Post on 03-Apr-2018
7/29/2019 Merck Pharma Case study
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DISCOVERING THE FUTURE:
R&D ATMERCK
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OVERVIEW AND STRATEGIC CHANGE
Long history of R&D
Merck Research Laboratories: An unique entity in itself
Robust financial performance:
Stock price had risen over 25%: An all time high of $91.99 per share.
Strong market position: Viox, Zocor, Singular andothers
Right time for strategic change and investment; CEOsdecision to invest and act
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THE FUTURE STRATEGY
Basic dilemma/decision: Merge, collaborate, orIsolate?
Traditional focus on scientific isolation and hiring
best talent than mergers and acquisitions Smaller and more focused development
community
Rational: Exposure and research ideas are fairlyavailable to all hence talent maters
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COST OF R&D
Bloated cost of companies which followed themergers path
M&A integration costs
Inflated staff Duality of work
Less than desirable ratios of
1. Profit to investment2. Sales to R&D costs
But……..
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THE NEW TREND
Emergence of a consolidation trend-Merck notplaying the game
consolidating not only to reduce expenditures
but to advance the science Focus on particular processes in merger
environment: Case of Eli Lilly
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COLLABORATION AT MERCK
Not total isolation: Belief in collaboration withoutside firms. Great success too. 1/3rd of successful product base came from 3rd party
collaboration Limited partnering paradigm
Funding issues: Competition between internaland external projects
Control tussle: MRL and Corporate head quarters Partnering only during early stages: More
profitable
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ADDITIONAL STRATEGIC ISSUES
Influencing decision for growth and survivability fornext 10 years:
Keep mergers and acquisitions to a minimum
Focus R&D Spending on Blockbuster drugs foremerging markets
Restrict Collaborative efforts to focused, smallventures ran and managed from MRL
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SYMPTOMS OF BUSINESS ISSUES
Not agile in relation to smaller firms
Organizational structure very restrictive due to the parent companies size
Not open to widespread exploration (outsourcing)
Not resilient, cannot absorb VIOX issue soon to come
Not enough partners and internal competitors
Inexperience employee’s (new collage hires)
Building in house and not buying solutions
Not expanded enough, closed culture
Authority Vs. Responsibility: battles between MRL and Corporate for power
Narrow Channels, need to embrace more collaborative opportunities
Failures of acceptance: organizational issues from a division to another
Weakening Pipeline: Generic Threats will occur but too far away to
motivate
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SWOT ANALYSIS
STRENGTH • Strong presence in blockbuster
market, low competition to date• Financial strength• Strong brand value• Scientific pedigree
WEAKNESS • Few novel products• Underperformance of pharmaceutical
process (too many control issues, notflexible in collaboration efforts)
• Huge company moves too slow
OPPORTUNITIES
• Smooth Acquisitions &Integrations
• Growing global market• Many small firms to collaborate
with
THREATS • Other firms Mergers and acquisitions
best opportunities already taken• Increased competition due to other
firms perfecting M&A as well asCollaboration processes
• Generic competition to mainstay drugs
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RECOMMENDATIONS
Change their approach towards M&A (Ex J&J)
Collaborative investment Vs Large size (Ex pfizer,Avantis)
Change this:o How Merck is doing:
o How industry is doing: (Pfizer, Avantis)
New discoveriesin smaller co
Major drugsextracted
Developed, Scaled, Productized,marketed, sold by larger firms
Smallinternal labs
Aristocratic approachto collaboration
Developed, Scaled, Productized,marketed, sold by merck
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THANK YOU
Prepared by
Maulik Parekh 34242
Jyoti Rajguru 34192
Ravi Garlapati 34113
Samik Sarkar 34252