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Merck & Co

Merck & Co (US)

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Merck & Co regained a position among the world's leading pharmaceutical companies in 2010 after several years of struggles against multiple setbacks. The most serious of these were the repercussions from defects in its blockbuster arthritis medicine Vioxx. Merck withdrew that product in 2004 after publication of a report which demonstrated that it increased the risk of heart attacks in some patients. A series of lawsuits ensued, although for the most part Merck was exonerated of any fault and later announced a settlement to cover all subsequent suits. As if that were not enough to contend with, the company's flagship product Zocor lost its patent in 2006, and Merck seemed to have comparatively few other blockbusters in its pipeline. Yet the company has made a dynamic recovery since then, turning what appeared to be a clutch of minor vaccines into what are now substantial products. In 2009 it acquired smaller competitor Schering-Plough, already its partner in a global asthma and anti-cholesterol joint venture. In 2014, it took the decision to exit OTC consumer healthcare, selling its portfolio to Bayer of Germany for $14.2bn. Outside North America, Merck & Co operates under the name MSD to avoid confusion with the entirely separate German company Merck KGaA.


Who handles Merck's advertising? Click here for Agency Account Assignments for Merck from Adbrands. The company declared advertising & promotion costs of $2.1bn in 2016.


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Brands & Activities

Merck's legal problems with Vioxx would have been more than enough to overcome a smaller company. However the drug giant was lucky enough to be already sitting on a significant cash pile which helped it ride out those challenges. After two years in which it struggled to find its balance, Merck has delivered a remarkable and dynamic return to growth since mid-2006, gaining FDA clearance for several new products. As a result, while other pharmaceutical companies watched helplessly as their stock price stumbled and fell during 2006 and 2007, Merck's more than doubled.

In 2009, it announced plans to acquire Schering-Plough for around $41.1bn in cash and stock. For legal reasons, the deal was structured as a reverse takeover of Merck by Schering-Plough, but the combined company adopted the Merck name and HQ and is led by Merck's pre-merger management team. In 2013, the group announced a strategic review of non-core divisions, in particular animal health and consumer care. The latter was sold to Bayer the following year. Animal health, however, was reclassified as a key growth driver and will be retained.


Merck sells its products in approximately 150 countries. The main drugs business is Merck Pharmaceuticals, with combined sales of $35.15bn in 2016. During 2017, the company suffered a crippling blow to its manufacturing operations as a result of a cyberattack from the Petya virus. This imapcted significantly on sales and profits.

Until comparatively recently, the group's best-selling product was Singulair, a once-a-day oral treatment for asthma, and the most prescribed drug in its class in the US. Sales peaked at $5.48bn in 2011. However, the group was facing the dramatic loss of most of this revenue once Singulair's patent expired in the US in 2011 and in Europe during 2012, and this was one of the key factors in the Schering-Plough takeover. Singulair's sales have plunged since then, finally falling out of the blockbuster category in 2016.

It has been overtaken as Merck's top-seller by oral diabetes drug Januvia. Introduced in 2007, its sales have soared since then, peaking at $4.09bn in 2012 before slipping back in 2014 below $4bn. (The drug is also marketed as Glactiv in Japan and as Tesavel in Spain by other companies). Some of that lost ground has been made up by spin-off product Janumet and its extended-release variant, which topped $2bn for the first time in 2014. The group introduced a combination of Januvia and cholesterol reducer Zocor under the name Juvisync in 2011 to treat diabetes as well as high blood pressure. Industry analysts expect the entire Januvia franchise to reach combined sales of around $10bn by 2018. Januvia/Janumet were together named as Medicine of the Year by Med Ad News in summer 2012.

Two other linked products are Cozaar and Hyzaar, related drugs for high blood pressure and hypertension. However combined sales of these have plunged since 2009 because of competition from generic products and then patent expiry, losing blockbuster status in 2014. Sales slumped to $514m for 2016.

One key motivation for the merger with Schering-Plough was to give Merck full control of an existing worldwide partnership to develop new cholesterol and respiratory products. Its biggest such brand is Zetia, which limits absorption of cholesterol by the intestine. Zetia launched in the US in late 2002, and is now available in 80 international markets under the name Ezetrol. Originally discovered by S-P, it was co-marketed by Merck for a comparatively low fee. Acquisition has given Merck most of the benefits from the brand (apart from in Japan, where Bayer shares rights). Another product, Vytorin, combines the ingredients of Zetia with Merck's own Zocor, targeting cholesterol on two fronts. It was approved in the US during 2004 and is marketed in a number of international markets under the name Inegy. The future of Vytorin came under threat in 2008, however, when new research indicated that its combination of Zetia and Zocor did not reduce arterial plaque any more effectively than Zocor on its own, now now available in generic form. This led to a sharp decline in sales and could result in sizeable litigation costs and damages. Combined sales of Zetia and Vytorin were $3.7bn in 2016.

The Schering-Plough takeover also added a collection of other important products to the portfolio. The biggest of these is Remicade, a treatment for rheumatoid arthritis, originally developed by Centocor, a division of Johnson & Johnson. SP had held international marketing rights (excluding the US and Japan) for the drug. The announcement of Schering's acquisition by Merck, prompted Centocor to launch a legal challenge to prevent the transfer of international marketing rights into the merged group. This dispute was eventually settled under arbitration, and Merck retained rights to the drug in most of Europe, although it must pay over a share of profits to Johnson & Johnson. Remicade contributed revenues of almost $1.3bn in 2016. (The largest proportion is generated by Johnson & Johnson in the US). It is partnered by another anti-inflammatory product, Simponi, with sales to Merck of $766m. Rounding out Merck's blockbuster group is Isentress, an HIV medication for patients who show resistance to other treatments. However sales have been in slow decline since 2014.

Schering-Plough's #2 product was Nasonex, part of an important allergy and respiratory portfolio which also includes Asmanex for asthma and Clarinex/Aerius non-drowsy antihistamine. Nasonex still generated sales of $537m in 2106. In 2011, the group introduced new asthma medication Dulera, sales of which reached $436m in 2016.

The group also manages a collection of former blockbusters, now in decline following patent expiry. Until the early 2000s, Merck's leading product was Zocor, one of the first drugs to reduce production of cholesterol by the liver. Sales declined sharply from 2005 onwards, settling at $186m by 2016. Another former high-flyer is Fosamax for post-menopausal osteoporosis (known as Fosavance in Europe, and as Bonalon in Japan, where it is marketed by Teijin). Merck's US patent expired in 2008, causing sales to fall sharply from over $3bn in 2006 to $284m by 2016.

Other important secondary drugs include hepatitis treatments Pegintron ($381m), chemotherapy agent Temodar (sales halved to $350m in 2013 after its US patent expired). From the acquisition of Organon BioSciences in 2007, Schering-Plough also contributed infertility hormone Follistim/Puregon ($355m); contraception products NuvaRing ($777m) and Nexplanon/Implanon ($606m).

Another newer product, Emend, is designed to reduce nausea in chemotherapy patients. Sales were $549m in 2016. Other products include infection treatment Invanz ($561m), Primaxin for respiratory tract infections ($297m), anti-fungals Cancidas ($558m) and Noxafil ($595m. The group markets Sustiva in some international markets, in some cases as Stocrin, although Bristol-Myers Squibb has rights in North America and most European territories.

The group has had comparatively few successful new product approvals since 2013. The most significant by far is Keytruda, introduced in 2014 as an immunotherapy treatment for melanoma. Sales in that treatment segment are still low, but the drug was approved in 2015 for the treatment of lung cancer, a development that has significantly increased sales, which came close to tripling in 2016 to $1.4bn. Further approvals have followed for Keytruda for other forms of cancer, with the result that sales are now expected to rise as high as $8bn by 2020. Also launched in 2014 was sleep aid Belsomra. One new approval in 2016 was the hepatitis treatment Zepatier, which achieved first year sales of $555m.

Instead, the group has sought to build its portfolio through acquisition. In June 2014, it agreed to acquire Idenix Pharmaceuticals, which is developing a portfolio of promising hepatitis C remedies, for $3.85bn. Later the same year it agreed to pay $9.5bn including debt for Cubist Pharmaceuticals, a specialist developer of antibiotics against hospital "superbugs". Its lead product is Cubicin, sales of which had been expected to reach $2bn in 2017. However in a case of unfortunate timing, the deal announcement was followed almost immediately by a US court ruling to allow generic competition to Cubicin as soon as 2016. Cubist had been pushing for patent protection until 2020. Merck shrugged off the adverse ruling but it prompted analysts to accuse the group of overpaying for Cubist by as much as $3bn. Cubicin contributed sales of $1.1bn to Merck during 2016.

In addition to the main pharmaceutical business, Merck Manufacturing produces a range of human and animal health drugs which are marketed by other companies or through joint venture operations. The group operates several successful joint ventures with partners. These include one with Johnson & Johnson to manufacture and market gastrointestinal remedy Pepcid and other non-prescription medicines in the US. Until recently the partners also operated a similar venture in Europe, Johnson & Johnson/MSD Europe, but J&J bought out Merck's shareholding in this unit in 2004. Until recently Merck also derived royalties from a development partnership with AstraZeneca, relating to Nexium and Prilosec. Its stake was bought out by AstraZeneca in 2014. In 2017, Merck agreed a new partnership with AstraZeneca to co-develop and commercialise the latter's cancer drug Lynparza.


There is also a substantial vaccines business, which has received significant further investment from the group as a result of challenges in the main pharmaceutical division. Its key products are ProQuad, a combined chickenpox and MMR vaccine, and newer launch Gardasil, a vaccine thought to entirely block the onset of cervical cancer. Results from the first full clinical tests, published in 2005, appeared to indicate an incredible 100% success rate. First year sales in 2007 were almost $1.5bn, but have fluctuated since then, falling to a low of $988m in 2010 before rebounding to a new high of $2.17bn in 2016. The ProQuad/MMR family contributed a further $1.64bn. Among other vaccine products are Zostavax for shingles (sales of $685m in 2016); Pneumovax for pneumonia ($641m); and RotaTeq against pediatric rotavirus gastroenteritis ($652m).

Until the beginning of 2017, Merck marketed its vaccines in Europe through Sanofi-Pasteur MSD, a joint venture with Sanofi. In 2016, the partners announced plans to dissolve that business and take back direct control of their own vaccines in the region.

Consumer Health

The Schering-Plough acquisition also bolted on an important consumer health business, led by the non-prescription formulation of Claritin (or Clarityn in the UK). Other group products included Afrin decongestant sprays, nappy rash cream A+D and Coricidin HBP cough and cold remedies. The group was also a leader in suncare with the Coppertone and Bain de Soleil brands. The Footcare portfolio included market-leading brand Dr Scholl's in the US, and athlete's foot treatment Lotrimin. Combined sales from consumer care were $1.9bn in 2013. In 2014, the group put the OTC division up for auction. The prize was eventually secured by Bayer, which agreed to acquire the business for $14bn.

Animal Health

Merial was for several years another standalone joint venture with Sanofi, combining the two companies' animal health operations. It is the world's leading animal health company, producing a wide range of pharmaceuticals and vaccines to keep livestock and pets healthy and productive. The business was originally a joint venture, but in 2009 Sanofi bought out Merck for $4bn to take full control of the business. However it also took an option at that point to bolt on the Intervet division of Schering-Plough, then about to be acquired by Merck. In 2010, the two companies announced plans to re-establish Merial as a joint venture by merging Merial and Intervet. The combined business would have had sales of around $5bn. However those plans were scrapped in 2011 as a result of opposition from regulators. As a result, Merck retains full control of Intervet and no holding in Merial. Its main line is in livestock products but it also produces some drugs for companion animals such as cats and dogs. Revenues from animal health were $3.48bn in 2016. Merck Animal Health was the global #3 in the sector with an estimated 14% share that year.


To avoid confusion with the entirely separate German company Merck KGaA, Merck trades as Merck Sharp & Dohme (or MSD), in all non-US markets except Japan, where it is represented by Banyu Pharmaceutical, one of the country's top 10 pharmaceutical companies. Formerly a joint venture, Merck took full control of the business in 2004.


The acquisition of Schering-Plough caused revenues to double from their mid-2000s level, peaking at $48.05bn in 2011. Since then, though, they have drifted steadily lower, falling 7% in 2013 alone to $44.03bn. There was a further decline in 2014 to $42.24bn, reflecting the sale of consumer care in October.

Attributable net income has fluctuated wildly in recent years, soaring to almost $12.9bn in 2009 as a result of accounting changes, mainly resulting from a revaluation of what was then the Merck-Schering-Plough partnership. The following year they plunged to $861m as a result of post-acquisition restructuring and impairments. For 2011, there was a recovery to $6.27bn, followed by a slight decline in 2012 to $6.17bn, and then $4.4bn in 2013. For 2014, though, the benefits from the sale of consumer care caused a leap in net profits to $11.92bn. Without any contribution from OTC, revenues for 2015 slipped back to $39.50bn. Net income was $4.46bn.

For 2016, revenues recovered some ground to $39.81bn. However, net income slipped back to $3.94bn, their lowest level since 2010. The group generated 46% of sales in the US in 2016. The EMEA region was its biggest international market, contributing 28% of revenues.


Merck & Co is able to trace its roots as far back as 1668, the year Friedrich Jacob Merck took over the Angel Drugstore in the German town of Darmstadt. For the next 150 years, this remained a little family-owned shop selling plant extracts and herbal potions. But in the early 19th century, Friedrich Merck's descendant Emanuel began Merck's transformation into a mass producer of alkaloids such as morphine and quinine. By the 1860s, Merck was the most powerful drug firm in Europe, the first to produce morphine, codeine and medicinal cocaine commercially. By 1900 the company had manufacturing premises in London and New York. Emanuel's grandson George Merck came to America in 1903 to take over the running of the US operation.

The outbreak of World War I in 1914 created a substantial division between the German company and its US subsidiary. Fond of his new home, George Merck broke with his family when America entered the war in 1917. It is unclear whether George Merck simply gifted the Merck family's 80% shareholding in its US business to the American government or it was forcibly confiscated. Whichever the case, George Merck retained his own 20% stake, and continued to run a business that was now 80%-owned by Uncle Sam. In 1920, the US government sold its shares in Merck to the public. (Germany's Merck went its separate way, and continues to be a significant pharmaceutical business in Europe, although it has no connection to Merck & Co).

In 1933, Merck opened its first dedicated research laboratory in the US, and was later one of the first pharmaceutical companies to find a process for synthesizing vitamins B-1 and B-12. In the 1940s, five of the company's biochemists received the Nobel Prize for developing the first commercial batch of arthritis-reliever cortisone. In 1953, the company merged with Canadian drug company Sharp & Dohme, which already had a network of sales offices around the world. Other operations were established outside the US during the 1960s and 1970s under the Merck Sharp Dohme name.

During the 1980s, the company pioneered new drugs for high cholesterol and blood pressure, introducing early blockbusters such as Vasotec. In 1990 it launched a joint venture with Johnson & Johnson to sell a range of non-prescription drugs acquired from ICI. Two years later the group acquired Medco. Formed in 1969 as a mail order company under the name National Pharmacies, this business had been acquired in the 1980s by entrepreneur Martin Wygod, who greatly expanded its network and its marketing database, and moved the company into a new sector, managing pharmacy benefits and long-term prescriptions for employers, insurers and other plan sponsors. Merck paid around $6.6bn to buy the business. In 1997 Merck's animal health business was merged with that of French drug company Rhone-Poulenc (now Sanofi-Aventis) to form Merial. A joint venture with Astra to market that company's drugs in the US was restructured in 1998 following the merger of Astra and Zeneca. Merck sold back its share of Astra's US operations but retained a royalty arrangement on drugs which it had helped to develop or manufacture, including former blockbuster Prilosec.

In 2001 the group's drugs development pipeline came under severe pressure as the patents on several blockbuster drugs expired, opening them up to competition from lower-cost generic copies. Pepcid, for example, saw its sales fall from almost $1bn in 1999 to around $355m in 2002. The biggest problem facing Merck is that for some time there have been no new potential blockbusters in its pipeline. The company did not have any commercially significant products approved by the FDA during 2001, nor did it have many in late-stage development. To speed up the selection of potential drugs for development, Merck acquired Rosetta Inpharmatics, which develops technologies that improve drug discovery.

Instead, the most dramatic change to the business during this period was the soaring success of the Medco prescription and benefits management business. Renamed Merck-Medco, its sales boomed from $2.2bn when it was acquired, to a mammoth $33bn by 2003. Yet Medco's profit margins remained weak. In 2001, for example, Medco generated almost two-thirds of the entire group's sales, but contributed only 5% of profits. This in turn stifled the group's share price. Plans to launch an IPO of Merck-Medco in 2002 were abandoned as a result of market turbulence. Instead the entire business was spun off to shareholders in 2003 as Medco Health Solutions.

New and far more challenging problems emerged soon afterwards. Two of the group's best-selling drugs from the 1990s, Prinivil and Vasotec, had lost patent protection in 2000, causing a steep decline in sales. Yet Merck's pipeline still had little to offer in the way of new products. Towards the end of 2003, two new of its new drugs failed in late-stage clinical trials, and had to be abandoned. Meanwhile, its blockbuster arthritis drug Vioxx was already locked in a marketing battle with rival Celebrex (marketed by Pfizer), which slowed down its rate of growth. But the product was also dogged by rumours that it caused heart problems. This controversy came to a head in September 2004 when an independent study suggested that patients taking Vioxx were twice as likely to suffer a heart attack or stroke. Merck withdrew the drug from worldwide circulation a few days later. A subsequent report suggested that the drug could have caused almost 28,000 heart attacks since it was introduced. Worse problems followed when it was alleged that Merck had ducked earlier warnings of risks associated with the drug in order to protect sales. A federal criminal investigation was launched in November 2004. The group was eventually cleared, not least as a result of calm and measured testimony from chairman-CEO Ray Gilmartin, who testified that his own wife had been taking Vioxx until right before its withdrawal.

Nevertheless, the first civil lawsuit over Vioxx came to trial in 2005, and a jury found Merck guilty by majority verdict of covering up known defects in the drug, which led to the death of patient Robert Ernst. His widow was awarded total damages of $253m, although these were reduced on appeal to around $26m. This was only the first of more than 25,000 such cases. Analysts initially estimated that Merck's ultimate liability could be as high as $50bn. The second trial, which ended in November 2005, found in favour of Merck, as did the first federal trial, initially ruled a mistrial after one lone juror held out against what would otherwise have been a not guilty verdict. Nevertheless, at around the same time, the prestigious New England Journal of Medicine stoked the fire by accusing Merck of deliberately manipulating clinical data to downplay heart risks for Vioxx. By the end of October 2007, a series of further cases had come to trial, bringing Merck's scorecard for the first 16 trials to 11 wins and five losses. In November 2007, the company negotiated a deal to settle around 26,500 outstanding lawsuits over the drug with a fund worth $4.85bn. Including legal expenses and other costs, Merck's total exposure is expected to total around $7bn, well below early estimates.

In the mean time, in an attempt to reduce its costs, Merck launched a restructuring programme in 2005, including plans to close five manufacturing sites and two preclinical sites in North America, Japan and the UK, as well as around 7,000 jobs.

The biggest blow to the group in recent years was the forced withdrawal of arthritis pain medicine Vioxx, and the resulting litigation from patients. Sales of the drug plunged in 2004 after an independent study suggested that patients taking Vioxx were twice as likely to suffer a heart attack or stroke. The product was initially withdrawn, but in 2005 an advisory panel of the FDA authorised Merck to reissue Vioxx subject to strict conditions, including clear warnings of the potential health risks involved for patients taking the drug. However the publicity surrounding the potential dangers of the drug had a serious impact on any remaining business, and the group was deluged with well over 25,000 lawsuits relating to alleged side-effects. It hopes to be able to draw a line under the worst of the financial impact from Vioxx by offering a $4.9bn fund to settle all outstanding suits. Separately the group agreed a $58m settlement in 2008 with around 30 state attorneys general over its marketing of Vioxx, and agreed to submit future direct-to-consumer advertising to the FDA for review before airing. A settlement with the Justice Department was finally reached in November 2011 at a cost of $950m.

Merck's follow-up to Vioxx, Arcoxia, has launched successfully in around 60 other countries since 2002. However, it has faced considerable challenges in gaining approval in the US. In Spring 2007, after months of deliberation, an FDA panel of experts recommended against approval, citing evidence that Arcoxia can increase the risk of stroke or heart disease and was no more effective at combating pain relief than other products. That decision was upheld by the FDA.

Last full revision 12th January 2017

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