Merck & Co has hiked the cost savings it expects to generate from its sweeping restructuring programme to $5 billion dollars from $4 billion, helped by a reduction in the therapeutic areas in which it operates.
"Merck will remain a research-driven pharmaceutical company, but we need to change our approach to virtually every aspect of our business, and we must act with a sense of urgency," said Richard Clark, who took over from Raymond Gilmartin as chief executive in May.
Earlier this month Merck said it would slash 7,000 staff, or 11% of its headcount, and close production plants to boost efficiencies in its manufacturing. Now, the company says it will focus on nine therapeutic areas - Alzheimer's disease, atherosclerosis, cardiovascular disease, diabetes, vaccines, obesity, oncology, pain and sleep disorders – that will allow it to improve R&D productivity and the reduce the time it takes to bring new product to market.
The new approach will allow the company to pare down its salesforce. Merck has already reduced the number of sales staff promoting each of its products by around 50%, and says the new measures will reduce its spending per brand by 15%-20% by 2010.
The catalyst for the restructuring is the forthcoming patent expiration in the USA for cholesterol-lowering drug Zocor (simvastatin) in the middle of next year, which will cut profits by 4.4% for 2006 as a whole, as well as the potentially huge liabilities the company faces in lawsuits alleging injury by its now-withdrawn painkiller Vioxx (rofecoxib). Last month, the drugmaker announced that it would cut 825 jobs worldwide after reporting a 2% drop in third-quarter revenues.
Merck said it anticipates three additional new product filings next year, including: Januvia (MK-431) for type 2 diabetes; vorinostat, a histone deacetylase inhibitor for cancer; and MK-517, a new intravenous medicine to treat chemotherapy-induced nausea and vomiting.
The company also said it would file for approval in 2007 for two new cholesterol lowering drugs, including MK-524A, a drug that raises protective high-density lipoprotein particles in the blood, and MK-524B, which combines this novel compound with simvastatin.