Merck Pharma Case study

7/29/2019 Merck Pharma Case study

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DISCOVERING THE FUTURE:

R&D ATMERCK



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



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



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……..



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



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



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



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



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



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



THANK YOU

Prepared by

Maulik Parekh 34242

Jyoti Rajguru 34192

Ravi Garlapati 34113

Samik Sarkar 34252

Merck Pharma Case study

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