NATAP: pharmatimes reports merck/schering merger (2050)
Larger Merck says merger will actually increase R&D efficiency
pharmatimes.com
05 November 2009
The new Merck & Co has opened its doors for business, and the company has been laying out its plans for future growth now that Schering-Plough has been added to the group.
Chief executive Richard Clark says that “our integration teams prepared us well for a strong start…with thorough plans designed to ensure a seamless transition”. The new entity now has more than 15 late-stage candidates “spanning critical therapeutic categories” and has 106,000 employees in more than 140 countries.
That figure is expected to be reduced by 15%, or some 15,000 jobs, as Merck has set itself a target of cost savings of $3.5 billion annually beyond 2011, “which are expected to come from all areas across the combined company”. Earnings for new Merck, excluding acquisition and restructuring costs, will increase at a high single-digit rate for each year through 2013 and more than 50% of its annual $40 billion revenues will be generated outside the USA.
The combined company “will have a strong balance sheet” with cash and investments of approximately $8 billion and it hopes that this figure will reach $15 billion by 2013.
Nimble decision-making
In an article published by Forbes.com, Mr Clark added that “efficiency and focus” are improved by the merger and “the paradox here is that the new Merck, while larger, is organised to be more nimble and efficient at making decisions”. He added that “breakthrough innovations have a better chance of occurring more quickly because of the company’s focus on external partnerships and collaborations”.
Mr Clark goes on to say that “we are humble enough to know that only a fraction of the science that drives innovation will come from inside the walls of our laboratories”. Likewise, “our strategy for the merger was to gain additional resources that could be applied to the best science, wherever it emerges”.
The Merck chief notes that “investments on a global scale – and the associated risks – are enormous”, noting that while “smaller companies may hit home runs by discovering one-off breakthrough drugs”, ongoing development, “the yeoman’s work of healthcare innovation, requires a different model”. He added that “we plan for the inevitable R&D failures and financial losses” as just one out of every 10,000 promising compounds results in an approved drug.
He writes that “we must also deliver on the late-stage compounds that have a high likelihood of approval and will therefore fund tomorrow’s research”. In that regard, “this merger also puts new legs under Merck by nearly doubling our potential medicines and vaccines in late-stage development.”
Mr Clark concludes by saying that “asking whether or not this merger will promote innovation is an important question” but “given all the available evidence…we’re confident that the Merck merger can be a bright new way forward”.