Healthy Skepticism Library item: 2863
Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.
Publication type: news
Herper M.
Doctor's Orders
Forbes.com 2005 Dec 10
http://www.forbes.com/free_forbes/2005/1226/052.html?partner=yahoomag
Keywords:
Merck Vioxx blockbuster
Notes:
Ralph Faggotter’s Comments:
The dilema faced by Merck, as depicted in this article, is likely to be experienced across the pharmaceutical industry (though perhaps less acutely for some companies).
The Vioxx chickens are coming home to roost, the blockbuster drugs of the 1990s are going off patent and there appears to be very little to replace them.
Where are the new blockbuster drugs of the next decade?
It appears to be getting harder and harder to find such drugs.
Full text:
Doctor’s Orders
Matthew Herper, 12.26.05
Merck’s new chief executive, Richard Clark, calls eliminating 7,000 positions, or 11% of the payroll, the first step toward righting the ailing company. Merck is losing $8 billion (annual volume) worth of drugs to patent expirations through 2008. And then there’s the Vioxx mess. So what are steps two and three? Some speculations:
Swing The Ax
“The company needs to cut more,” says Michael Krensavage of Raymond James, a Merck bull. He recommends the unthinkable: Cut the 13,000-rep sales force, ending a decade-long drug industry arms race.
Do A Deal
Merck could buy Schering-Plough. It already sells cholesterol drugs Zetia and Vytorin with the company. Or, more radically, it could sell itself to Pfizer, as Barbara Ryan at Deutsche Bank suggests. What about antitrust problems? The next wave of patent expirations could erase most of them.
Disclose Secret Drugs
Merck has long prided itself on keeping much of its earlier-stage research under wraps to elude competitors. But investors would feel a lot more confident if they knew whether high levels of research spending would be able to replace Merck’s current top sellers.
Give It Away
Merck already has a 5.1% dividend yield, but maybe it should give back more. Or, says Christopher Schott of Bank of America, maybe it should buy back more shares. Either move would put the cash safely out of the reach of tort lawyers.
