Merck & Co., Inc. (MRK)’s Late-Stage Breakdown

But all of these drugs have fared better than the heart drug Tredaptive. Merck had to pull the drug from the market earlier this year due to poor efficacy, and potential side effects including infection and bleeding. The drug was cancelled before it sought approval in the U.S. but was sold in 40 countries before its withdrawal.

Perlmutter potential?

Investors started calling for Peter Kim’s head after the odanacatib delay and Kim soon announced his forthcoming retirement in August. Roger Perlmutter was brought in as Kim’s replacement. Perlmutter previously worked at Merck as a senior researcher but then moved on to Amgen, Inc. (NASDAQ:AMGN), which shuffled him out last year after more than a decade.

While at Amgen, Inc. (NASDAQ:AMGN), Perlmutter was behind a number of acquisitions that thickened Amgen, Inc. (NASDAQ:AMGN)’s late-stage pipes. But now Perlmutter finds himself in the unenviable position of having to revive an R&D department without raising expenses much higher.

Merck & Co., Inc. (NYSE:MRK)’s research expenses are already among the highest in pharma. The company’s research expenses to revenue ratio equals about 17%. Compare that to 14% for Sanofi SA (ADR) (NYSE:SNY), which has a stronger slate of late-stage products and the $4 billion insulin Lantus in its portfolio. Amgen spends about 20% on development, mostly due to Perlmutter’s acquisitions, but the company at least has the pipeline to show for it.

Back at Merck, Perlmutter’s starting with cuts to research jobs and a restructuring of departments, which may provide the financial wiggle room for actual innovation. But it will be some time before we have a clear picture of Perlmutter’s version of Merck.

Foolish final thoughts

Merck’s product portfolio took a major hit with last year’s Singulair patent expiration. And the remaining improved products include a mix of winners and losers. It’s vital that Merck strengthen the pipeline, and bringing in Perlmutter is a step in the right direction.

The article Merck’s Late-Stage Breakdown originally appeared on Fool.com and is written by Brandy Betz.

Brandy Betz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Brandy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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