaccine. The disagreement, he says, was tied to the idea of working with other companies, "particularly other companies that were moving very rapidly with untested platforms."

The company decided to pursue two so-called replicating vaccines, or those that employ a weakened virus that multiplies, an approach that could produce a more durable immune response than other technologies, Dr. Perlmutter says. These proven technologies take longer to develop than the types of vaccines rivals are working on, he says.

Seeing results from rivals' vaccines, Dr. Perlmutter says, "gives us some understanding of where our vaccine fits in the broader profile."

Merck would have been near the top on any list of drugmakers expected to lead the charge against the coronavirus before the pandemic began. Merck pioneered vaccines that have become staples around the world, including the first to prevent mumps, chickenpox, rubella and shingles.

Of the seven vaccines approved in the U.S. the past 25 years, four were brought forward by Merck. Its most recent vaccine, Ervebo, prevents Ebola, a highly contagious and deadly disease. Gardasil, its human papillomavirus shot, had $3.7 billion in sales last year.

The experience and expertise give the company perspective about how quickly an effective vaccine could be brought to market even with an all-hands effort triggered by a pandemic, vaccine experts say.

As companies have raced to develop vaccines against Covid-19 and shared ambitious timelines for bringing their shots to market, Merck and Mr. Frazier, the CEO, have sounded notes of caution. In an interview in May, he wouldn't commit to Merck's vaccine being ready within 12 to 18 months, noting that large clinical trials are needed to prove safety and efficacy.

"Those take time, there's no two ways about it," he said.

In July, Mr. Frazier told an online audience hosted by Harvard University that those raising hopes for a widely available vaccine by the end of this year are doing "a grave disservice to the public."

Mr. Frazier isn't the only CEO of a major drugmaker expressing caution. Vas Narasimhan, the CEO of Swiss giant Novartis AG, has said an effective vaccine may not become broadly available until the end of 2021.

"I don't buy that," says Mark Davis, director of the Stanford Institute for Immunology, Transplantation and Infection, who is part of a Covid-19 vaccine working group formed by the National Institutes of Health. "They're sniping from the sidelines."

Several rivals are further along than Merck after embracing innovative vaccine technologies. Johnson and Johnson's one-shot vaccine, which uses a relatively new but approved technology, is in late-stage testing. The company recently halted its trials of the shot, because a study volunteer had an unexplained illness.

Other rivals have jumped ahead in their vaccine efforts by forming new partnerships. After the University of Oxford researchers rebuffed Merck, AstraZeneca formed a partnership with the scientists, who moved quickly by advancing a vaccine technology previously shown to be safe in humans in a different virus. Pfizer tapped an existing relationship with BioNTech SE, a pioneer in a new kind of gene-based vaccine.

The Pfizer and Moderna vaccines, each of which uses a genetic material known as messenger RNA, or mRNA, to produce an immune response capable of protecting from the coronavirus, have shown promise in early-phase studies and might have final-stage trial results in coming months, Dr. Davis says.

In the early 1990s, it was Merck scientists who were among the first to try to generate immune response from DNA vaccines but they dropped the effort. In 2016, Merck partnered with Moderna on cancer research. Yet Dr. Perlmutter and others at Merck have been less enthused about the mRNA approach to infectious diseases.

"We knew that an mRNA vaccine would be faster, that's for sure," Dr. Perlmutter said in the interview, but Merck preferred to focus on proven technologies.

In mid-March, when Merck decided to pursue its own vaccine, it reached out to the scientific-research organization IAVI, whose experimental vaccine uses technology that is the basis for Merck's Ebola virus vaccine. Human testing for this Covid-19 vaccine should begin this month.

Mark Feinberg, IAVI's CEO and a former Merck executive, said the partnership is essentially an "insurance policy" in case the vaccines that are further along in the development process are ineffective for some or all people.

"In the likely case that several types of vaccines are needed to address different populations and different circumstances, we'll be in a position to offer another useful approach," he says.

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10-23-20 1248ET