Even though Merck faces threats from generic competition, they are the world’s leader in healthcare and chemical production because their pioneering inventions save lives which drives continued sales growth. As a mutual fund manager, big pharma means big business. After all, there’s no doubt that medicine saves lives. Both innovative and lucrative, Chief Research Officers agree that risky pharmaceutical investments can lead to great returns. Merck is a healthy company to invest in with a diverse portfolio since their merger with Schering-Plough in 2007. Before investing however, there are a few things to consider.
Upon aligning forces with its Zetia/Vytoria marketing partner who had recently acquired Organon Biosciences, Merck vastly improved their late-pipeline and increased their market share of women’s health and animal health products. According to Kesic, by “alliancing they tend to create strategic synergies in an endeavor to be successful, competitive and capable to continue with further development circles (1). Merck has been a major competitor in the vaccine market but have historically struggled with generic erosion despite blockbuster product launches (Data Monitor, Merck & Co. , Inc. 6).
Schering’s relatively safe product portfolio secures sales growth which leverages Merck’s weak late-pipeline. Merck’s internal stakeholders include its 100,000 employees, management, and investors. Employees and applicable unions are vested in stability and profitability of employers. It is not uncommon to see a company with negative revenue put employee benefits on the chopping block first. Investors are directly concerned with upfront capital risks and the rate of return on their investments. Mega mergers, acquisitions, and investments are decided upon by using business analysis data.
For example, Wall Street investors rely on company information to determine buy, hold or sell strategies. Senior management is front line to carry out company goals and visions. With superior portfolio knowledge, management should be able to advise and make recommendations when needed. External stakeholders include patients, corporate stakeholders like Fujifilm that invested in Merck’s biomanufacturing, physicians that write the prescriptions (pharmaceutical representatives that market product), environmentalists, and government agencies that regulate drugs like the Federal Drug Administration.
There have been well-publicized events involving pharmaceutical companies withdrawing drugs from the U. S. market. According to the International Society for Pharmacoeconomics and Outcomes Research, pharmaceutical companies have “underscored the importance of under-standing and measuring individuals’ preferences regarding risk-benefit trade-offs”. They argue that the voluminous product withdrawals are a sign that the scientific information base at the time the product was approved is severely flawed (1). Merck is the world’s leader in healthcare and chemical production.
Although the risk of patent expiration threatens their sales, the company remains one of the highest in yearend revenue. Before the merger, Data Monitor stated that Merck’s prescription portfolio was set to see sales decline in 2008-13at a compound annual growth rate (CAGR) of -03% due to generic competition. To put their growth rate decline in full perspective, even with new product launches set to actually boost annual sales by 5. 7 billion, expiring products will cost them $6. 1 billion in annual sales. The Schering-Plough merger improved Merck’s annual sales growth rate from -0.
3% to +1. 7% for 2008-2013. The immunology and inflammation portfolio was the most prominent acquisition. Remicade (infliximab) added more than $2 billion in sales alone (Market Watch 25). Renowned for their refined research and development process, Merck is on track for continued enhancements in biology. “Merck has successfully launched seven new therapeutics since the start of 2006, namely RotaTeq (2006), Zostavax (2006), Gardasil (2006), Januvia (2006), Zolinza (2006), Janumet (2007) and Isentress (2007).
Formulations for mature brands such as Fosamax Plus D (2005) and Emend IV (2008) overcome the downturn associated with the withdrawal of Vioxx and also the patent expiry of Zocor. ” (Data Monitor, Merck ; Co. , Inc. 5). With that being said, it takes a lot of profits from the few approved drugs that make it to market to pay for all the basic research and failed development. According to Data Monitor, “ProQuad, RotaTeq and Zostavax all represent key vaccine launches over the past few years, although in terms of revenue yield Gardasil is the stand-out product” (6).
Marketed as an anti-cancer vaccine, Gardasil is The HPV (human papillomavirus) vaccine. The FDA licensed Gardasil for use on June 8, 2006. Since its market approval, The Centers for Disease Control and well known professional organizations of physicians have since recommended routine universal vaccination in young girls (Collins p. 463). Questions regarding the vaccines safety and effectiveness remain despite its FDA approval. According to Collins, Gardasil does not eliminate the need for routine Pap screening and there is no proof that it will decrease cervical cancer rates in the future (Collins p.465).
The Zoster vaccine (Zostavax) is a new preventative immunization for adults 60 years of age or older with HZ or shingles. In May 2006, The Food and Drug Administration approved Zostavax. Subsequently, the Centers for Disease Control and Prevention further recommended Zostavax for routine vaccination in patients over 60 years of age. Like most antiviral medications, Zostavax has not been evaluated in any clinical studies.
Merck faced major sales declines due to generic competition its products like Singulair, Cozaar/Hyzaar, Fosamax and Zocor all, with patents set to expire out to 2013 (Data Monitor 2009, 25). Merck applied for a patent on Gardasil in March of 1995 and was granted in October of 1998. Granted patent extensions for both products, Word Press confirms that Merck has 17 years from the date of patent issuance or 20 years from application date under US patent law (Word Press 1). These laws prohibit generic companies from bringing a drug to market prior to patent erosion.