Merck & Co. Performance, Products, Pipeline and Potential

Established in 1891, Merck & Co discovers, develops, manufactures and markets vaccines and pharmaceutical medicines to address unmet medical needs. The company operates on a global basis and is represented in more than 200 countries. Merck’s headquarters are based in Whitehouse Station, NJ.

Merck is looking to relaunch itself following the well-publicised problems with Vioxx. In the financial short-term, the company’s strategy is strongly focused on improving the efficiency of its manufacturing and production facilities. Merck hopes these developments will help the company realise savings of US$4 billion by 2010, money which can help cover the damage imposed from Vioxx-related litigations and be re-invested into R&D in order to rejuvenate Merck’s pipeline.

Short-term growth and recovery from the Vioxx withdrawal will not only rely on Merck’s new company strategy, but also the successful marketing of currently launched products. Merck’s product portfolio is diverse, containing major products spread throughout eight key therapeutic areas. In fiscal 2008, the company had seven blockbuster products with sales in excess of US$1 billion. However, a major concern remains the loss of market exclusivity for several of these products, which will lead to an inevitable decline in sales. This process has already begun with Merck’s top-selling product Zocor, which experienced a double-digit sales decline for the fourth year running in 2008. Similar falling sales are anticipated with Proscar, Trusopt, Fosamax and Cozaar/Hyzaar within our forecast period to 2013.

Merck’s main tools to offset these losses have emerged from its successful joint venture with Schering-Plough, which has seen Vytorin and Zetia come to market. Vytorin in particular is expected to become a major growth driver, despite the fact the company only receives a proportion of the income from its sales. Within two years on the market it has achieved sales in excess of US$1 billion and our forecasts suggest continued strong growth. Clinical trial results have shown both Vytorin and Zetia are capable of competing with current market leaders, whilst Singulair continues to develop strong sales and has established itself as a leading competitor in the respiratory market.

In light of this successful cardiovascular franchise, it is not surprising that in March 2009, Merck and Schering-Plough agreed a deal to merge in a transaction valued in excess of US$40 billion. By leveraging the combined company's expanded product offerings, Merck expects to benefit from additional revenue growth opportunities. For example, the combined company will have expanded opportunities for life-cycle management through the introduction of potential new combinations and formulations of existing products. In addition, Merck and Schering-Plough together have high-potential early-, mid- and late-stage pipeline candidates. The transaction will double the number of potential medicines Merck has in Phase III development, bringing the total to 18.

Merck has a history as a pharmaceutical innovator, with Cozaar/Hyzaar, Proscar, Trusopt, Cancidas, Propecia and Gardasil all the first products in their class to be launched. Within Merck’s current pipeline, Januvia (now approved in most markets), Isentress (US and EU approval received in October and December 2007 respectively) and the cancer and HIV vaccines are all following in this tradition, providing novel mechanisms to treat problems with a significant medical need. An important factor with these aforementioned candidate compounds, is that they fall into therapeutic areas in which Merck does not currently market any products of note, namely Metabolic, Oncology and HIV, further broadening the scope of an already varied product portfolio.

Therefore, although Merck continues to feel the negative impact of the withdrawal of Vioxx, the company has now positioned itself back amongst the leading pharmaceutical players, with a product portfolio containing many blockbusters, and a pipeline with much promise. The union of Merck and Schering-Plough will allow the combined company to continue to compete in an increasingly difficult globabl pharmaceutical market. During October 2009, Pfizer and Wyeth, two other major US-based pharma companies, completed a similar merger, consolidating the market still further. These new Merck/Schering-Plough and Pfizer/Wyeth conglomerates are set to go head-to-head and are expected to dominate large sections of the pharmaceutical industry.