Transcript Merck & Co. Seminar Prep

Merck & Co., Inc. Seminar Prep
Rutgers Business School
September 21, 2006
Ryan Field
Roberto Lavie
Phil Hodes, Advisor
Snapshot
• Head office: 1 Merck Drive, Whitehouse Station,
NJ 08889, (908) 423-1000
• Website: www.merck.com
• Stock Info: NYSE, MRK
– $41.94 on Wed 9/20/06
• Financials: 2005 Sales $22B,
Net Income $4.6B
• CEO and President:
Richard T. Clark
*Note: All financial information is from FY 2005
Early History
• 1887: Theodore Weicker establishes a US branch
of a German chemical company, E. Merck AG, that
serves as an importer
• 1904: First US factory is opened (Rahway)
• 1933: First research lab is opened
• WWII: CEO George Merck gives 80% of
company’s German-held stock to US government,
and it is taken public after the war
• 1940s-50s: Merck researchers win 5 Nobel Prizes
Revenues by Geography
• US: Sales $12.7B, -5.2% to LY, 58% of
company’s revenues
• Europe, Middle East, Africa: Sales $5.2B,
-4.4% to LY, 23.6% of company’s revenues
• Japan: Sales $1.6B, -1.8% to LY, 7.4% of
company’s revenues
• Other: Sales $2.4B, +2.0% to LY, 10.9% of
company’s revenues
*Note: All financial information is from FY 2005
New Products
• Merck/Schering-Plough Pharmaceuticals
– Vytorin
• Fastest growing product in cholesterol market
• Superior LDL lowering efficacy vs. competitors
– Zetia
• Strong growth in cholesterol market
• Add-on LDL lowering efficacy (with statin and as
monotherapy)
New Products
• Gardasil
– Only vaccine in US for prevention of HPV types 16and 18-related cervical cancer, for use in females
ages 9 – 26
– Also approved for prevention of genital warts and lowgrade cervical lesions caused by HPV types 6, 11, 16
and 18
– In US, an average of 10 women per day die from
cervical cancer
• Zostavax
– Reduced incidence of shingles by 51%
– With 1 million cases of shingles each year, 40% 50% occur in those age 60 and older
New Products
• Rotateq
– Pediatric vaccine used in prevention of rotavirus gastroenteritis
– In developing world, rotavirus is the cause of 1/3 of diarrhearelated hospitalizations and 500,000 deaths each year
– Merck will put strong effort into making the vaccine available
where it is needed
• Januvia
– Diabetes drug, currently under review
– Phase III study showed significant results in lowering glucose
levels when used in conjunction with metformin
– Potential to be the first in a new class of oral drugs in US to
enhance the body’s natural ability to lower blood sugar when it is
elevated
Blockbuster Products/Divisions
• Zocor (simvastatin)
– Atherosclerosis (cholesterol)
– Financials: Sales $4.3B, -15.7% to LY, 19.9% of
company’s revenues
– Special note: Zocor went off-patent in June 2006, and
it is rapidly losing market share to generic version
• Fosamax (alendronate sodium)
– Osteoporosis
– Financials: Sales $3.2B, +1% to LY, 14.5% of
company’s revenue
– Off-patent in February 2008
*Note: All financial information is from FY 2005
Blockbuster Products/Divisions
• Cozaar/Hyzaar (losartan potassium)
– High blood pressure
– Financials: Sales $3.0B, +7.6% to LY, 13.8%
of company’s revenues
• Singulair (montelukast sodium)
– Asthma, allergies
– Financials: Sales $2.9B, +13.5% to LY, 13.5%
of company’s revenues
*Note: All financial information is from FY 2005
Other Major Products/Divisions
• Vaccines/biologicals
– Key products:
• Varivax: chickenpox vaccine
• M-M-R II: pediatric vaccine for measles, mumps,
and rubela
• Pneumovax: vaccine against pneumococcal
disease
• Recombivax HB: vaccine against hepatitis B
– Financials of division: Sales $1.1B, +6.5% to
LY, 5% of company’s sales
*Note: All financial information is from FY 2005
Other Major Products/Divisions
• Proscar (finasteride)
– Treatment of symptomatic benign prostate
enlargement
– Off-patent in June 2006
• Primaxin (imipenem and cilastatin)
– Antibiotic
• Vasotec/Vaseretic (enalapril maleate)
– Hypertention, heart failure
– Joint Venture with Biovail Corporation
Other Major Products/Divisions
• Cosopt/Trusopt (dorzolamide hydrochloride)
– Lower intraocular pressure
– Off-patent in October 2008
• Cancidas (caspofungin acetate)
– Antifungal
• Maxalt (rizatripton benzoate)
– Acute migrane
• Propecia (finasteride)
– Treatment of male pattern hair loss
Other Major Products/Divisions
• Other Division
– Financials: Sales $3.4B, +15% to LY, 15.4% of
company’s sales
– Consumer drug alliance with Johnson & Johnson
• Pepcid
– Animal health company: Merial
• Joint alliance with Sanofi Aventis
– Alliance with AstraZeneca
• Prilosec
• Nexium
– Other products
• Unbiased health information published
as a not-for-profit service
*Note: All financial information is from FY 2005
Merck Pipeline – August 01, 2006
Merck’s Strengths/Weaknesses
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Strengths
Market leadership
Streamlined business
model
Strong late stage
product pipeline
High ROI and ROE
Strategic alliances
Weaknesses
• Product Recall
• Weak operating
performance
• Short-term sales have
high costs associated
(i.e. vaccines)
Challenges/Opportunities in the
Global Health Care Market
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Challenges
Declining success rates
in new drug development
Rising cost or drug
development and
commercialization
Increasing pricing and
reimbursement pressures
Greater regulatory
scrutiny
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Opportunities
Rising disease incidence
globally
High unmet medical
needs (e.g. Oncology)
New technologies for
research and
development
Expanding access,
income, and insurance
coverage in key emerging
pharma markets
Merck’s Plan to Win
5 Strategic Actions
• Priority disease areas
– Alzheimer’s disease, atherosclerosis,
cardiovascular disease, diabetes, novel
vaccines, obesity, cancer, pain, and sleep
disorders
• Redefine product R&D
– Increase productivity of product in the pipeline
– Make the most use of advanced scientific
techniques and technologies to improve rates
of success in R&D
Merck’s Plan to Win
5 Strategic Actions
• New Commercial Model
– Efficiently providing value to all customers by getting them the
right information, at the right time, in the right way
– Devote more resources to bringing relevant information to
payers and consumers, all of whom are becoming more and
more involved in the choice of medicines
• Emerging Markets
– Build long term leadership in emerging markets
• Flexible Cost Structure
– LEAN and flexible cost structure
– Supply strategy
"Effort counts, but results count more, and I am counting on results."
--Dick Clark, Merck's CEO and president
Current Events and News
• Vioxx
– On September 30, 2004 Merck announced the voluntarily
worldwide withdrawal of Vioxx® (rofecoxib) from the market due
to an increased risk of serious thrombotic cardiovascular
adverse events is associated with all COX 2 selective NSAIDs
– There are over 16,000 pending lawsuits against Merck, who is
litigating them individually
• As of 7/14/06, Merck’s record was 4 wins and 3 losses
• On 8/18/06, Merck lost its first federal case with $51 million awarded
to the plaintiff (this award has since been overturned by a judge)
– Merck is developing a new painkiller called Arcoxia to replace
Vioxx to compete with the arthritis drug Celebrex
• Arcoxia is facing opposition with claims that it may be as risky as
Vioxx
– New journal reports are giving ammunition to patients suing
Merck, causing stock price to fall
Current Events and News
• Januvia
– On September 14, 2006 New Phase III data showed significant
glucose-lowering efficacy of Januvia™, an investigational
medicine for Type 2 diabetes, when taken simultaneously with
Metformin (common names: Glucophage®, Fortamet®,
Riomet®)
– Januvia has been accepted for standard review by the FDA
• Merck expects an FDA action on the New Drug Application (NDA)
by mid-October
• Emend
– On July 11, 2006 Merck announced that the FDA has approved
Emend® (aprepitant) for the prevention of postoperative nausea
and vomiting (PONV), one of the most common side effects
associated with surgical procedures
Current Events and News
• Gardasil
– On June 8, 2006, Merck announced that the FDA
approved Gardasil® [Quadrivalent Human
Papillomavirus (Types 6, 11, 16, 18) Recombinant
Vaccine]
– The vaccine is designed to protect against the four
types of human papillomavirus (HPV) that account for
some 70% of cervical cancer cases and 90% of
genital wart conditions
• Zostavax
– FDA approves Zostavax on May 25, 2006
– Zostavox is the first vaccine that may prevent shingles
in people age 60 and older
Current Events and News
• On November 28, 2005, Merck announced it
would cut 7,000 jobs (11 percent of its work
force) and close or sell five manufacturing plants
in the first phase of a restructuring meant to
save up to $4 billion by the end of the decade
• In an act of goodwill, Merck donated 55,000
doses of its vaccine against the viral illness
rubella following an outbreak in India earlier this
year
Current Events and News
• Merck was named one of the 100 Best
Companies for Working Mothers in 2004
by Working Mothers magazine
• For Merck shareholders
– $0.38 per share dividend is payable on
October 2, 2006 to stockholders of record at
the close of business on September 1, 2006
Tomorrow’s Speakers
• Topic: The Challenges and Opportunities of
Marketing and Finance in the Pharmaceutical
Industry
• 9:00a-9:15a: Mrs. Regina Flynn
– Director of University Relations
• 9:15a-10:00a: Mr. John Copeland
– Senior Manager, Influence Networks
• 10:00a-10:45a: Mr. Larry Smith
– Marketing Director
• 10:45a-11:30a: Mr. John Canan
– Vice President, Corporate Audit Services
Sources Cited
• Last year’s Merck &
Co., Inc. seminar prep
presentation
• Merck’s website
• Merck’s 2005 Annual
Report
• Datamonitor’s Merck
company profile, July
2006
• Merck Investor
Presentation,
September 2006
• Vault’s Merck profile
• S&P MRK stock
report
• News sources:
Yahoo, Google,
Wikipedia