Merck: Schering-Plough integration is on track

Drugmaker Merck & Co.‘s integration of Schering-Plough Corp. is progressing well, with their operations already combined in 16 of its top 20 markets, sales rising in emerging markets and new medicines poised for approval, company executives said Tuesday.

Merck said that since the $41 billion Nov. 3 acquisition, it’s been building sales of key products, launching new ones for depression, asthma, fertility problems and other conditions, and retooling its marketing to focus more on doctor and patient needs. However, the company’s first effort at producing a biologic drug has flopped.

The Whitehouse Station, N.J., company gave its first business briefing since the deal that made it the world’s second-largest pharmaceutical company.

“This merger is very much on track,” Chief Executive Richard Clark told analysts. “Today’s Merck is clearly succeeding. It is not just about the synergies, it’s about the science.”

Merck now has four drugs awaiting approval, for schizophrenia, contraception, asthma and irregular heartbeat. More than 20 others are in final-stage testing, including ones for osteoporosis, allergies and heart disease.

A new leadership team also has been assembled, including the promotion of Kenneth Frazier from head of global sales to president of Merck, a position that makes him the heir apparent when Clark, 64, retires next March.

Erik Gordon, an analyst and professor at University of Michigan’s Ross School of Business, said that while some of Merck’s cardiovascular research is promising because it focuses on understanding of the disease mechanism, other research shows little innovation.

He said he’s also concerned too much of Merck’s planned $3.5 billion in savings from the merger by 2012 will come from the research budget _ after Merck said it stopped or put on hold much of its mid-stage research _ meaning the research pipeline “will be a pale shadow of itself” later.

“If the goal is to impress the analyst world that Merck is the R&D leader, they have missed their shot,” Gordon said.

Clark noted that during the last two quarters, Merck boosted its total revenue by 7 percent. That’s despite cutting the combined company’s global sales force from roughly 13,000 in 2007 to about 7,000 now.

“We’re quite pleased that our global human health and animal care business showed growth,” and consumer care is poised for growth, Clark said.

Eight of the new Merck’s top 10 products grew through the normally disruptive period of integration, Frazier noted. Those include blockbusters Januvia and Janumet for diabetes, Singulair for asthma and hay fever, Zetia and Vytorin for cholesterol problems and Remicade for autoimmune disorders.

Peter Kim, head of Merck Research Labs, said Merck’s 1-1/2-year-old division to make biologic drugs, Merck BioVentures, has five new biologic drugs and two “biosimilar” ones in human testing and should have five programs in late-stage testing by 2012. The company plans to make both new biologic medicines and versions of existing ones that are either similar or improvements on existing biologic drugs, which are grown in living cells.

Merck discontinued development of what was to be its first biologic drug, an anemia treatment, after regulators said they wouldn’t approve it unless Merck first did a large study showing whether the drug carries any heart risks. That would have been costly and delay chances of approval for at least a couple years.

In one of Merck’s longtime priority areas, cardiovascular medicine, the company now has six new drugs in large, late-stage tests. Those drugs are for preventing life-threatening blood clots, treating tissue damage caused by restricted blood supply, or treating Atherosclerosis, or hardening of the arteries, said Luciano Rossetti, head of global scientific strategy.

Merck forecast that sales in emerging markets such as China and India will bring more than 25 percent of all pharmaceutical and vaccine revenue by 2013, up from about 17 percent now, as it puts more resources there.

Gordon, however, said that will destroy profit margins because emerging markets “cannot and will not pay prices that support Big Pharma business models, including Merck’s.”

Merck and rivals such as Pfizer Inc., though, say they can make comfortable profits in those countries _ mainly by hiring cheaper local labor for manufacturing, sales and even research.

Merck’s shares fell 74 cents, or 2.2 percent, to close Tuesday at $33.51.

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By: LINDA A. JOHNSON
The Associated Press