Merck

The new Merck: Developing markets, vaccines and biologics are focus for growth

The new Merck was launched in November 2009, following its reverse takeover of Schering-Plough for $41 billion.

The merger was Merck's response to increasingly tough trading conditions - and as with all 'mega-mergers' the union must produce improved profitablity and R&D productivity in the long term, and not simply help to cut costs.

Analysts Datamonitor forecast that the merger should return Merck to positive sales growth and provide a raft of new pipeline and marketed products.

Datamonitor calculated that a standalone Merck's prescription pharma portfolio would see sales decline for 2008-13 at a compound annual growth rate (CAGR) of -0.3%.

Generic competition against drugs like Singulair, Cozaar/Hyzaar, Fosamax and Zocor would be largely to blame for this decline.

Despite new launches such as Isentress and Janumet, expiring products would have left Merck's 2013 sales $435 million below those of 2008.

Merck aims to focus on growth in developing markets, vaccines and biologics.

Its five divisions are global human health (GHH), consumer health care, animal health, Merck Research Laboratories (MRL) and Merck Manufacturing.

2011 performance

In early 2012, chief executive Kenneth Frazier defended his company’s ‘bumpy’ performance in 2011, and has highlighted key drugs for investors to watch.

Frazier was speaking at an investor event held by Goldman Sachs, and made a frank admission on the firm’s 2011 performance.

“Going back to last year, it couldn’t have possibly started much worse than it did, frankly.”

Merck was rocked in January 2011 when its blood thinner vorapaxar – a potential blockbuster – had to be pulled from one trial and discontinued from stroke patients in another. 

Some investors were also displeased when the firm announced it would not make further cuts to its $8.6 billion R&D budget.

This led to a drop in the firm’s stock at the beginning of the year, but shares rallied in the last few months of 2011.

Merck plans to file eight new medicines in 2012 and 2013, including two allergy medicines, drugs for atherosclerosis and osteoporosis and V503, an improved version of Gardasil, its blockbuster cervical cancer vaccine Gardasil.

“Over time, I would see more of a shift toward specialty” drugs, plus heart and diabetes medicines, Frazier said. “We’re very interested in areas like hepatitis C, HIV and rheumatoid arthritis.

Frazier also made it clear that Merck was looking to augment the pipeline and acquire drug candidates "on terms where we believe we can create value for shareholders over the long term". He added that Merck had traditionally found "the sweet spot has been earlier rather than late, but we are also looking at Phase II compounds and the occasional Phase III compounds".

He said the licensing deals with Indian generics maker Sun Pharma and the Chinese pharma firm Simcere were also major achievements in increasing its presence in emerging markets.