Merck setback forces a shift to new drugs

Merck plans to intensify cost-cutting, while using people and assets freed up by its voluntary withdrawal of Vioxx to push out promising new...

Merck plans to intensify cost-cutting, while using people and assets freed up by its voluntary withdrawal of Vioxx to push out promising new drugs faster.

Meanwhile, the board of directors of Merck signalled their continuing support for not only Ray Gilmartin, chairman and chief executive, but also Merck8217;s strategy to avoid large mergers, and growing from its own research labs and outside licensing.

This prescription to try to boost sales and new products comes as the US drugmaker faces the unexpected loss of its second-biggest drug Vioxx, and 2.5bn of sales per year.

Gilmartin said Merck would save in capital expenses by using factory capacity freed up by Vioxx, instead of expanding capacity. No factories would close. He said salespeople would move to cover areas in which the company had expected to hire employees.

More importantly, perhaps, he said research scientists, efforts and assets would be redeployed to promising new products to speed up the timeline for their launch. Merck is working on a new diabetes drug, Muraglitazar, with Bristol-Myers Squibb, and has three promising vaccines, including one for cervical cancer.

Asked if Gilmartin was in trouble with the board, William Bowen, a director ,said: 8220;Absolutely not. Ask me a hard question.8221; Mr Bowen is president of the Andrew W. Mellon Foundation.

Bowen stressed board support for Gilmartin, downplaying Merck8217;s risk as a takeover target after its shares plunged Thursday. He added, big mergers were not in Merck8217;s plans. 8220;We will live another day,8221; he said.

Story continues below this ad

He said Merck was well-positioned to make its financial numbers this year, until the board8217;s unanimous decision to pull Vioxx. However, Merck8217;s reputation suffered, but culture and business is not broken.

8220;I suppose in some measure the reputation has certainly not been helped by these disappointments . . . Does Ray regret the bunching? Absolutely,8221; he said.

Bowen said Gilmartin8217;s succession plan is on track and included inside and outside candidates. 8212;NYT