Merck & Co. Inc. announced what experts are calling a long overdue restructuring strategy Nov. 28. The plan includes laying off 11 percent of its workforce, predominately in manufacturing, and eliminating five manufacturing facilities, one research site, and two preclinical development sites. But it remains unclear whether the initiative is enough to staunch the company’s wounds from ongoing Vioxx litigation, the impending loss the patent on Zocor (simvastatin), and what many perceive as a weak pipeline.

    The investment community immediately pounced on the plan as not extensive enough. In a recent report, Morningstar analyst Tom D’Amore predicted that the costs of implementing the restructuring would offset the potential savings.

    More far-reaching changes are needed before the company’s sales and earnings forecasts will improve, said Le Anne Zhao, an analyst at Caris & Company, in a Nov. 29 report. She described Merck stock as “dead money” for the next year to 18 months.

    Analysts are particularly skeptical about the sales potential of Merck’s pipeline and about the loss of revenue when Zocor goes off patent next year. The drug had the second highest number of sales in the entire industry in 2004, generating $4.6 billion, according to IMS Health.

    “We believe Merck still has valuable assets and a capable research-and-development program to replenish its thinning drug portfolio, but investors will need a strong stomach to ride out what could be a stormy next few years for the firm,” D’Amore wrote.

    Continuing Vioxx lawsuits leave the company financially vulnerable as well, said Cheryl Buxton, global managing director of healthcare markets at Korn/Ferry International, an executive recruiting firm. But she called the lawsuits a catalyst that accelerated change, not its underlying cause.

    The restructuring is an attempt to right excesses left over from the 1980s and early 90s, when the whole industry overbuilt in response to tax issues and trade restrictions, explained Walter Birch, director of Michael Kelly Associates, a managerial recruiting company that specializes in healthcare and financial services. In better times, the industry did not need to be 100 percent efficient he said.

    “The whole industry needs to rationalize itself,” Birch said.

    Other major pharmaceutical companies have gone through downsizing following major mergers, which helped correct lingering excesses, Buxton said.

    “Merck hasn’t gone through that exercise,” she said. “It’s long overdue.”

One of the main challenges facing Merck is retaining staff members in divisions other than manufacturing who are nervous about further layoffs, Birch said.

    “When you look at management, there’s got to be an aggressive play in reassuring the people you want to keep,” he said.

    Buxton agreed, saying that until recently people stayed at Merck for long-term careers. But the company culture has changed in recent years, she indicated, and newer staff members may not be willing to stick it out through the restructuring.

    She indicated that further rounds of layoffs would probably include other sectors of the company, and she identified sales as an easy target.

    Birch agreed that the sales force would probably face some changes.

    “It’s hard to do layoffs in one area without some in all areas,” he said. “With the exception of R&D, I would expect layoffs in ever other area, at least to a certain extent.”

Articles

The embattled pharma company needs to walk a tightrope between reassuring employees and pleasing investors. Can it succeed? Analysts and personnel experts share their insights.

Merck Will Lay Off 7,000 and Close Five Plants

Electronic data capture (EDC) may well be the future of data collection in clinical research environments, but some software companies are taking the concept a step further. At least two companies are developing tools that would enable researchers to electronically gather data in preclinical studies.

    EDC allows researchers to upload data directly from electronic measuring devices – scales, calipers, chip readers, etc. – onto a computer. The software then sorts the data and graphs them instantaneously to create an up-to-the-minute analysis of the experiment.

    The two leaders in preclinical software development are New Jersey-based Innovative Programming Associates Inc., which makes a program called LABCAT, and San Francisco-based Studylog Systems Inc., which makes Study Director.

    Professionals are split over whether these types of programs improve the quality and efficiency of research. The question at hand involves whether the current procedure for data collection – in most animal studies, that involves jotting down data in notebooks, then transferring them onto Word processors – adequately serves its purpose, or if using electronics would be more efficient.

    Dr. Ingegerd Hellström, an affiliate professor of pathology at the University of Washington and former vice president of Bristol-Myers Squibb, said he believes the current methods of data collection are outdated.

    “There are all kinds of possibility for error, and I think that this improved method can decrease investigator error,” Hellström said. “I think that is of great value, and so this in my mind is one of the great advantages of this approach.

    “Of course, lots of good work has been done for a hundred years in animal experiments without this fancy software. One doesn’t necessarily need a computer for doing anything, but one is a fool if one doesn’t use the modern technology which is available.”

    Since using EDC devices eliminates the need for handwriting data, it decreases the risk for clerical errors. Melinda Hollingshead, chief of the Developmental Therapeutics Lab at the National Cancer Institute (NCI), noted that the most common laboratory errors are clerical – in other words, dumb mistakes that could be avoided by using more sophisticated data gathering processes.

    Hollingshead’s lab was the first to implement Study Director, in 2004. Hollingshead said she would recommend the software to anyone who conducts a large number of animal studies, especially if they involve collecting precise data.

    Others, however, are slow to accept EDC software as inherently better than the status quo.

    “In a generic sense, you have an opportunity to increase your efficiency and also improve the reliability of the data collected,” said Ken Boschert, associate director for the Division of Comparative Medicine at Washington University in St. Louis. “On one hand it does it, but on the other hand it also has the potential to introduce new variables that you didn’t previously consider.

    “In my experience, new does not always mean improved.”

    On that point, Hollingshead agreed, noting that her lab tried several home-built software programs that actually made the process of data gathering more complicated than taking notes by hand. She has encountered no such problems with Study Director, however.

    Study Director is the brainchild of Eric Ibsen, a former cancer researcher who had worked on animal studies for 15 years. Frustrated with what he perceived as inefficiencies in animal research, he set out to design software that would be flexible enough to manage studies and give researchers the ability to change designs on the fly.

    Studylog currently has nine customers, including the NCI and three of the 10 largest pharmaceutical companies in the country. The company is now working to create an online database that allows researchers to share their results with the scientific community.

    “It’s the preservation of tribal knowledge,” Ibsen said. “It’s having that information at your fingertips where it can be used, and where it’s stored consistently.”

    Eventually, Ibsen wants to expand his software to all phases of drug development, from toxicology studies to clinical tests, to create “the first fully integrated system from bench-top to bedside.”

    “I want to make drug discovery as optimally efficient as possible,” Ibsen said. 

    The goal, if not the means, is something all researchers can agree on.

The electronic revolution in clinical trials is still a work in progress, but researchers say it's time to bring EDC to the preclinical world.

Preclinical Goes Digital

A new understanding of how certain kinds of bacteria build cell walls could lead to a breakthrough in tuberculosis treatment.

    An article in the Dec. 2 issue of 

 examines how mycobacteria, the category of bacteria that includes the pathogens behind tuberculosis and leprosy, grow into a communal structure called a biofilm.

    A biofilm forms when a community of bacteria grows together on a surface and is encompassed by a common extracellular matrix, according to Graham Hatfull, co-lead investigator from the University of Pittsburgh. In other types of bacteria, biofilm formation is linked to increased hardiness that makes antibiotic treatment very difficult or even impossible, he explained.

    When biofilms grow on prosthetic joints, the devices must be replaced because antibiotics will never kill the bacteria, according to Zhenkun Ma, the head of research at the Global Alliance for TB Drug Development.

    Hatfill speculated that tuberculosis bacteria might grow into a biofilm inside the bodies of patients, which would account for the treatment being so difficult. Eliminating the tuberculosis bacteria with antibiotics takes six to nine months, according to the Centers for Disease Control.

    “We don’t know if TB forms a biofilm in people but we think it does,” said co-lead investigator William Jacobs of Albert Einstein College. “When TB goes in the body, it hunkers down. Biofilms are a form of hunkering down.”

The study’s authors may be speculating about tuberculosis colonizing into biofilms, but they demonstrated that 

, a relative of tuberculosis that is easier to work with in the lab, does grow into biofilms. These structures are unusual because the common extracellular matrix is made out of long chains of fatty acids. In other classes of bacteria this structure is made of long chains of sugars.

    The researchers identified a gene, groEL1, which is essential for mycobacteria to turn into a biofilm. Mycobacteria normally produce very long fatty acids with 60 to 90 carbons, called mycolic acids, Hatfull explained. These are incorporated into the cell wall.

    When mycobacteria form biofilms they produce shorter chains of fatty acids, 58 to 68 carbons in length, Hatfull said. This usually occurs in the final stages of biofilm formation. These fatty acids may be involved in creating the encompassing matrix, he added.

    According to Jacobs, groEL1 is probably involved in processing proteins that are essential for switching to the shorter fatty acid chains, KasA and KasB. GroEL1 is a chaperone protein, a type of molecule that is necessary for folding other proteins into their proper formations.

    KasA and KasB were still present in cells where groEL1 was knocked out, but biofilm formation was impossible, Jacobs said. As a result he speculated that these two proteins were not able to get into their proper formations for fatty acid synthesis without the help of groEL1.

This study does not provide evidence that tuberculosis bacteria grow into biofilms inside infected people. But it does show that 

, another member of the same class does create biofilms. It also shows that groEL1, a protein present in all mycobacteria, is essential for biofilm formation.

    The next steps, according to Hatfull, are to determine whether biofilm formation is part of tuberculosis infections and whether groEL1 is involved in this process.

    If so, groEL1 could be a good drug target, he said. But even if it is not involved in tuberculosis pathogenesis, this knowledge could help researchers identify a different drug target down the road, he continued.

    If these findings about groEL1 and biofilm formation are extended to tuberculosis it could cut down on treatment time, said Mel Spigelman, R&D director at the TB Alliance. Knowing how to weaken the tuberculosis bacteria by preventing biofilm formation, if it occurs, could be a tremendous breakthrough.

    He said the research was “in a speculative mode but potentially very important.”

    It also might give scientists insight into how the leading drugs work to fight TB infection, he said.

    The leading TB drug, Nydrazid or Laniazid (isoniazid), inhibits the synthesis of the longer chains of fatty acids that are part of the tuberculosis bacterial cell wall, Hatfull said.

A new understanding about how one class of bacteria protects itself from the environment could dramatically cut tuberculosis treatment time.

Pharmaceutical Executive-12-06-2005

Merck Will Lay Off 7,000 and Close Five Plants

Preclinical Goes Digital

Microbiology Research Could Lead to Improved TB Treatment