MERCK STRENGTHENS R&D FOCUS TO INCREASE PROFITABILITY
Building on its restructuring plan announced late last month, Merck said yesterday
it is refocusing its R&D operations in an effort to increase profitability
and become more competitive in the marketplace.
Merck has been under fire recently, facing 9,200 lawsuits over its withdrawn
painkiller Vioxx (rofecoxib), and will be hurt by the upcoming loss of exclusivity
for its biggest moneymaker, the cholesterol-lowering drug Zocor (simvastatin).
To combat these losses, Merck will make numerous changes to its research and
sales operations, the firm said recently.
As the centerpiece of this plan, the company will refocus its R&D efforts
on nine disease areas: Alzheimer's disease, atherosclerosis, cardiovascular
disease, diabetes, novel vaccines, obesity, oncology, pain and sleep disorders.
These areas were chosen not only based on the medical needs they represent,
but also the economic opportunity for the company, Merck said.
The plan is "part of an ongoing effort to continually improve our execution
and deliver sustained revenue and earnings growth over the longer-term,"
Merck CEO Richard Clark said. Specifically, the company believes it can start
increasing earnings in 2007, with double-digit earnings growth over the next
three to five years, Clark added.
However, these changes will not affect the company's immediate growth, with
Merck continuing to predict a drop in earnings per share from between $2.47
and $2.51 in 2005 down to between $2.28 and $2.36 in 2006.
Some analysts have criticized Merck for failing to focus enough resources on
drug development in recent years a fault that has left the New Jersey-based
drugmaker vulnerable to competitors. Analysts have viewed Merck for years as
a "large, ponderous organization" that was slow to react to market
changes, one analyst said. Merck has too many sales and administrative employees
and an insufficient R&D program, the analyst added.
But the company dismissed the view that Merck was behind the competition in
R&D. "Productivity is an industry-wide issue, not just an issue for
Merck," Merck spokeswoman Janet Skidmore said. Instead, the move will only
improve the company's already extensive R&D effort, Skidmore told FDAnews.
Merck is "very clearly and very strongly on the right track."
In addition to focusing on specific therapeutic areas, Merck intends to revamp
its clinical trial policies to make clinical development "more efficient,
global [and] consistent" in order to reduce product development time. Merck
expects a cut in the development process of as much as nine months by 2007.
Merck's announcement comes roughly two weeks after the company said it was moving
forward with a major restructuring of its manufacturing division. The manufacturing
overhaul will include a global rollout of lean manufacturing principles and
a major consolidation of its manufacturing operations, including closing five
of its 31 drug plants.
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