Merck slashes staff and revamps R&D

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Merck & Co, still reeling from the impact of pulling its
painkiller Vioxx (rofecoxib) from the market, is to slash its staff
by 5,100 positions in a bid to save hundreds of millions of dollars
by the end of the year.

This is 700 more positions than had been envisaged when Merck first announced its restructuring drive last year, but most will be from the manufacturing function, with R&D largely spared. The firm's CEO, Raymond Gilmartin, said the aim is to save $2.4 billion over the next four years.

The company faces a huge legal liability bill over the withdrawal of the drug, which has been prescribed to millions of patients since it was first introduced in 1999. Analysts have been estimating that the ultimate legal cost to Merck could be in the $15-$18 million range, with one, Sanford Bernstein's Richard Evans, predicting it could go as high as $38 billion.

Merck withdrew Vioxx in October after an increase in cardiovascular events was observed following 18 months of continuous use of the drug. 475 lawsuits have already been filed alleging damage from use of the drug.

From a drug development perspective, the case has lent greater urgency to Merck's ongoing scramble to license new drugs to fill its product pipeline. Pharmaprojects recently issued an analysis suggesting that Merck has no new active substances in development above Phase III, so is unlikely to be able to launch anything completely new for more than a year.

Moreover, the company is also facing the expiry of patent protection for Zocor (simvastatin), its $5 billion cholesterol-lowering drug, and while it has three vaccines due to reach the market next year, the most promising of these (against human papillomavirus) is tipped to make around $1 billion at peak.

In addition, the firm is planning to file for approval this month of muraglitazar, a dual peroxisome proliferator-activated receptor (PPAR) agonist currently undergoing Phase III evaluation as a treatment for both blood glucose and lipid abnormalities in patients with type 2 diabetes. It is being co-developed under an agreement signed with Bristol Myers-Squibb earlier this year.

However, even if all these products meet their targets it seems unlikely that they will plug the whole left by Zocor, let alone Vioxx as well.

Pipeline building effort

Merck said it is planning to make significant cost cuts in manufacturing, procurement, and inventory reduction, but the company is planning to increase spending on R&D, mindful of the deep need to replenish its pipeline if it is to weather the Vioxx withdrawal.

This will be accompanied by even more efforts in out-licensing of drugs - the company plans to have signed 50 such deals by the end of the year, a fivefold increase on 1999 - and investments in technologies aimed at shortening the drug discovery and development process.

At the heart of these is the implementation of genetic profiling technology, acquired alongside Rosetta Inpharmatics in 2001, across all of Merck's 11 R&D facilities, said a spokeswoman for the company.

This technology will make it possible to make go/no go decisions earlier in the development process, she said. Other changes will include a redesign of the committee structure within labs to increase the speed of decision-making.

Related topics Clinical trials & development

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