Reviving Merck

Why it will take years to see Perlmutter's effect on R&D at Merck

As Merck & Co. Inc.'s new head of R&D, Roger Perlmutter plans to refocus and prune the pharma's pipeline of 31 Phase II and Phase III programs. But with half of its Phase III programs near completion, the real evidence of his handiwork may not be visible for another three to five years.

Merck has struggled more than many of its pharma peers to fill the gap left by patent expirations for blockbuster drugs due to late-stage discontinuations and regulatory setbacks. Among its seven programs in registration, Merck has received complete response letters for three, including one request for additional trials. Additionally, since June 2011, Merck has discontinued three programs after large Phase III trials were complete.

Thus on Oct. 1, Merck announced that it would restructure its commercial and R&D operations. The restructuring includes headcount reductions of 8,500 and is expected to save $2.5 billion by 2015, with half of the savings coming from R&D.

Leading the work on the R&D side will be Perlmutter, who replaced Peter Kim as president of Merck Research Laboratories in April after 11 years as EVP of R&D at Amgen Inc.

At Amgen, Perlmutter organized the extensive development program for the Zytiga/Prolia denosumab franchise, increased the size of Amgen's clinical pipeline, built out its oncology programs and oversaw the approval of seven new drugs and multiple label expansions.

The aggregate 2012 sales of those seven new drugs was $3 billion.

At Merck, job one for Perlmutter will be to trim the pipeline to achieve $1.25 billion in R&D savings by 2015. That would put its R&D spend more in line with its big pharma peers. Right now it's $7.9 billion and 17% of revenues compared to the 2012 average of $6.7 billion and 14% for its peers valued between $100 and $200 billion (see "Merck's R&D Comps").

Merck hasn't said how it will meet the $1.25 billion goal. But Perlmutter may have to cobble together the savings from a range of Phase II and Phase III assets as the company's largest and most expensive Phase III programs are already out of the barn. For example, the 30,000-patient cardiovascular outcomes trial for anacetrapib is fully enrolled.

The pharma has said it will focus on diabetes, acute hospital care, vaccines and oncology while reducing its focus on platform technologies. Based on that list of priorities, the company's three reproductive health programs could be on the chopping block along with some of its

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